Percentage of income you would spend on a DD

We have a lot of threads about daily drivers and spending limits on such vehicles, and I'm left wondering; what kind of money would you spend as a percentage of gross annual income on a daily driver?

For folks looking at a DD, what are you thinking of spending as it relates to your income? Folks that have purchased in the last few years, what about you all? I'm wondering if I'm just naturally "inexpensive" or what, and I haven't purchased a proper DD since... never? I'm still driving the car I was given by my parents when I was a college student, and it was 2001 when I got the thing, so I'm pretty happy to stay on the cheap end. My Mustang is kind of a toy that is being pressed into service as a trips car because it has working HVAC and the DD doesn't.

Maybe this has been asked before, if so I apologize for the redundancy.

I would say no more than 20% inc insurance, plates, tires etc. If it's new you've got a warranty, if older I'd factor in spares as well.

We're willing to go about 20% of household annual income for 1 of our main 2 cars. Of course, we don't buy DDs very often; like every 9-10 years. We'll probably go longer than that this time - hers is a 2004 bought new in 2004; mine is a 2003 bought new in early 2007. I don't see either of these cars going away in the next 5 years unless something catastrophic happens.

[edit] By 20%, I mean purchase price. But it probably works out to more like 5-10% per annum on an ongoing basis, counting insurance, maintenance, etc.

E36 M3.... i couldn't even afford a new DD by those rules.

Swank Force One wrote: E36 M3.... i couldn't even afford a new DD by those rules.

cars.com says the cheapest new cars 30 miles around me are barely out of reach. And that's before I do anything like put a plate or insurance on the thing. If I was playing this only by the dollar signs, I'd be searching CL for bigger cities in my time zone for an Insight and a small trailer and ditch a couple cars that are currently in my driveway. But what fun would that be?

Swank Force One wrote: E36 M3.... i couldn't even afford a new DD by those rules.

If we keep my wife's TSX another 5 years, we will have owned it for 14 years, it will have well under 100k on it, and it will likely have not needed anything other than gas, oil, tires, and brakes. And insurance, of course. We will have paid about $2700 a year complete cost of ownership, minus gas.

Generally I would look up some "budgeting" guidelines like Dave Ramsey or similar to see what they recommend and adjust all of the amounts to fit your situation. Like for me we have no Mortgage so my Housing expense is Insurance/taxes which are approx. 3% gross so I feel comfortable spending more on the DD.

As a Percentage of Gross, My wife's and My car where 40% to purchase outright of Annual Gross. My wifes car was bought New with cash, mine was financed. Monthly this plus insurance on both cars works out to a whole 6% of our Take home. I don't think I'd really want to spend much more. If both where financed it would be around 10%. 20% would be extreme for me and I don't have other debt.

5% if its cheap to run. Otherwise $1500 max.

In reply to nocones:

I was looking at this more as a "what are the other inmates in the asylum spending on DD's" and not some kind of smart financial decision maker. That'd be boring.

I spent three thousand on my Civic and it has lasted me 3 years so far with only oil, tires, battery and few other small parts so far.

I'm DDing a crapcan - less than 1%. Care & feeding annually is about the same as purchase price. It is costing in time though. Considering stepping it up to a little nicer ride - more like a 10%er

Duke wrote:

Swank Force One wrote: E36 M3.... i couldn't even afford a new DD by those rules.

If we keep my wife's TSX another 5 years, we will have owned it for 14 years, it will have well under 100k on it, and it will likely have not needed anything other than gas, oil, tires, and brakes. And insurance, of course. We will have paid about $2700 a year complete cost of ownership, minus gas.

Oh.... i thought you meant purchase price should only be 20% of your income. I took that to mean that i will never own a brand new car in my lifetime.

I think the MX6 has cost me about... $800/yr including everything but gas.

But it's certainly not nice.

GRM is the wrong place to ask this as we'll mostly string and duct tape together a 20 year old pile with an engine swap to keep driving... but Google tells me a good "rule of thumb" is as follows:

...the 20/4/10 rule of thumb for buying a car. You should pay at least 20% down, finance for no more that four years, and the payment should be less than 10% of your income. The first part of this rule prevents you from owing more than the car is worth, and the last two parts prevent you from buying more car than you can afford."

There are far worse approaches, so that sounds pretty reasonable to me.

pres589 wrote: In reply to nocones: I was looking at this more as a "what are the other inmates in the asylum spending on DD's" and not some kind of smart financial decision maker. That'd be boring.

For a DD for myself, i've never spent more than $2k.

If i want to step up to something nicer, or if i was shopping for SWMBO again (She got the Cherokee last time), i'd probably step up to $5k for a good "Sweet Spot."

We got lucky on the Cherokee, got it for $3k.

The next time she'll get a "new" DD will be when FJ Cruisers drop down under $10k for a nice one.

For me.... i'll probably drive this MX6 for another decade, then re-evaluate. I purchased it for $900 3.5 years ago.

I didn't really answer the question, my bad.

As a percentage of gross annual income, i'm OK with spending about... 3% for myself.

Total between DDs for both drivers in the household, both incomes... 10% is about what i'm ok with, but tend to stay under.

My lease is less then 1% with insurance and gas + payment. I don't even like having that. The next car will push it to ~2% give or take physically hurts me to think about. When you grew up poor you hate revolving payments.

The fun cars I pay for in cash sell one add another stack of bills on top if I want to upgrade.

At 20% both my wife and I would have Bentley's.

My spending seems to be similar - 20% at most, and several of them have been 10% or less.

Duke wrote: mine is a 2003 bought new in early 2007.

where did you find a 4 year old, new car?

for my DD, I always try to keep it under 3k. then I drive it, and fix it.. and after an average of 7 years or so, I get another.

Our last two major DD total purchase prices were 17% and 13% of our annual gross at that time. From a monthly payment perspective, the loans were roughly 3% of our monthly income. The 17% one was purchased new and the 13% one was a CPO. They are now 7 and 8 years old, respectively, and we're hoping to get another 5 years out of each of them. Both have been paid off for a while now.

In terms of maintenance and repair, I usually try to budget about $1500 per vehicle per year (I drive about 25k per year on my DD, and we put at least 15K on my wife's car, so our running costs are probably higher than usual). That number does not include things like taxes and insurance. I handle a good portion of the maintenance myself, and take it to the dealer/mechanic when I don't have the time/tools/skills to complete the job. Things like tires can really eat into that maintenance budget, so if I have some extra left over from one year, I add it to the next year.

I've never looked at it in the perspective of annual income before, we just have some numbers in our head as to what's a reasonable car purchase that likely won't change much even if our income does change. When at all possible, we usually pay our vehicles off in about 1/2 the term of the loan we take (i.e. 5 year loan is usually paid off in 2.5 years.) Another thing we've tried to avoid is having multiple car payments at a point in time.

As others have said, a lot depends on your overall financial situation and debt levels.

Around 18% net or so, just on the payment.

My car payment is actually bigger than my half of the house payment. I like driving a new, nice, fast car that I don't have to worry about fixing.

If it was preventing me from saving the ~30% net that I do, I would definitely not be driving something as nice or new.

In reply to wearymicrobe:

Something tells me you're in an income bracket I cannot fathom. Less than 1% of your annual gross income goes into leasing, insuring, and fueling a car?

Swank Force One wrote:

Duke wrote:

Swank Force One wrote: E36 M3.... i couldn't even afford a new DD by those rules.

If we keep my wife's TSX another 5 years, we will have owned it for 14 years, it will have well under 100k on it, and it will likely have not needed anything other than gas, oil, tires, and brakes. And insurance, of course. We will have paid about $2700 a year complete cost of ownership, minus gas.

Oh.... i thought you meant purchase price should only be 20% of your income. I took that to mean that i will never own a brand new car in my lifetime.

Well, that is actually what I did mean. We paid about 20% of our combined annual income to buy the car new. With my car (used, 3 years old) it was more like 15%.

Lifetime cost-of-ownership (minus gas) for the TSX is going to work out to roughly 1.5%-2% of our income per year over the predicted 15-year lifespan.

Depends how much you make. Below a certain level, it's basically a fixed amount regardless of what you make, even if you get the most reliable old Corolla in the world, and unless it's expensive/a troublesome E36 M3box there's no way to "downsize" to save money.

If "downsizing" is an option I'd say ~20% net, if you've already "hit rock bottom" as I described above (which is quite easy to do), it's when you'd be better off getting rid of the car and finding a job within walking distance/taking the bus.

Duke wrote:

Swank Force One wrote:

Duke wrote:

Swank Force One wrote: E36 M3.... i couldn't even afford a new DD by those rules.

If we keep my wife's TSX another 5 years, we will have owned it for 14 years, it will have well under 100k on it, and it will likely have not needed anything other than gas, oil, tires, and brakes. And insurance, of course. We will have paid about $2700 a year complete cost of ownership, minus gas.

Oh.... i thought you meant purchase price should only be 20% of your income. I took that to mean that i will never own a brand new car in my lifetime.

Well, that is actually what I did mean. We paid about 20% of our combined annual income to buy the car new. With my car (used, 3 years old) it was more like 15%. Lifetime cost-of-ownership (minus gas) for the TSX is going to work out to roughly 1.5%-2% of our income per year over the predicted 15-year lifespan.

Oh.... Bummer. Not really any cars sold brand new for less than $8k these days.

Swank Force One wrote:

Duke wrote:

Swank Force One wrote:

Duke wrote:

Swank Force One wrote: E36 M3.... i couldn't even afford a new DD by those rules.

If we keep my wife's TSX another 5 years, we will have owned it for 14 years, it will have well under 100k on it, and it will likely have not needed anything other than gas, oil, tires, and brakes. And insurance, of course. We will have paid about $2700 a year complete cost of ownership, minus gas.

Oh.... i thought you meant purchase price should only be 20% of your income. I took that to mean that i will never own a brand new car in my lifetime.

Well, that is actually what I did mean. We paid about 20% of our combined annual income to buy the car new. With my car (used, 3 years old) it was more like 15%. Lifetime cost-of-ownership (minus gas) for the TSX is going to work out to roughly 1.5%-2% of our income per year over the predicted 15-year lifespan.

Oh.... Bummer. Not really any cars sold brand new for less than $8k these days.

Sorry, man, if it's any consolation, compared to Weary, you and I are the same...