Car, by defination, can neither be considered as investment nor is an accessory.
Is there a rule of thumb to estimate the max car value I can affort based on income ?
I know this is a generic question. So let's assume certain factors:
. Income is as of above-avg. desi-canadian with possible (not certain) income growth in future.
. Family size, small-to-medium - say a 1-2 kid with parents.
. Car is a need.
. Existance of other financial family requirements: rrsp, resp, home, vacation expenses, etc.
From my views, the car purchase value should be no more than 40% of gross annual income.
What do our community believe ?
For average family
CIVIC/Corolla
If you are a little bit more comfortable with $$
Accord/ Camry
If you are very comfotable with dollars
BMW/Benz
What is your comfort level
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Quote:
Originally posted by Smiley
What is your comfort level
Best part of north american system is that "anybody can affort anything".
How do you define a "comfort-level". At an avg. salary of 40K, taking out 500-600 per month for 5 yrs on car loan installment is not difficult.
But my question is, is it advisable ?
I just want to have open discussion. Not that I am looking for some or any car.
I recently saw two cases. Here are few details.
Person1:
Family size: 2 adults + 1 kid
Housing: Rental - one bed room
Income : Upper-to-Mid 60's K
Car bought: 14K, 4-5 yrs old Camry.
Immig. Status: In Canada since past 3-4 yrs
Person2:
Family size: 2 adults + 2 aged parents
Housing: Rental - 2 bed room
Income : 70K
Car bought: ~36K - New Accord
Immig. Status: In Canada since past 3-4 yrs
I was just wondering who made a wise choice ?
Person1 could have got a new car.
Is Person2's choice of new car a wise decision ? Keeping in mind that he does not have a home and have two aged parents ?
What could be the disadvantages (short-term and long-term) in both the cases ?
I know, it's all personnel choice. But I'm more intrested in learning thing before experiencing them.
Comments ?
Quote:
Originally posted by l5a
Person1 could have got a new car.
Is Person2's choice of new car a wise decision ? Keeping in mind that he does not have a home and have two aged parents ?
What could be the disadvantages (short-term and long-term) in both the cases ?
Theres also the mindset to consider. For me I'd rather go for the used camry(if its been tested by a trusted inspector...low mileage, good condition etc). My reasoning is that a car depreciates most in the first 3-4 yrs. Why would I make an investment that goes down almost 40% in the first 4 years? Let some other hotshot do it
. At middle-class levels of income (even in the low-mid six digits), I dont think a new vehicle is that sound an investment and conducive to long term accumulation of wealth (given those income levels).All this from personal experience because I have purchased a new vehicle before. Looking at the value now, I dont think I should have. I did not have the time then to research and look into a reliable used car. So if you do not have the time...maybe used cars are not for you.
As for used...I'd stick with the Jap brands 3-4 yrs old...low mileage/good condition. Any older and there may be problems with maintenence(unless you know cars well, unlike moi). A yardstick I apply is the car has to last 1 yr for every 1000$ I spend. The Toyotas and Hondas are likely to hold up to this criteria better than other vehicles (based on their track record).
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My thinking is very similar to Smiley on this issue. Buying a car in Canada in Canada is like buying an Elephant. Eventhough the Elephant might be cheap, the small needle which is used to control it(it is called ankhusham) is expensive; it is the same way the insurance is costlier than the car.
I've spoken to many Car Driving School instructors and also many mechanics from Canadian Tire to Midas to local Desis. The onething I found in common was their praise for the Toyota Corollas Engine and smoothness/resale value of the Honda Civic. Typically the Phillipino or others will not touch the Corolla when you try to sell it to them as the Corolla is a Taxi model driven in their country.
Based on the Driving Schools my vote for the best engine(350,000Kms maintenance free) is the Corolla; while an equivalent car with better resale value is the Honda Civic. Both are extremely good on GAS.
If somebody wants to spend a few K's less but not expect the same resale value then a Nissan Sentra/Altima or Mazda would do the job. You would be able to bargain with a Nissan or Mazda salesman while you would not have the same bargaining power with Toyota or Honda salesman.
My suggestion would be a Toyota Corolla or a Honda Civic to start with and the second car could be Camry or an Accord or if not a Toyota Sienna or a Honda Odyssey.
This is my take on it.
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Quote:
Originally posted by jake3d
A yardstick I apply is the car has to last 1 yr for every 1000$ I spend.
My experience too agrees with this.
I like that formula. $1000 for 1 Year. Makes sense. But let's ignore the small delta - the maintenance cost, which varies by car age.
Back to my question, how do you relate this "$1000" to an individual's income ?
( A "$1000" do have different value for different ppls)
Consider a new immigrant just landed with a small family and is looking for a car. He is not aware of all inventments/expenses he will face in future.
How would he decide what should be his "cap" on purchase price ?
Location: God's own country
Posted on: 15-03-06 14:00:14
Sankaracharya,
Good analysis. As a proud Toyota Corolla owner i am proud of your statement and of the car.
I bought mine from a dealer in July 2004 for $6750 basic ( i paid 15% on tax +200 or so for registration and plate). It is a 1999 model and had 136K when i bought it. The reason that i got it so cheap was b'cos it was an accident car (i never cared to find out what kind of accident it was). He cheated me in a sense, b'cos he took the money in cash and then wrote $5750 in the receipt (basic). So i guess the real value was only that.
The car has been good, no troubles with it at all.
TK
Sidenote : since i use canadian tire for all repairs (they ask for GST/PST, environmental charge etc...), i typically have spent $200 a year on repairs, oil change etc... for 2 years now. if i used a private garage then this will reduce by atleast 30-40%. Once Canadian Tyre cheated me and changed the timing belt (with my permission but they charged me 200% more than what they told me) and they said that they repaired my brake shoe(without my permission). the bill for that and the oil change was $270.
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