random_username 0 Report post Posted March 9, 2011 so, i noticed some pointers floating around on the net about how much a house instalment/house price should be as a percentage of income or net worth. are there any of these guidelines for cost of car (just total buy price and instalments where applicable, not counting maintenance. parking etc). or any personal guidelines i can take the cue from? i'm pretty shocked at how much some of my peers spend on their cars, as a percentage to their net worth (shocked as in i think it's v high for something that depreciates so much from the get go). TIA! Share this post Link to post Share on other sites
gimz63251073 0 Report post Posted March 10, 2011 different percentage for people with different situation. I don't think there is a formula to say 10% or 20%. personally, i would take a prudent approach and not load myself with liabilities. So my ratios/approach: - The monthly instalment for housing is to be fully paid by CPF contribution with excess every month. - A 40% to 50% downpayment for car (in future, when wife have kids) - Insurance coverage for myself in case something unfortunate happens - contribute monthly to a reserve account for rainy days - save 50% of bonus every year, the rest distribute to parents, wife and myself. - whenever i get an increment, i save the 50% of the increment given. My beliefs: - no need for branded goods, just keep urself fit and healthy and u will look twice as nice as the uncle in LV - your car does not reflect your social status anymore. with 0% downpayment, anyone can get a car. - not concerned about being judged. People judge u from the car, house or whatever u wear. So long as you are comfortable, why bother? networth usually counts for nothing really unless u are able to sell off your assets for cash. Many people have the bulk of their networth in their house, which they cannot sell (unless they want to sleep in parks/bus stops). Where personal finance is concerned, i would pay most attention to cashflow, i.e. ensure a positive cashflow at the end of every month. Share this post Link to post Share on other sites
kalimantan 6 Report post Posted March 19, 2011 Net worth = total asset less total liabilities. Residential house is excluded from total asset calculations (only can add 2nd property owwards). Therefore most people so-called total asset is worth much less. Share this post Link to post Share on other sites
random_username 0 Report post Posted March 19, 2011 (edited) different percentage for people with different situation. I don't think there is a formula to say 10% or 20%. personally, i would take a prudent approach and not load myself with liabilities. So my ratios/approach: - The monthly instalment for housing is to be fully paid by CPF contribution with excess every month. - A 40% to 50% downpayment for car (in future, when wife have kids) - Insurance coverage for myself in case something unfortunate happens - contribute monthly to a reserve account for rainy days - save 50% of bonus every year, the rest distribute to parents, wife and myself. - whenever i get an increment, i save the 50% of the increment given. My beliefs: - no need for branded goods, just keep urself fit and healthy and u will look twice as nice as the uncle in LV - your car does not reflect your social status anymore. with 0% downpayment, anyone can get a car. - not concerned about being judged. People judge u from the car, house or whatever u wear. So long as you are comfortable, why bother? networth usually counts for nothing really unless u are able to sell off your assets for cash. Many people have the bulk of their networth in their house, which they cannot sell (unless they want to sleep in parks/bus stops). Where personal finance is concerned, i would pay most attention to cashflow, i.e. ensure a positive cashflow at the end of every month. oh, i didn't know that there's 0% downpayment for car! But, the financing companies will assess income before lending, i assume? in what circumstances would it make sense to pay for a car in full without loan, then? Net worth = total asset less total liabilities. Residential house is excluded from total asset calculations (only can add 2nd property owwards). Therefore most people so-called total asset is worth much less. based on that, then, do you have a guideline as to how much a car should take up? i'm assuming that though the residence is excluded from total asset calculations, the loan, if any, on the residence will still be factored in the liabilities? Edited March 19, 2011 by random_username Share this post Link to post Share on other sites
eiffel76 1 Report post Posted March 20, 2011 i guess can approach fr another angle ie. how much one intends to save. eg. if one draws 5k and seeks to save 1k, then 4k is avail for use, be it household, car, luxury etc. so it doesnt matter if ur colleague drives a better car than u, u simply chose to save more than him. just a matter of choice la Share this post Link to post Share on other sites
bepgof 20 Report post Posted March 21, 2011 (edited) Bought the 1st 2nd hand car at $21k in 1997 when 2nd child was born. Loan 10K, 36 instalments. 2 yr later, changed to another "better" 2nd car. Loan 10K, 36 instalment. 3rd, 4th & 5th-existing car are "brand new", loan 10K, 36 instalments. These have been my "yardsticks". Let me provide forumers some figures (1.5L, japanese car) 1. Monthly instalment -342 2. Monthly fuel - 320 3. Insurance - 789, /12 = 66 4. Rd Tax - 682,/12 = 57 5. Parking (hdb, erp, coupon)- 150 6. Maintenance (eng oil, brake, battery, tire..)- 70 Totol(monthly) =1,005 = $33.5/per day Mine + wife combin income slightly >10K, say take as 10K. 1. Housing - $370/10000 = 3.7% 2. Car = 1005/10000 = 10.1% 3. Saving ~ 2-3K (cash), excl personal insurance.... 4. All expenses So, 10% to 15% of income on car is "quite normal", unless is "performance car" which the insurance is abt 3K/yr, = 250/monthly. - Mah BT's 35%-40% on housing, to me is too much at present. so, i noticed some pointers floating around on the net about how much a house instalment/house price should be as a percentage of income or net worth. are there any of these guidelines for cost of car (just total buy price and instalments where applicable, not counting maintenance. parking etc). or any personal guidelines i can take the cue from? i'm pretty shocked at how much some of my peers spend on their cars, as a percentage to their net worth (shocked as in i think it's v high for something that depreciates so much from the get go). TIA! Edited March 21, 2011 by bepgof Share this post Link to post Share on other sites
gimz63251073 0 Report post Posted March 21, 2011 oh, i didn't know that there's 0% downpayment for car! But, the financing companies will assess income before lending, i assume? in what circumstances would it make sense to pay for a car in full without loan, then? yes there is... it always make sense to pay full. Interest on cars are charged at flat rate basis, so the effective interest rate is very high. while u can get a car without any downpayment, its effectively financial suicide. Lets say u get a car with $0 downpayment, some time down the road u decide to sell it off. But u realise that u need to pay $ to sell it off as the value of car is not enough to repay the loan amount. A typical 10year car loan takes around 7-8years to breakeven, i.e. sell car without topping up. So a $0 downpayment effectively makes a poor man poorer. So if u ask me, when would it make sense to pay in full? My answer is always. Share this post Link to post Share on other sites
archenemy 0 Report post Posted March 30, 2011 generally...your annual income is the value of the car you should buy... if your annual income is $50K..then buy a $50K car lor.. but that is just a very general guide...ultimately..there are lots of other factors to consider, eg liabilities, spending pattern, lifestyle, income constant or not, job stable or not etc etc... do your sums properly..and dont over-estimate yourself. the machine price of the car is usually only 1/2 of what you need to pay every month to keep the car going...good luck.. Share this post Link to post Share on other sites
wd88 0 Report post Posted March 31, 2011 (edited) For me, it was my first car (brand new) that I took a 70% loan but 5 years quantum. As for my 2nd brand new car, I took 40% loan and returned in less than 3 years, and then paid up fully for my 3rd brand new car. (I hate to pay interest and I know some people will say I am dumb not to take loan) After doing all the above stupid things, I realised I could have at least $150 k cash at hands if I did not go into those buying spree(just buying the car and not considering other factors like insurance, road tax, petrol, etc). I changed car like every 2.5 years..dumb me! My current car is 2nd hand car which was a year old when I bought in 2008, and the first owner lost the 25-28k for the premium. So my advice to you is that try to buy 2nd hand car (since COE is so high now, it is simply not worth it) if you really need one. I am currently looking for a second 2nd hand car now as my wife is using my car for her business but I am trying to resist the temptation. Even a 2nd hand car could make you $10-15k poorer annually if you factor in the insurance, road tax, petrol, traffic fines, etc. I do not generally quantify the ownership of car based on net worth, but rather it is based on how much you are willing to lose thru depreciation. So the conclusion is do not own a car if you do not need one. Take public transport if you can! Edited March 31, 2011 by wd88 Share this post Link to post Share on other sites
dreamhouse 0 Report post Posted March 31, 2011 here is what i think: realise that car is an (expensive) luxury item understand that you lose $ when you sell/change car - regardless of "break even" point buy the cheapest car you like drive for as long as you can enjoy your car... Share this post Link to post Share on other sites
random_username 0 Report post Posted April 7, 2011 super interesting! Thanks for all the views :) Share this post Link to post Share on other sites
