What kind of car do you own and % of salary

[Katsmeow]

Right now I drive a Ford Explorer, DH drives a Hyundai Veloster. He is retired and I am semi-retired.

In the distant past (25 years ago) I paid about 50% of my annual income to buy a Corvette. I don't look back on it as a good decision.

Your question though is too narrow. Is it possible to pay 50% of your gross income and still retire early? Yes, under certain circumstances. It is the certain circumstances part that varies.

Keep that Lexus and drive it for the next 15 years and I don't think the fact you bought it will be a negative impact.

Trade it in every two years for ever increasingly expensive cars and yes it is a problem.

The bigger issue is that the more fun, expensive, luxury items you buy now the less you can save for the future. It is your choice how you want to make that balance.

Saving 10% of your income is good. However, unless you have a traditional pension or your income grows very, very high it won't be sufficient to allow you to retire early.

 

[pb4uski]

being in late 20s i am on this board because of the experience users have over me.....the point of this thread is to create a discussion and to obtain an understanding of how much money people allocate to cars. i do not want to be in your situation where i end up with more money than i can spend. i would like to balance my present finances with my future finances.

It is great that you own a Lexus at your age. I'll have to admit that I don't know many people your age who drive a Lexus.

I don't think of allocating a certain portion of my income to cars (or houses or whatever). I buy cars that I like and enjoy owning and that I believe give me good value for my money - at the end of the day I guess it is a judgement call on my priorities. While I could probably 'afford" a Lexus, what I would need to spend for a Lexus is just more than I would want to spend on a car.

DD is about you age and very LBYM. She owns a nice used Saab that was probably 20-30% of her gross when she purchased it but I suspect that she will drive it until the fenders fall off. Unfortunately I don't have many datapoints to offer.

What do your peers who seem to be positioning themselves well for financial independence drive? That might give you better insight than us geezers.

 

[savory]

I find your question difficult to answer. ER is based upon how much is saved, not spent. Thinking with the end in mind, a person needs to determine how much money they think will be required when they retire. As you know, there are lots of tools to help you with that. Based upon the analysis, you will be able to know how much to save. Once you have built your saving plan, you will know the amount of assets required for a successful ER. Buy all the cars, houses, etc. that fit into your plan. Save more money to reduce the likelihood of failure during ER. Spend more money now to enjoy the present and raise the future risk. There is not a right answer, just one that makes you comfortable. For me, material things are not that important. But, as I look back, while I was frugal, I still think I spent too much money on my various homes purchased during re-locations.

 

[foxfirev5]

My DW bought a new Lexus 8 years ago. Best car either of us has ever had. No regrets and no plans to get rid of it any time soon.
Also it certainly has had no negative impact on our FI or RE plans. Buy what you want and keep it forever.

 

[Gumby]

The last car we bought was about 12.5% of our gross annual wages, but only about 1.25% of our net worth. I expect we'll have it for at least the next 15 years.

I should add that it's also by far the most expensive car we've ever purchased.

 

[Walt34]

We're in the group that will buy a nice new car but then keep it until either reliability or parts availability become issues. In 2002/2003 we bought two new cars and a new house all in the same 12-month period but I'm pretty sure we'll never do that again. All of those purchases were planned years in advance so they were not impulse buys. The two new vehicles replaced a 14-year-old car and an 18-year-old pickup truck.

 

[azphx1972]

I'm probably a bad example since I'm a car enthusiast, and own several vehicles. My daily driver is a used Honda that cost 4.5% of my gross salary at the time. The value of all of my vehicles represents one year's salary, and I owe approx 50% of my gross salary on outstanding vehicle loans (@1.99%). However, I'm pretty frugal in other areas of my life, and my annual expenses are about 45% of my gross salary, plus I have four times my salary accumulated in retirement savings.

 

[RE2Boys]

FIRE (Financially Independent, Retired Early) is generally a state of mind. With financial independence, one can choose to work or not work, with or without compensation. Spending a lot on luxury items is generally not considered the way to financial independence. Attaining FI is so ingrained that I could not imagine splurging on such an item, would not wish to jeopardize reaching FI by such a splurge. But we all have some special item/activity that gives us pleasure and a car may be yours. For me, there was a 15 year period where an annual ski vacation (lived in Alabama at the time) was my special exemption to being FI orientated.

Regarding your question, most I spent on a car was for my first new car in 1974 which cost me about 35% of my income in that period. My last new car, an 1989 Grand Prix, was at about 20% of that years income. Since then, I've always been below the 20% level after realizing that 1-3 year old used cars provided the most bang for the buck. Last car a bought was a 2005 Freestar Limited in 2007, got it for about 40% of the original sticker price. Have yet to pay over $20K for any vehicle and only once in my life did I finance a car. Financing, until the advent of 1% or less deals, was not consistent with achieving FI.
Once I reached FI, I was no longer beholden to the organization or management for my continued comfort. Where I work seasonally, they know that I can take or leave the job, they treat me really nicely.

 

[scrabbler1]

The first car I bought (new) in 1986 I spent about 25% of my annual income (which was rising quickly in the late 1980s). The second car I bought (used, with a trade-in) in 1992 I spent about 17% of my annual income (which was still rising quickly but not as quickly as in the 1980s). My current car I bought in 2007 (a new Corolla) I spent about 60% of my annual income but that was because I reduced (again) my annual income in anticipation of an early retirement in 2008. The car, paid in cash like the other two, was only about 5% of my taxable investments so it was barely a blip on the radar screen.

 

[truenorth418]

I drove 2 BMW 3 series during my accumulation phase, though at least I bought them "pre-owned". I regret it now because the maintenance and repairs over time (15 years between the 2 of them) added up to more than I paid to buy them. Approaching ER I traded the second one in toward a used 2009 Honda Civic which is driving well and is cheap to drive and maintain. I guess it doesn't have the prestige of the BMW brand but that's not what I'm about anymore.

 

[braumeister]

I'm happy with my car, which cost less than 25% of our annual budget. Being the kind of person who actually enjoys long drives, I typically put well over 20,000 miles per year on my car, so they tend to last 6-8 years before I feel it advisable to get a new one.

When I was the OP's age, and for a good while after, I thought my ultimate goal would be to own a Mercedes Benz. But as others have said, the feeling passed without my even realizing it. I could afford one now, but no longer have any interest in it. My Honda meets my needs nicely, is extremely comfortable, and I will probably buy another one when the time comes.

OTOH, I have two friends who own and love BMWs. I have to smile inwardly at the fact that a significant fraction of their conversation revolves around discussion of the latest repair work they're having done, and how close a relationship they have with their BMW repairman. It's worth it to them, but not to me.

 

[Purron]

Old beat up Subaru. Bought it new many years ago. Not even factored into net worth. But it does bring this classic song to mind So guess it's worth somthin'
Blondie - Rapture - YouTube

 

[growing_older]

Usually it cost me less than 10% of gross salary for a new-to-me used car, but the last one I bought I sprung for new at a little over 15% of gross. Then I still have that car 17 years later, so on the whole the new car was cheaper in the long run than the used ones were.

If I manage to retire in a few years, one of the first things I might like to do is drive all around the country, so it could be time for another new car purchase.

 

[FIRE'd@51]

I spent approx 50% of my gross on a Lexus.

I notice you said spent, not spend. I interpret that as meaning you bought a car with a price equal to 50% of your income. No big deal, IMO.

The relevant question is not what % of your income the car price is, but what the annual carrying cost is as a % of your income. I don't think 50% of your income is that unusual if you are talking about the purchase price of the car. The average income in the US is about 40K, yet it's pretty hard to find a new car for less than 20k.

Let's say someone makes 100K per year and buys a 50K car. Today you can finance a new car for 6 years at 3% (or less). The car payments in this example would be about 9K per year, or only 9% of one's income.

 

[M Paquette]

Salary... Salary... Prithee, Stranger, what is this "Salary" you speak of?

 

[Zathras]

About 90% of my current income (retired for 7 years).
Of course, I had saved up for this, going into debt for that would have been bad.
Fancier car than I normally would buy, but only EV with 150+ range.
We felt we owed it to our nieces and nephews, the rest of the next generation, our brave soldiers and figured if we can reduce our own contribution to our trade deficit, we should.
Next car will likely be 33% to 50%. Also keep in mind we won't be spending 3% of our income on gas, and instead about 0.3% on electricity.

 

[Nords]

I been advised I spent too much on my car and curious what people on this board have spent on cars.
I spent approx 50% of my gross on a Lexus.

I don't think that it matters what you spend on anything while you're earning a paycheck.

What matters is how much you're saving for financial independence, and your FI budget is going to determine how much you're going to need to save.

I've never read or heard about anyone trying to compare the car you buy to a percentage of your income. However I've read plenty about how many hours you'd have to work (after taxes) to earn the money to buy the car. How many hours of your life did you have to work to buy yours?

I think you're wasting your time trying to [-]rationalize[/-] ratio the car's expense to a salary percentage. You might gain more insight from trying to forecast your FI budget and boosting your savings rate.

If you can only boost your savings by selling the car, then that's a decision about your values. And if a car is worth that much to you, well then you'd better be willing to work for it.
How many years does it take to become financially independent?

 

[NYEXPAT]

If it helps, I bought every car I ever wanted and still retired 25 years ago at 34. Here is a partial list motorcycles not included)

1967 Chrysler 300L (new)
1969 Triumph GT6 (used)
1974 Datsun 260Z (new)
1976 Honda Civic (new)
1980 Mazda RX-7 (new)
1969 Aston Martin (used)
1980 Chevrolet Corvette (used)
1987 Jeep Cherokee Limited (new)
1989 Mercedes 420 SEL (new)
1992 Jaguar XJ6 (new)
1994 BMW 740 I (new)
1994 Cheverolet Yukon Sport (new)
1998 GMC Yukon Sport (new)
2000 Porsche Boxster S (new)
1997 Toyota Caldina SW (used)

I have no idea "what % of income" I spent as they were almost all company owned (25 years later ex still owns the company) but she was more in to shoes!

I got over the whole "car thing" years ago (now do not own a car) but everyday a few cars pass me while I am walking around the city and still manage to turn my head. While I still give the obligatory admiring glance to a Ferrari or Mercedes, I find it is better to receive than to give and enjoy the admiring glances of Chica's much more so, when I am not wrapped up in a phallic symbol!

 

[brewer12345]

I am not a car person, so mostly I view cars as appliances. I am aware other people see things differently, and much luck to them. Usually, I buy new and keep for 10+ years. The last vehicle we bought was my cowboy cadillac, a crew cab F150. It was by far the most expensive vehicle we have ever bought, but well worth the expense every time I hitch up the travel trailer or go down a Forest Service road while hunting. I guess it cost about 30% of my gross for the year, give or take.

OP, I am not sure what you are looking for, but it really doesn't matter what you spend your money on. What matters is that you save enough to reach your goals in the time you wanted to reach them.

 

[Animorph]

I bought 3 new cars while I was working. Each was right about 75% of my gross salary. The first required a loan from my dad, the other two I paid for with cash. No regrets, I enjoyed them every day, spent a lot of time with them, and was active in the car club until I had kids. I would have hated an econobox every one of those days, and I am often shocked at how crappy most of my rental cars drive.

You have your income throughout your life. It's up to you to spend it in a way that makes you feel best. I cheap-out on plenty of stuff, but not my cars. And I do keep them for a long time.

 

[CyclingInvestor]

I am not a car person at all, and have only owned a car about 1/3rd of my adult life (motorcycle maybe 1/5th, the rest bicycle only). I generally spent $1k - $2k on each, so a median of maybe 2%. The one new car I bought 26 years ago (Toyota Camry) would bring the mean up to about 4%.

 

[Ronstar]

We have 2 acuras, a corvette and an F-150. They averaged about 15% of our income in the years that we bought them.

 

[NW-Bound]

The last time we bought a new car was in 2003, and it was an SUV for my wife. We paid cash for it, and it now has but 27K miles on it. It will be a while before we need to buy another new vehicle. I recently needed to get a toad to tow behind my RV, and bought a used one.

I see that the OP is still young in his late 20s. At that age, surely I cared more about cars too. I did not buy anything expensive because I was frugal. Now, I do not care much about cars any more.

My nephew has an Audi S4 with a V8 engine and a 6-speed stick shift. As a pharmarcist in his early 30s and single, surely he could afford it, and I told him that he should enjoy it while in his youth and still cared about it. I drove his car once when he wanted me to pick him up at the airport, and frankly, driving a stick shift is too much work for me nowadays. That time is way past for me. I had a Datsun 280Z back in those days, and though not an expensive car it did get my adrenaline up.

So, I think young people should enjoy cars when they still care about it. As long as one does not trade one in every 3 or 4 years, it should not make much of an impact on his ability to ER.

 

[Major Tom]

3 years ago, I spent 0.64% of my annual gross on my set of wheels.

Admission - the set of wheels in question (my only form of transport) was a bicycle which I found used on Craigslist

The annual maintenance cost is a pleasingly low figure!

 

[FIREd]

Compared to the people living in my building, we have very cheap cars. Still, it sickens me to see all the dents and scratches made by people who carelessly bang their car doors against mine. I am so glad I don't have a luxury car.