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Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:02 pm
by Hyades
Hi Guys,
After reading the other thread (vehicle resale value) this got me thinking. What does the average guy pay per month on their vehicle. Not the maintenance, the actual amount you pay back to the bank.
I know of some guys earning about R30k to R35k per month, but they spend R9k+ per month just on HP payments. From where I'm standing that is crazy. I cannot fathom spending almost a third of my salary just on a vehicle's financing.
Am I crazy, or is this the norm? Cause I see a lot of new double cabs, and they are all in and over the R500k mark. If financed without a balloon, the monthly cost is over R10k per month?
The above mentioned guy is also the guy you ask what he paid for the car then he says R550k.
Then I ask, "
ohh so you bought it cash"
"
No no, I'm paying it off" is always the answer I get.
I always ask them if they've made the calculation as to what that R550k car costs after you've paid it off. It's way, WAY more than R550k. To my surprise very few people ever make this sum, or just choose not to think about the R550k car they paid over R700k for. Dunno...
So what does the average guy percentage wise, spend on their car per month? Third, quarter, fifth, a tenth of their monthly salary?
Me... 0% I don't have vehicle debt, but I would love a new double cab
Just can't bring myself to spend that money...
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:19 pm
by Ricof4e
I understand your argument, but there is another argument to make.
For instance, I have a 12k vehicle allowance at my disposal. I get hammered by the tax man if I buy any vehicle with a monthly payment of >8k.
As the vehicle is used 90% for work, I am able to off-set the depreciation for three years against my tax dues. Then the cycle starts again for the next vehicle. Luckily, Namibia has no Capital Gains Tax.... yet.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:21 pm
by Ricof4e
To add, my wife's vehicle has been paid off. Thus, the 8k I pay a month (no balloon - just a large deposit made when I bought it) is actually very low considering our combined income. I can therefore afford a 4x4 D/C.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:40 pm
by Hyades
Ricoffy wrote: ↑Wed Jul 24, 2019 3:19 pm
I understand your argument, but there is another argument to make.
For instance, I have a 12k vehicle allowance at my disposal. I get hammered by the tax man if I buy any vehicle with a monthly payment of >8k.
As the vehicle is used 90% for work, I am able to off-set the depreciation for three years against my tax dues. Then the cycle starts again for the next vehicle. Luckily, Namibia has no Capital Gains Tax.... yet.
Yep, I'm guessing there are rather a few guys that get vehicle allowance from their employer.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:49 pm
by KurtG
Are you talking about the before tax earnings or the amount that is transferred into your account by your employer?
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:51 pm
by Ricof4e
Hyades wrote: ↑Wed Jul 24, 2019 3:40 pm
Ricoffy wrote: ↑Wed Jul 24, 2019 3:19 pm
I understand your argument, but there is another argument to make.
For instance, I have a 12k vehicle allowance at my disposal. I get hammered by the tax man if I buy any vehicle with a monthly payment of >8k.
As the vehicle is used 90% for work, I am able to off-set the depreciation for three years against my tax dues. Then the cycle starts again for the next vehicle. Luckily, Namibia has no Capital Gains Tax.... yet.
Yep, I'm guessing there are rather a few guys that get vehicle allowance from their employer.
Maybe so. I follow a simple formula:
1) If you can afford 10k a month for a 4x4, buy for 8k
2) Save the 2k religiously every month;
3) Sell in three to four years just as you are able to get 10% to 20% of the vehicle's value (at the time of trading in back in your pocket) - use the proceeds and savings as a deposit for the new car.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 3:53 pm
by Ricof4e
KurtG wrote: ↑Wed Jul 24, 2019 3:49 pm
Are you talking about the before tax earnings or the amount that is transferred into your account by your employer?
Its a fringe benefit, so it accounts for the gross income prior to deductions.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 4:06 pm
by Hyades
Ricoffy wrote: ↑Wed Jul 24, 2019 3:51 pm
Hyades wrote: ↑Wed Jul 24, 2019 3:40 pm
Ricoffy wrote: ↑Wed Jul 24, 2019 3:19 pm
I understand your argument, but there is another argument to make.
For instance, I have a 12k vehicle allowance at my disposal. I get hammered by the tax man if I buy any vehicle with a monthly payment of >8k.
As the vehicle is used 90% for work, I am able to off-set the depreciation for three years against my tax dues. Then the cycle starts again for the next vehicle. Luckily, Namibia has no Capital Gains Tax.... yet.
Yep, I'm guessing there are rather a few guys that get vehicle allowance from their employer.
Maybe so. I follow a simple formula:
1) If you can afford 10k a month for a 4x4, buy for 8k
That's very good! I think few people do it like this
2) Save the 2k religiously every month;
Agree with this as well
3) Sell in three to four years just as you are able to get 10% to 20% of the vehicle's value (at the time of trading in back in your pocket) - use the proceeds and savings as a deposit for the new car.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 4:18 pm
by Mad Manny
Buying a vehicle you can barely afford 'for tax reasons' is as stupid as buying with a balloon payment 'for tax reasons'...
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 4:20 pm
by KurtG
Ricoffy wrote:
Its a fringe benefit, so it accounts for the gross income prior to deductions.
Sorry, I was asking Hyades how his requested calculation should work. Are we calculating the % monthly payment versus gross income, or take home pay?
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 4:26 pm
by Ricof4e
Mad Manny wrote: ↑Wed Jul 24, 2019 4:18 pm
Buying a vehicle you can barely afford 'for tax reasons' is as stupid as buying with a balloon payment 'for tax reasons'...
I agree
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 4:41 pm
by Hyades
KurtG wrote: ↑Wed Jul 24, 2019 4:20 pm
Ricoffy wrote:
Its a fringe benefit, so it accounts for the gross income prior to deductions.
Sorry, I was asking Hyades how his requested calculation should work. Are we calculating the % monthly payment versus gross income, or take home pay?
Sorry Kurt,
I suppose take home pay. In the example I gave in the first post. The guy is earning R35k, so I'm guessing that's about R28ish per month take home? not sure. Either way, it boils down to about a third of his salary, before or after tax.
Just spit-balling here, starting to wonder if I'm just a tight cu$#, haha
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 4:56 pm
by KurtG
In that case for our combined household income I’m at less than 10% for both cars.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 5:13 pm
by Hyades
I see there are a lot of views, but not a lot of votes...
Guessing it is the norm to spend more than 30% of one's salary on vehicle repayments.
The votes are anonymous.
Re: Percentage of income spent on vehicle repayments?
Posted: Wed Jul 24, 2019 6:06 pm
by Rabbiddog RIP 7/6/21
I have only financed 6 vehicles of all the ones i have owned.
I do not believe in balloon payments, changing to a newer vehicles every 3 years, or paying more than 10% of your disposable income on a liability.
99% of vehicles are not an asset.