What is the average spend relative to income?

Galmay

Hey guys this might seem like an odd and/or stupid question but I am a bit clueless as to how it works

what do people generally spend on a car relative to their income? The country is awash with mercs beemers and audis and new ones at that. So considering that the average industrial wage in Ireland is in the region of €35k would i be right in deducing that while a huge amount of these will be earning more than enough to buy these cars twice over in a yr there must be a significant number of people buying cars worth 75/80% even 100% or more of their annual income? And if so how?

And now the reason i ask! i started earning serious money this yr (hope to top 70k this yr) therefore I wouldnt mind trading up from my 97 corolla(still love that car tho)! Im 24 so have no mortgage etc to worry bout, just rent. I had my head turned by an A5:D the other day which would be 50,000 at the cheapest i'd imagine.

Is it justifiable to spend that amount on a car with an income of 65-70k?

Large chunk of that would be a loan. So what happens when it comes to changing it down the line? Im trying to get my head round this part, i imagine it would be like building up equity in a car. ie few yrs down the line ive paid off 20k, i trade in, add a small bit to loan with the new purchase and continue to pay my monthly repayment. So my loan for the next car will be less than the current one and so on. Is this how it works?!

JoeA3

Don't think I could stomach borrowing more than a few grand for a car personally... I think I'd baulk at the monthly repayments on 40-50k!

I've done just as you sort-of described - I've built up "equity" in cars over a good few years now, keeping the "cost to change" reasonable to my pocket each time. My current car retailed for around 37k, but I owe next to nothing on it... I usually borrow a relatively small amount (~8-10k) on a variable rate with the bank and generally try to repay as early as possible... by then I'm usually looking at the brochures again!!

There are others who finance cars 100% or with massive balloon payments at the end of 5-year finance deals, but thats not something I'd recommend.

Many people on here will tell you that you are completely nuts to even consider it, especially in the current economic climate and with all this VRT uncertainty! Horses for courses though.

unkel

Galmay wrote: »

i started earning serious money this yr (hope to top 70k this yr) therefore I wouldnt mind trading up from my 97 corolla(still love that car tho)! Im 24 so have no mortgage etc to worry bout

Fair play to ya. You're earning the money and you have no dependants. Now's the time to indulge yourself. Buy whatever flash / fast car you fancy and enjoy

Those silly girls ads state because you are worth it :rolleyes:

In real life terms, you have actually deserved (and earned) it

jimmycrackcorm

I'm happy paying €600 per month on my car. I earn more than the op.

woop

http://lotus.linders.ie/contentv3/
go on!:D

-Chris-

Look at your monthly budget, work out what you can spare for owning & running a car. Pull out money for your expected fuel spend, road tax and you'll then know what you're comfortable spending per month on the car itself.

Take that figure to a dealer/bank and get them to work backwards from monthly payment to outright budget.

Post the budget here along with a "What can I buy with €X0,000?" question and watch the sparks fly :p

In all seriousness though, I don't believe anyone is spending as much on their car as they earn - I'd expect someone on €70k has a car worth €50k(ish) or less.
The people on €35k are spending mid-€20s on their cars (biggest selling cars in Ireland are Focus/Golf size cars).

There are execeptions to every rule though...

Soarer

You're in a very envious position OP.
But like JoeA3 mentioned, I'd flood the place in gawk at the thought of spending €50k on a car!:o
I had a conversation with one of the lads in the office here about spending €100k on a car if you had it. It actually started from a thread on here with the Audi S8.
Anyways, I reckoned if I'd €100k to spare, I'd only spend around €20k on a car, and spend the other €80k on something else. Trying to figure out what to do with that stumped me altogether.

But do as AudiChris says. Work out what everything's going to cost you per month, see what it comes to, and buy accordingly.

Personally though, I'd keep your Corolla, try buy a house/apartment, and use your new income and that "dead money" rent to pay for it.
You'll get more action in a bachelor pad than a car!

Anan1

As Soarer says, money spent on a car is "dead money". Money can be used in two ways, either to buy things that give you pleasure or to make more money for your future. Only you can decide what proportion suits you now.

cabrwab

Wow lucky you. I think i would rather spend around 35/40k in your position, but up to you.
I would only borrow as somebody said here already max 15k. But with 70K a year see what you can afford budget yourself!

personally get a house you own. hold onto the corrolla.

r3nu4l

OP, don't forget that a good few of the cars you see such as Audi A4 are company cars. At the higher end too, many of the bigger cars are 'company' cars owned either by guys who have their own business or by people who are very high up in their company. Not all of them but enough to make a distinct impression in the market.

Not all of these guys are spending their own money on these cars.

Kind of off-topic but worth it to clear up the assumption that all of these people shelled out on these cars themselves.

slickmcvic

.....Dont bother with a house!!your young and sucessfull,Grab yourself a hot car and get lots of attention from hotties......go for something flash and fast
if i was in your shoes I'd get a golf GTI,astra OPC or stretch and get a beemer 3 series.....no shame in getin a nearly new or ex-demo either

CyberGhost

cabrwab wrote: »

Wow lucky you. I think i would rather spend around 35/40k in your position, but up to you.
I would only borrow as somebody said here already max 15k. But with 70K a year see what you can afford budget yourself!

personally get a house you own. hold onto the corrolla.

I agree with cabrwab, get solid roots first.

Your own house should be the first priority.

As for the car, spending 50K on a car, is a waste, with your salary, I'd be willing to spend no more than 25K.

Also buying new is a bad idea, as the car immediately drops in price once you drive it out of the garage.

I'd buy a Golf GTI or Civic Type R, Golf is a classy car, it's fast, economical, only 2 litres so lower tax.


But eh, we live only once, so I guess listen to your heart.

It BeeMee

Anan1 wrote: »

As Soarer says, money spent on a car is "dead money". Money can be used in two ways, either to buy things that give you pleasure or to make more money for your future. Only you can decide what proportion suits you now.

OP: you're 24. Time enough to start worrying about the future at 26

r3nu4l wrote: »

OP, don't forget that a good few of the cars you see such as Audi A4 are company cars. At the higher end too, many of the bigger cars are 'company' cars owned either by guys who have their own business or by people who are very high up in their company. Not all of them but enough to make a distinct impression in the market.

Not all of these guys are spending their own money on these cars.

You've also got to consider that money has been very cheap the last few years, so people have borrowed heavily to pay for their outward shows of affluence. Times they are a-changing though....

As to the original question:
there are no hard rules as to how much you "should" spend on a car. As has been said, work out what you will be able to afford.

Remember to keep enough to enjoy the rest of life : no point having a shiny motor outside the door if you're surviving on tinned beans and stale bread...

itarumaa

well you only have one life you know and if you really like cars and make so much money, why not?

But it is really no point to buy new car, you can easily pay road tax etc for that money you lose just buying a new car,

TheBazman

There is nothing wrong spending that money on a car with your income, however I'd feel there is a problem with borrowing most of it. Given you are coming from a '97 Corolla you could easily jump a couple of steps up the motoring ladder without having to spend 50k. If I were you I would do this rather than taking the savage hit on depreciation on a new motor and paying the interest on a motor loan

drunkdaz

I don't think you can really give a "percentage" you should spend at your age, I just think you need to "build up" to a good car if you know what I mean. Its the cost to change thats important. So starting from a corolla you aren't realistically going to get that A5, unless you have a lot saved already.

I doubt many spend close to 50% on their car. Remember 70k is gross; you have to pay tax so its probably closer to 50k, then rent/mortgage etc etc........

I consider myself a car nut, and always want something pretty flash but my car only cost the equivilent of about 33% of my gross. I'm 27, no mortgage!

OTK

there's a lot more pleasure to be had from an expensive flashy car when you're young and shouldn't really be driving it than when you're middle aged and you're expected to drive it, according to your demographic.

A convertible M3 or a boxster would do the trick.

Years ago I got a job with a big salary and I bought a car that cost a year's pay. It was certainly worth it. Now I'm older and I have a 12 yr old corolla.

"Anyone who lives within their means suffers from lack of imagination."
&
"Extravagance is the luxury of the poor; penury is the luxury of the rich."
-Oscar Wilde

Biro

Soarer wrote: »

Anyways, I reckoned if I'd €100k to spare, I'd only spend around €20k on a car, and spend the other €80k on something else. Trying to figure out what to do with that stumped me altogether.

That's the thing, if you had €100k to spare, you'd already have the something else! Otherwise you'd have less than €100k to spare!

Galmay

Hey guys thanks for the input. Good point about the company cars taking up a large proportion of the expensive cars on our roads, I hadnt factored that in.

People seem to be either in the "cop yourself on and save a deposit for a house" section or the "go on, go on, go on, you know ya want to! devil on my shoulder" section! I know my father would go ape if he knew Id even consider spending money like this! And despite being 24, living away from home and working in a successful job etc his response would have to be evaluated!

However I do know myself, and I know that I want a flash car and therefore its inevitable that I will end up buying one! Im probably just gonna have to be smarter about this, save hard for a yr, smaller loan? something like that. Make it more justifiable perhaps, not only to my father but myself! Its just with big money being a novelty its a big temptation!

JoeA3

Galmay wrote: »

Hey guys thanks for the input. Good point about the company cars taking up a large proportion of the expensive cars on our roads, I hadnt factored that in.

People seem to be either in the "cop yourself on and save a deposit for a house" section or the "go on, go on, go on, you know ya want to! devil on my shoulder" section! I know my father would go ape if he knew Id even consider spending money like this! And despite being 24, living away from home and working in a successful job etc his response would have to be evaluated!

However I do know myself, and I know that I want a flash car and therefore its inevitable that I will end up buying one! Im probably just gonna have to be smarter about this, save hard for a yr, smaller loan? something like that. Make it more justifiable perhaps, not only to my father but myself! Its just with big money being a novelty its a big temptation!

There's no need to spend 50 or 60k to get something nice, with a bit of poke and some "street cred". Someone else above suggested the likes of a GTI / OPC - you'd get a decent 1-2 year old one of those for half of what a new A5 would cost you!

uberwolf

I upgraded from a '96 polo to a '02 skoda (1.8T 4*4). I'm really enjoying driving the new car. Size, poke, toys - all relative to the car that went before. And next year I'll go again, spend a bit more and enjoy the upgrade. If you get the business now, what do you have to look forward to?

bennyc

This is the motoring section so there should be a ban on guilt trips for not buying a house. OP go out and test drive everything and anything that takes your fancy we have all heard the story about the 25yo who walks in the BMW showroom and the salesman wont give him the time of day he goes next door and gets an M5 well thats you and fair f%^king play.

Marcus.Aurelius

I'm on 48k a year now, just started life in the real world (postgrad before!!) and I only want to spend €15k on a Lexus GS300 and keep it around for 3 or 4 years.

There's probably no point in asking for averages and recommendations from people who, most likely, are nothing like you in tastes or ambition, buy what you like, when you like.

Do whatever makes you feel good, both in monetary and driving terms.

kyote00

two other options:

1) put the spare money you have to work for YOU (and not the car dealers) - i.e. invest it over a few years and then come back and then spent the extra on a flash car....

2) move to a neighboorhood where a '97 Corolla is a flash car

ultimately, your money, your choice...

Galmay wrote: »

Hey guys thanks for the input. Good point about the company cars taking up a large proportion of the expensive cars on our roads, I hadnt factored that in.

People seem to be either in the "cop yourself on and save a deposit for a house" section or the "go on, go on, go on, you know ya want to! devil on my shoulder" section! I know my father would go ape if he knew Id even consider spending money like this! And despite being 24, living away from home and working in a successful job etc his response would have to be evaluated!

However I do know myself, and I know that I want a flash car and therefore its inevitable that I will end up buying one! Im probably just gonna have to be smarter about this, save hard for a yr, smaller loan? something like that. Make it more justifiable perhaps, not only to my father but myself! Its just with big money being a novelty its a big temptation!

-Chris-

Buy something like this http://adverts.ie/57902 and have a blast for a year.

Save some money during that year (you should be able to put away 5 figures pretty easily), then make your decision as to whether you want to put that wedge into a property or as a downpayment on a car (minimising the amount borrowed etc. etc.).


P.S. (and I'll probably get flamed for this) GTIs are fine, but don't buy an OPC - you'll absolutely lose your shirt. They depreciate by a huge amount.

pburns

AudiChris wrote: »

Buy something like this http://adverts.ie/57902 and have a blast for a year.

Save some money during that year (you should be able to put away 5 figures pretty easily), then make your decision as to whether you want to put that wedge into a property or as a downpayment on a car (minimising the amount borrowed etc. etc.).


P.S. (and I'll probably get flamed for this) GTIs are fine, but don't buy an OPC - you'll absolutely lose your shirt. They depreciate by a huge amount.

Good advice - and that's coming from a car salesman!

Credit ain't going to be as cheap as it was and spending a shedload of money you haven't (yet) got on a depreciating asset is a mugs game - especially in the current, uncertain environment. Buy something really nice that is >3years old. Enjoy it, savour (relatively) low depreciation and THEN think about that A5 (or whatever else takes your fancy by then).

The whole glamour thing of a young lad walking into a showroom and trying to buy an M5 off a disbelieving salesman is a load of attention-seeking urban-myth bollocks. I've seen lads with this off-handed attitude and they always crash and burn. Even 2-3 years down the road an A5-level car is a hell of an achievement and you should have a nice little nest-egg to back it up by then...

Blisterman

bennyc wrote: »

This is the motoring section so there should be a ban on guilt trips for not buying a house. OP go out and test drive everything and anything that takes your fancy we have all heard the story about the 25yo who walks in the BMW showroom and the salesman wont give him the time of day he goes next door and gets an M5 well thats you and fair f%^king play.

Hear hear.

The maths don't add up, the prediction is for house prices to have dropped by 10% THIS YEAR ALONE.

Anyone who bought a house worth €400,000 in january, will be out €40,000, by december, and god knows how much by the end of next year.

So, to be honest, you'd probably be better off financially buying an decent car, and renting a couple more years, until house prices are more stable.

Zube

Blisterman wrote: »

The maths don't add up, the prediction is for house prices to have dropped by 10% THIS YEAR ALONE.

Anyone who bought a house worth €400,000 in january, will be out €40,000, by december, and god knows how much by the end of next year.

House price maths is different from car price maths, because houses go back up, cars don't. If you are buying a house to live in, as opposed to rental/investment buying, it doesn't matter if the market drops 10%, you're only going to sell it to buy another, which will also have dropped, reducing your cost to change.

Leprechaun77

I would opt for a 2 year old car in the €25-30k bracket as I think the loan repayments would be astronomical on a €50k loan...(:eek:more astronomical than a €25k loan that is). Whilst the disposable income the OP has now will cover this, he will inevitably have to get a 4-5 year loan which will be a lot of baggage should he decide to do anything over the next 2-3-4 years. (house/holidays/emigrate). I would be interested to know if the OP's salary is a basic, or whether he is estimating bonuses etc. I know a lot of friends who were/are in the same position and bought Porsche's, BMW's etc. and whilst they lived the dream for a year or so, the novelty has worn out a bit. Anyway, if I were a bank manager, I would not sanction a loan of €50k to an individual on this salary, especially in the current climate.....

Fey!

Might be worth bearing in mind that without bricks and mortar in the backround, someone will probably have to secure any loan.

OP; as a lot of people have said, have a look at second hand; there are some good deals around for flash, couple of years old cars.

smash

get to the uk before July 1st and get yourself a Lotus Exige... you wont regret it!

Balfa

This is a pretty interesting question, and makes me think about it in a way I haven't, before.

Granted, living in a completely different economic climate to your own, my experience may not have a much relevance for you. One car's repayments consume almost 5% of my wife and I's monthly take-home pay. The other car eats 2.5%. Obviously that excludes maintenance, insurance, tax, fuel, etc.

For reference, we have a mortgage and no children (until December! yikes!)


Also...

Galmay wrote: »

I know my father would go ape if he knew Id even consider spending money like this!

With regards to this, I suggest you drop a proverbial brown envelope on his lap to ease his angst
Maybe a weekend getaway or something?

Bulmers

assuming 40k loan for 5 yrs ,putting 10k yourself,the repayments are €800/month...alot of money even on a 70k salary,70k salary will leave you with approx take home of 4k/month

up to individual i suppose but borrowing that amount of money is alot, given depreciation you'd see on the car, think if aimed for 30-35k motor of which there are plenty of good ones might be better option...new audi TT TDi is 44k, prob zero extras though...

positron

Five years ago, I spend 5% of my then annual income to buy the car and now annual maintenance ads up to about 1% of my annual income. No, I don't earn a lot, its just that I drive a cheap car! Never gave a minute's bother so far - touch wood!

We are upgrading soon, and the budget is about 15% of me and gf's combined annual income.

peasant

Personally, I have never, ever taken out a loan to buy or run a car. The yokes are dear enough without giving money to the bank on top of it all.

Needless to say, I've never, ever driven anything even remotely "flash" either but all of the cars I bought were what I wanted at the time (within my stingy parameters), were fun and I enjoyed them ...no white goods here either.

Galmay

Thanks guys ye really are a wise lot! But I know in my head borrowing 40,000 isnt really on! The heart needed convincing tho!

As I said, I only recently started earning this (and to leprechaun77 its basic ~45000 and the rest guarenteed on-call work, permanent and pensionable public sector) so I dont actually have it yet, so plan is save till ive 10-15k and buy something a few yrs old. Someone mentioned a GTi, certainly a possiblity! Continue to save for another while and I should have another 10k or more to add to the pot. Then I'll go cracked! Providing maturity doesnt catch up with me in the meantime...