# Vehicle purchase



## rl1983 (Jun 17, 2015)

The post above got me thinking, is there any suggestions for how much vehicle you should buy in relation to income? Not counting any savings, say if you make 60k a year, does that mean you can buy a 60k vehicle?


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## nathan79 (Feb 21, 2011)

I've heard everything from 1/10th up to half of your gross annual income... no real agreement. Now personally I've never spent more than 25% of my annual income on a vehicle, so I would probably not recommend spending more than half.


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## Saniokca (Sep 5, 2009)

I owned two cars so far: 30k brand new bought after paying off my student loans (paid off 30k of loans and borrowed 30k on a new vw rabbit). Now years later I drive a 2005 corolla with almost 300k on it (got it when our income was over 200k). Both performed just as well based on our needs. Yes the rabbit was powerful and fun to drive but it wears off and I found that I like money/freedom more than a car (I took 8 unpaid months off work to stay at home with wife and baby). You don't have to be extreme but think what you prefer more. Next car we buy will probably be a used SUV (for convenience) in the class of rav4/crv/xs5/etc. Our income now is about 100k.

Don't forget that *usually* the more expensive the car will be more expensive to maintain.


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## janus10 (Nov 7, 2013)

Maybe it makes more sense to look at how long you are going to own the vehicle and divide the cost of the purchase price by the total income you expect to earn over the years you own the vehicle.

That would make the first vehicle you own as an adult probably the highest ratio as you would expect your income to start at its lowest level.

For me, my first vehicle would have cost about 4% of the income I earned over the 10 years I owned it. The second vehicle was almost twice as expensive but I also earned a lot more, so it came to 2.5% of the income over the 10 years I owned it. The third vehicle (driven by my wife for the last 5 years) was about 2.5% of the income I earned over the 8 years before I retired last year. 

I just bought a vehicle this month but because I now have the money from investments that I never had before and no income other than from my investments, that makes it perhaps not applicable (like going from Classical Mechanics to Quantum Mechanics). So, if you are retired and have either a healthy pension and/or a large nest egg, then $60k doesn't seem so bad. But, if you are still putting money away for retirement/RESPs, have a mortgage, and aren't expecting to earn a lot more in the future than you do now, then paying $60k for a vehicle on a $60k income is, IMO, at least 2x too expensive.


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## My Own Advisor (Sep 24, 2012)

"Maybe it makes more sense to look at how long you are going to own the vehicle and divide the cost of the purchase price by the total income you expect to earn over the years you own the vehicle."

That's how I see it....

Looking at a newer car now, for purchase in 2018. Trying to get a handle on the price I want to pay. I have figured that my budget should be about $15K-$20K. Looking at 2-3 year old car.

I intend to own the car for at least 10 years. 


Back to OP - I say you buy enough car as to prevent you a) going into major debt with it and b) something that does not monopolize other spending needs.

FWIW from 2015 - 'average' Canadians spent 19.4% on transportation. Seems high to me so I wouldn't strive to be 'average' 

http://www.myownadvisor.ca/wp-content/uploads/2017/02/How-much-do-you-spend.jpg


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## Mortgage u/w (Feb 6, 2014)

Its a good question. But isn't that like classifying society by what they drive? Even though that's how society is perceived, it shouldn't be the case and far from it. There are plenty of people out there driving $100k cars who make almost minimum wage salaries......but look like a million bucks!

What's important to you? Do you want to be perceived like a 'million bucks' or rather have the 'bucks' in the bank? Personally, anyone making a salary between $50k and $150k fall in the same category. What will differentiate them is how much money they sacrifice in savings. Lets face it, anyone in this range of salary can afford the same category of cars. And all are capable of racking up a storm of debts - which most do. The higher the income, the higher the debtload.

When I was younger, my car was my life. Even then, I bought a 5 year old car and paid cash. 
Today, my car is an accessory. I still pay cash. I just don't buff it every other day.

My experience between new and used: I've only bought 1 car new which I still drive 10 years later. The rest were used. Although I kept the used cars less time, I've noticed that it all depends on the brand you drive. So my next car will most likely be Honda or Acura, slightly used or demo at most. My goal is to have no payments or pay off in 24 months or less (if interest rate is close to nothing).

I am also at a point in life where I still place importance on savings and aim to be mortgage free.

So for me, its got nothing to do with the income I earn. I am generally frugal so no matter how much I earn or have in savings, splurging on a car is not interesting to me. Its a dead investment. Don't get me wrong - I love cars. But I love financial freedom even more.


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## Jimmy (May 19, 2017)

Mortgage u/w said:


> Its a good question. But isn't that like classifying society by what they drive? Even though that's how society is perceived, it shouldn't be the case and far from it. There are plenty of people out there driving $100k cars who make almost minimum wage salaries......but look like a million bucks!
> 
> What's important to you? Do you want to be perceived like a 'million bucks' or rather have the 'bucks' in the bank? Personally, anyone making a salary between $50k and $150k fall in the same category. What will differentiate them is how much money they sacrifice in savings. Lets face it, anyone in this range of salary can afford the same category of cars. And all are capable of racking up a storm of debts - which most do. The higher the income, the higher the debtload.
> 
> ...


I agree w all of this. You can usually save 20-30% getting a 1 yr old car w 20k on it. They are a depreciating asset so no pt investing lots of $, just get something dependable w a v6.

As far as car economics for repair vs replace, there was a study that showed you are best to drive the car for 10-15+ yrs paying repair costs vs selling it and getting new cars. Just put some wax on it every other year. Getting an $800 repair every other year is also cheaper than a $300/mo payment.


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## twa2w (Mar 5, 2016)

Yup, 1st and 2nd year deprec are huge.

Today I bought a 2016 subaru crosstrek for my wife.
Mileage under 5,000 km. Price 16,900.(plus GST) - hadn't even had the first oil change.

MSRP in 2016 when new was 26,245 plus taxes fees etc.

The 2018 models are just coming out so this is technically 2 model years old.

Agree with Jimmy. Buy used, fairly new and drive it until repair costs are more than 1/2 the value of the car.

I have a couple of friends who buy older cars for about 1500 to 2,000 bucks.
Pay for a CAA membership. Change the oil once a year, drive them for 2 years. Sell for 500.00 and repeat. So far they have had good luck but they drive mostly in city so no problem if breakdown.

I do rural remote winter driving so want more reliablility.


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## rl1983 (Jun 17, 2015)

Thanks for all the input. I currently drive a 2007 Chevy HHR. It's been good, but at 206xxx KMS on it, parts are starting to fail excessively on it. I'm looking for something sporty but the frugal aspect of me is keeping me from splurging. Plus I'm saving for the next step in real estate, plus keeping my retirement goals in check. Not an easy balance. 

I plan on buying at most 2 year old model ( like I did with the HHR ) that way you still have a warranty as well.


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## MrMatt (Dec 21, 2011)

Jimmy said:


> I agree w all of this. You can usually save 20-30% getting a 1 yr old car w 20k on it. They are a depreciating asset so no pt investing lots of $, just get something dependable w a v6.
> 
> As far as car economics for repair vs replace, there was a study that showed you are best to drive the car for 10-15+ yrs paying repair costs vs selling it and getting new cars. Just put some wax on it every other year. Getting an $800 repair every other year is also cheaper than a $300/mo payment.


When my car starts getting an $500 repair every other month, I replace it.


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## My Own Advisor (Sep 24, 2012)

twa2w said:


> Yup, 1st and 2nd year deprec are huge.
> 
> Today I bought a 2016 subaru crosstrek for my wife.
> Mileage under 5,000 km. Price 16,900.(plus GST) - hadn't even had the first oil change.
> ...


Wow, nicely done.


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## My Own Advisor (Sep 24, 2012)

Same MrMatt.

I have a 17-year-old car now. Taking in for my drive clean test tonight. Hopefully it will pass. I will let you know if it doesn't. 

I suspect most CMFers would drive it into the ground? 

I think my push-lawnmower is worth more than my car.


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## Nerd Investor (Nov 3, 2015)

I drive a 2008 civic which I bought new, though it was just before the 2009s were coming out so I got a decent price (on what is otherwise an affordable car to begin with) a pretty generous trade in value to apply against it on my 1997 civic. Combined with 0.9% financing and it was tough to beat. I plan to keep this thing for at least another 4-5 years barring any major issues.

I agree with the post above that the best bet in theory is to find a car that's a 1-2 years old with low mileage as so much depreciation occurs early on. That will likely be my plan for my next vehicle.


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## twa2w (Mar 5, 2016)

My Own Advisor said:


> Same MrMatt.
> 
> I have a 17-year-old car now. Taking in for my drive clean test tonight. Hopefully it will pass. I will let you know if it doesn't.
> 
> ...


Sounds like one of my old cars. Fill it with gas, the value doubles


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## ian (Jun 18, 2016)

That is how we bought my spouse's car. Three years old, one owner, low mileage. Took us three months of casual looking to find the right car..we had some specific wants. Lots of accident vehicles out there.

Just bought a Solara convertable summer car for me. Looked at other brands but came back to Toyota. Older, because out of production, but very low km summer only driving.

The plus...no taxes. 

We always run carfax and lien reports prior to buying.


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## scorpion_ca (Nov 3, 2014)

What do you think about this van? How much would you offer for this van? One of the tires is worn out and the remaining rear brake pads are 6mm. Although dealer is telling that it's SE/SXT, carproof report states that it's SE model. It has a carproof report. Dealer is asking all-inclusive price of $14,500.

http://www.kijiji.ca/v-cars-trucks/calgary/2013-dodge-grand-caravan-se-sxt/1276799201


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## AltaRed (Jun 8, 2009)

We all have our biases, but I would not touch anything from Fiat/Chrysler. I'd always check Consumer Report ratings first.


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## scorpion_ca (Nov 3, 2014)

It's not my first choice. However, the van price of Honda/Toyota is too expensive.


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## AltaRed (Jun 8, 2009)

scorpion_ca said:


> It's not my first choice. However, the van price of Honda/Toyota is too expensive.


There is a reason for that.... reliability and longevity. I had a Dodge Caravan many years ago. Needed something repaired/replaced every year after the first 4-5 years. Biggest piece of crap I ever owned.


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## olivaw (Nov 21, 2010)

I too would avoid a Fiat/Chrysler product. 

Honda and Toyota are expensive because they are in demand. One option is to look for a good used Nissan, Mazda, Mitsubishi, Subaru, Kia or Hyundai. They are also well built but can often be found for a lower price than Honda or Toyota 

The main thing is to check Consumer Reports for reliability before you buy anything.


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## BeautifulAngel (Jun 30, 2017)

rl1983 said:


> The post above got me thinking, is there any suggestions for how much vehicle you should buy in relation to income? Not counting any savings, say if you make 60k a year, does that mean you can buy a 60k vehicle?


I would suggest that you pay no more than 10-15% of your yearly salary. Reason being is that you also have to pay for maintenance, repairs, gas, etc. 

To back me up here are some resources: 

https://www.moneyunder30.com/how-much-car-can-you-afford
https://www.cars.com/articles/2015/02/firsttimebuyers-how-much-should-i-spend-on-my-car/


Here's also a calculator on how much car you can afford, this is a Canadian calculator. 
https://practicalmoneyskills.ca/calculators/calculate/autoloan.php?calccategory=auto

Hope these help answer your question!


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## WGZ (Feb 3, 2017)

bought 30k car new...fun car, love it. 3 years now, 10k a year ... I probably would've done much dumber things and wasted money on buying/selling/fixing/modding other cars taking them in like stray dogs and fixing them up. So I view this as keeping me out of all that trouble. The car has also needed nothing at all, just oil changes every 6 month/8000km so far on the maintenance side of things. Plan to keep for 15 years / as long as feasible. I can look at it as $2000/year. Another $2000/year on gas. 60k right there over 15 years. That's insane how fuel cost will add up to what I paid for my car new in 15 years but whatever, just spreadsheet shenanigans. I don't even want to get in to car insurance costs over the same period of time until mine goes down significantly. :ambivalence:

Car enthusiast through and through. Pops, crackles, and chu-chu sounds even when I'm 75, because don't care.


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## none (Jan 15, 2013)

I'm starting to get the car purchasing bug. No real reason but one need to spend money on SOMETHING. The problem is the math and that I bike to work (and that's not going to change) so my real need for a car is minimal. Also, I have the car share / car rental stuff dialed in pretty well. The last con is that the mental space of a car I think would cause me angst.

Anyway, the car I'm looking at is a 2015 and I'd like to get it for about 22K.

Unfortunately the math works out to be (assuming I pay cash) - just the coast of the first year!):
- $1500 insurance
- $1100 opportunity cost (22K * 0.05)
- $2200 depreciation in the car (assuming a fixed 10 year life span and car is worth $0 after 10 years)
- $0 car maintenance (this of course will NOT be zero after year 1)

So total cost of a car sitting in my driveway is $4600 or close to $400 a month. That's a lot of car shares and rentals. When I do that math it gets pretty hard to justify....

I always get close and then I do the math and I ditch the idea.... ugh... funny how I complain about owning a car costing mental space but I also feel like NOT owning a car takes mental space!

One thing that I'm struggling with a bit now is mazda has a promotion of 0% for 60 months. Almost makes buying new worth it rather than dumping a whole pile of money in one shot to buy used.


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## ian (Jun 18, 2016)

At one time we lived in downtown Toronto. A short walk to the subway, bus outside the door. Worked downtown, went to university downtown.

We decided not to have a car. Would ride our bikes down Jarvis to the Market and then over to the Island. We looked at the cost of a car, insurance, mtce, parking, what have you. It was far cheaper to rent a car whenever we needed one. Usually on the weekend and there were always low Friday PM to Sunday PM rental rates. Owning a car at that point in our lives was a mugs game.

Just bought our fifth Toyota yesterday. This time a ten year old Solara convertable with 94K on the clock. It keeps the Accord company in our garage. Yup, we like Toyotas and Hondas. Especially after having GM and Ford company cars from high
end through to standard sedans and SUV's. during my working years.


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## rl1983 (Jun 17, 2015)

Toyotas are solid, my fathers' 2006 Matrix is going strong after all these years. He babies it though, and only 160xxxkms on it.

There's not a lot out there under 30k for newer vehicles that are practical and a bit sporty. That seems to be where it starts, and then things REALLY get fun when you hit the 40k bracket. It didn't seem to be all that long ago that 30K would buy you a very nice vehicle.


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## Mukhang pera (Feb 26, 2016)

The Art of dealing ....

A retired old couple returned to a Mercedes dealership where the salesman promised to hold a car for them.

But they found the car was just sold to a beautiful, leggy, busty blonde in a mini skirt and a halter top.

The old man was visibly upset. He spoke to the salesman sharply, "Young man, you said you would hold that car till we raised the $95,000 asking price, yet you closed the deal for $75,000 to the young lady there. And if I remember right, you had insisted there was no discount for this model !

"The salesman took a deep breath, cleared his throat and reached for a large glass of water.

"Well, what can I tell you? She had the cash ready, didn't need any financing help, and, Sir, just look at her, how could I resist?", replied the grinning salesman sheepishly.

Just then the young woman walked over to the senior couple and gave the car keys to the old man.

"There you go," she said. "I told you I could get him to lower the price. See you later Dad, Happy Father's day."


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## rl1983 (Jun 17, 2015)

^ Haha. That's a good one!


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