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  1. Post
    #1

    How much to spend on a car?

    Hi guys and girls,

    I am currently in the market to look for a economic car daily car, my budget is $6,000 - 8,000, cash purchase.

    I was reading somewhere on the internet, i am pretty sure its a USA article that no one should spend more than 10% of there annual net pay on a car? for example net pay I make $40,800. If I follow the 10% rule, I should only spend $4,080 on a car?

    What are your thoughts on that is 10% to low?

    I know a lot of my colleagues goes into debt to purchase cars, I am pretty sure there pay is similar to mine driving $18-25k cars.

  2. Post
    #2
    Don't borrow money to buy a car.

    That should be the only rule, rest should be based on what you wouldn't feel bad spending on a vehicle you're interested in buying.

    EG, I drive a $3,000 2010 Hyundai i30 after selling my $10,000 van and presently looking at importing a $15k car albeit I could outright buy far better because I'm a miser. I don't feel bad buying the more expensive car because it can get 35KM/L. But I would feel bad if it didn't achieve the latter and would stick to my 3k car.

    Also considering buying a Leaf for the same reason, cheap to run.

    If I only had 2k spare, I'd drive a 2k car. A couple years ago I picked up a 2006 Sirion for $1,400 and drove that around happily simply because it was cheap.

    I get more enjoyment out of a good deal than a flashy car.

  3. Post
    #3
    Being a US article where everyone finances their vehicles I'm going to assume they're saying make sure your annual repayment isn't more than 10% of your take home pay.

    Anyway from my scientific analysis of vehicle and running costs the cheapest car to be driving overall is a Prius that is one year too old for Uber.

  4. Post
    #4
    Disinfo wrote:
    Being a US article where everyone finances their vehicles I'm going to assume they're saying make sure your annual repayment isn't more than 10% of your take home pay.

    Anyway from my scientific analysis of vehicle and running costs the cheapest car to be driving overall is a Prius that is one year too old for Uber.

    I wouldn't mind driving a Prius, but my GF hates it because people will think shes a Urber driver if she takes the car out.

  5. Post
    #5
    I have only bought 5 cars in my driving life, and they have generally been about 15-20% of my salary at the time of purchase and drive them until they are uneconomic to maintain. However each time I paid a little bit more as my salary went up.

  6. Post
    #6
    Spend what ever you want on a car that makes sense for your situation.

  7. Post
    #7
    Most sense ludez has ever made.

    If you don't want to spend money on a car buy a $1000 shitter.

    If you want a bling as ride then spend $40k.

    When I got my first full time job I was on $27k a year and purchased a $22k car on finance .

  8. Post
    #8
    Yeah, finance isn't all that bad. It is only bad when it is excessive. Just make sure it fits your situation. You can always pay it off sooner than later without dealing with the interest.

  9. Post
    #9
    I've read some of those articles and yes they always seem to be based on the ratio of income to finance repayments. I think the 10% rule is per year so if you earn 40k and you are buying a car to use for 3 years then the car should be worth around 12k. Sometimes I wonder if those articles are sponsored by finance companies.

    In 1996 I financed a 1986 Honda Accord 2.0si, was 8k and cost me around 11k in the end. It was probably a stupid move considering I was on $7.50 per hour. But I was young and I was very happy with it.

    Haven't financed a car in many years but that doesn't stop me from wasting money on them.

  10. Post
    #10
    Better to get something reliable and spend a bit more, even if it means taking out a small loan.

    For me, it usually makes sense to part finance a vehicle to free up cash flow.

    If you are in an industry where you are client facing, don't buy a shitter.

  11. Post
    #11
    Yeah ive never seen a problem with loan/finance as long as you can afford to repay it. The two times ive used it have both been because ive found the perfect car I wanted for a good price, and didnt have the cash to buy it till i had sold my previous vehicle. Once i sold previous vehicle i paid off X amount of the loan, and the interest was worth getting a good deal on the car I wanted.

  12. Post
    #12
    It depends what you need out of a car.

    My current Vitz hackabout cost a whopping $1200.

    Don't get me wrong, it's a giant pile of crap, but it drives around, and does the things I need for the moment.

  13. Post
    #13
    Don't forget that a second hand car will probably need some work so factor this in your budget.
    Also the work that will need to be done can be a lever for negotiation.

    We bought a 2006 Mazda Axela that was advertised for 5500 and when we viewed the car we manage to get it for 5000 as the brakes needed attention (cheap pads nothing major) and transmission flush as there was not history of it (cost about 300$ at our mechanic including new trans filter)

    There are lots of good cheap looked after car to buy on trademe.
    We bought our first car when we arrived in NZ for 1700$ (Mirage Asti-V) and kept it for 5 years with no major repair and just oil change.

  14. Post
    #14
    Personally i'd look at something cheap on gas in your price range.
    Mazda Demio, Suzuki Swift, Toyota Yaris are all reliable cars, cheap to maintain with lots of spares, and very good on gas.

    Dont see a problem with finance either, but generally you'd want to avoid financing more than 50% to keep the interest down.
    So with that in mind i'd consider up to around ~$12,000 which would bring you into range for some of the more decent Toyota hybrids from the early 10's like the Camry, Prius & Sai.

  15. Post
    #15
    Don't buy something you can't afford to maintain/repair (maintenance does not mean taking it for a wof every 6/12 months) (nor does a wof = a service)

  16. Post
    #16
    The average persons definition of "Always serviced" car seems to be having a basic service aka oil & filter change every 10,000-20,000km, then driving it till something fails a WOF, or a failed\failing parts starts to annoy them enough to get it fixed.

  17. Post
    #17
    I think a lot of people go by what their mechanic recommends; "10,000km or one year, whichever comes first". That said, if you'd invested in something better than your average runabout, you'd take the time to figure out how to maintain its reliability / health.

  18. Post
    #18
    You can recommend but its typical only people with money or knowledge that would actual see the value in it and go ahead. People think about engine oil and filter but there's plenty of other oils and filters that should be done, power steering fluid and fuel filters are the worst for this and can lead to expensive repairs down the line.

  19. Post
    #19
    What people often forget is the cost of depreciation, repairs and insurance on a more expensive car. In general, cars are liabilities and the more you put into them, the less you can make your money work for you.

  20. Post
    #20
    Much of that does depend on the car too. Ive come across plenty of owners who will drive a car into the ground and are financially forced to buy another one. They usually opt for newer with low k's because they perceive they wont have to spend anything on it for awhile, but they rarely do any research or get it inspected before buying, so get caught out when their 10 year old <100,000km car with a shit load of engine hours needs work.

  21. Post
    #21
    So that would mostly be Jap imports that have spent their whole lives in stop/start Tokyo traffic?

  22. Post
    #22
    ^ yeah...my 64k volvo import would have had that to deal with which is why the auto is a bit tired even though she's pretty 'new'.

  23. Post
    #23
    Frederick James wrote:
    So that would mostly be Jap imports that have spent their whole lives in stop/start Tokyo traffic?
    NZ traffic isn't a lot better in a lot of cases.

  24. Post
    #24
    Frederick James wrote:
    So that would mostly be Jap imports that have spent their whole lives in stop/start Tokyo traffic?
    Just a generalization given most cars are imports and it always comes down to the example, but i try to avoid imports for my car buying due to other reasons as well. If you get all the fluids and filters done and make sure everything is functioning correctly then you should be fine as long as the car isn't inherently flawed design.