What percentage of your net worth should be dedicated to your vehicle?

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GuiltyDetective133@reddit

I’d say a good used car in good mechanical condition is $8,000. And I’d recommend 5% of your net worth to be spent on a car purchase. So I’m around $110k in my stock portfolio, and 50k in my Roth portfolios, and my car is a 2003 BMW E46 330Ci 5 Speed that I bought for $5,000 6 years ago and spent $2,200 fixing the transmission and replacing aged parts. I’ll continue to live by the 5% rule but it’s pretty understandable for someone who is young to spend $6-8,000 on a car and have that be your entire net worth.

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smallcooper@reddit

I'm 28 and have spent over half of my life's income on cars. That's normal right?

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unatleticodemadrid@reddit

Never more than 10%.

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shellmiro@reddit

I'm curious seeing your collection, if you don't mind, what percent of your net annual income are you comfortable spending on buying cars?

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unatleticodemadrid@reddit

It’s the second, I buy whatever catches my fancy. I’ll be at around 15% this year but I also have a couple of large payments coming up for allocations/bids so it’s not consistently that high.

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Kitchen-Lab9028@reddit

Really curious what you do for a living?

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unatleticodemadrid@reddit

Finance

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TheArchist@reddit

really shit question because cars depreciate and their "value" is dependent entirely on what you use them for. not to mention it also matters what you're trying to pay off and if you'll actually stick with it for years and years down the line or are you just gonna hop around in different lease deals, which completely changes the question.

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jasonmoyer@reddit

150%

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Shmokesshweed@reddit

Congrats on your 120 month 19% loan on this lightly used 2005 Corolla.

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dissss0@reddit

Still paying off the loan on the previous car too (a sweet Ram 3500 which was totalled in an unfortunate drunk driving incident)

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SnooChipmunks2079@reddit

Net worth is irrelevant in my opinion, because cars are almost uniformly depreciating assets and should be looked at as cost as a percentage of income, not assets. Our cars are worth around 2.5% of our net worth, a 2018 Camry and a 2023 Bolt EUV.

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BuriedMystic@reddit

Umm… cars are very often depreciating assets, but they are still ASSETS. If you have positive equity you can sell and gain liquidity.

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SnooChipmunks2079@reddit

Sure, they're assets, but for personal finance purposes, my argument is that it makes more sense to think of them in terms of an expense - what does it cost in depreciation, insurance, loan, service, etcetera per month. That may make more sense for someone who buys a car and has it for a while. If you're buying a different car every few months or every year then it may make sense to think of it in terms of being an asset. I guess I'm just really saying that in day to day financial planning, most people are better off thinking of cars in terms of impact to monthly cash flow instead of as an asset.

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BuriedMystic@reddit

That’s cute but you’re conflating accounting concepts in order to portray an asset as something other than an asset. You could have 5 paid off cars and one with a payment. The payment and maintenance affects your cash flow but the assets affect your net worth. You could have significant positive equity from a large down payment. The list goes on.

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SnooChipmunks2079@reddit

I am, because there’s little point to tracking the value of a constantly depreciating asset when you’re thinking about net worth.

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dnyank1@reddit

and that's why I lease :P

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EnaBoC@reddit

But that's not his point. The outlook is fundamentally flawed because looking at % of NW makes no sense as time goes on and your life continues. Your NW gets higher and higher (you hope) and locked in to mostly illliquid assets. Would you say the people who make $80k CAD annually in GVRD, who happened to have had their condo value go up from $400k to $1.5M in the last decade, should be getting a $300k GT3RS since that's "only" 20% of their NW? You say you can sell and gain liquidity but for the vast amount of people you can't because the largest concentrations of people's net worth is their house and their retirement fund. If you sell your house you'd have to buy another one anyway. Nor can you withdrew from your $2M RRSP Portfolio without substantial tax (plus that would be incredibly stupid, tax efficiency wise). The only thing that matters is cashflow. With this much net income per month, can I afford to own an M2, and whether I sell it for a depreciated value or not in 3 years is irrelevant. You can always get more debt. The question is whether you can service it.

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BuriedMystic@reddit

Your net worth doesn’t force you to buy anything. You can be a Camry-driving billionaire. Just because it’s difficult to sell doesn’t mean it’s illiquid. And there are home equity and 401k loans that one can access. Cash flow is important from an r/personalfinance perspective but a car with a payment is both an asset and a liability until it’s paid off at which point it is purely an asset with ongoing maintenance expenditures.

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XCCO@reddit

Don't listen to those nerds on personal finance. They all drive $500 beaters that last 1 million miles and bring as much joy as a dishwasher.

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xkmackx@reddit

Lmao. Most on that that sub dumpster dive to save a few bucks

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LifeLowandSlow@reddit

I devote 5% of net income to car payments and insurance. That’s one lease at $313 a month and 2 other cars. I generally say don’t exceed 10%. My friend with a 539 credit score doesn’t under stand that and devotes around 40% and is literally on verge of bankruptcy.

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kradist@reddit

Net worth is a bad metric. It includes any inheritance and assets that can't really accessed. Net income would be better. My wife and I are basically debt free. We have two cars and three motorcycles. I paid (cash) 22k € for our VW 2.0 TSI 190 hp compact, main car. Another 1600€ for sporty tires and light rims. None of our vehicles are financed. I wait untill the worst depreciation is over and then buy used. I also do basic maintenance myself. (oils, filters, brakes) That's around 1/4 of our net income. Running costs are around 2500 € per year for the main car. Our commutes are short (10 to 20 minutes) and in the summer I take the 125cc scooter/ or motorcycle and my wife rides her e-bike to work. If I was 20 years younger and didn't have a somewhat sporty motorcycle, I guess I would dedicate more money to a car, but with increased traffic and less chances to get my car up to 120 - 140 mph on the Autobahn, I really would not have any use for more hp. Anything above basic and safe transportation is unneccessary spent money, but if you enjoy the hobby and tech behind it and it makes you smile, go for it.

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olov244@reddit

vehicle or vehicles?

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Richard_Lionheart69@reddit

Don’t consider your car part of your networth, step 1 to not being a dork

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fullock@reddit

After food, shelter, and other costs of living are paid for, I think a young person can splurge on a car if they don't go too deep into debt to get it. I bought my first nice car, a Lotus Elise, when I was in my 30's and it consumed 100% of my savings at the time to do so, however, I was cash flow positive and recovered from that in a couple of years. The r/personalfinance people would say this is nuts, but you live only once.

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MauiSurfFreak@reddit

0.01% Anyone 5% or more is a broke poor moron

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DudeWhereIsMyDuduk@reddit

Net worth lol

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LewdDarling@reddit

I don't think it makes sense thinking of it this way. For an 18 year old there is no problem if a $5000 used car is 100% of their net worth For a 65 year old about to retire with 2mil net worth a $100k car (or 5% of their net worth) might be too much.

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JustoBeard@reddit

Even as a car guy, it makes me cringe how much people financially jeopardize themselves for their cars. As I've gotten older, I've trended towards buying cheaper and older cars because I've been more value driven (and like the cars from when I was growing up). There are so many fun cars out there that don't require top dollar. Now, I have 4 fun cars and combined they cost less than my neighbors new minivan.

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RT023@reddit

You can live in a car but you can’t drive a house

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twelvegaugee@reddit

\*Race\*

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jrileyy229@reddit

I'd say OPs question is probably for common car guy... That has a Corvette or a mustang and goes to cars and coffee. As soon as you get into track/race cars, it's going to be a much different answer.

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clownpirate@reddit

An Urus or Purosangue costs as much as a house but you can live in one while you can’t drive a house.

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I_Am_Very_Busy_7@reddit

This is the only acceptable answer

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Vayro@reddit

I can't imagine living in my Miata but I at the same time I love the idea of it

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dreaminphp@reddit

i dont want to answer lol

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DooceBigalo@reddit

You don't have to, enjoy yoself!

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Crybabyredditmod@reddit

You won’t be laying on your deathbed wishing you had driven a Camry instead. If you can reasonably afford it and it makes you happy, then it was worth it.

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Astramael@reddit

*Should be*? Zero. Actually is? *ahem* I won’t be answering that question today.

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papasmurf61@reddit

The answer to this question isn’t constant and doesn’t scale linearly with income/net worth. A single dude making 250k with little other debt can probably afford a $150k car pretty comfortably. Especially if cars are a hobby and entertainment. The same can’t be said of a single dude making 250k with multiple kids and a spouse who doesn’t work. There just isn’t a good easy answer to this question.

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RyanGreener@reddit

I don't base any calculations or ideas off of my net worth or income. To me, if I can buy the car twice then I can afford it. I had a a 2020 A6, 1999 NB Miata and my 1999 911. I sold the A7 and NB Miata and a new car is coming for me as a replacement for both of those. I don't know why anyone would calculate car purchases off net worth, as the number is mostly useless because a lot of people's net worths are based on assets that aren't liquid (or shouldn't really be pulled out unless absolutely necessary).

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ArdillasVoladoras@reddit

Our cars are around 8-10% of take home pay. With our Santa Fe getting somewhat close to payoff, it's tempting to pay via lump sum and take the remaining interest payments saved over the 18 month term left as "gains", then dump more money into our investments over time.

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ymjcmfvaeykwxscaai@reddit

Depends on how much it depreciates. For most people as an appliance it "should" be as little as possible. I don't think this means you shouldn't buy a truck though, or a high value sports car that you'll keep and take care of, which will depreciate slowly. It's much different than spending 70k on an EV appliance car.

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albiorix_@reddit

Wrong sub

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BruisendTablet@reddit

Depends if your net worth is -400k, 250, 60k or 270m.

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ColdCouchWall@reddit

200% Your net worth + double leverage

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Shmokesshweed@reddit

"I bet this guy posts on WSB" *Checks comments* "... Yeap."

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wtfandy@reddit

Who needs $ROPE when you can have... $GUARDRAIL.

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1995LexusLS400@reddit

Net worth for spending money is meaningless. If I spent 10% of my net worth on a car, I'd be able to drive around in a nearly $2M car. My income is no where near enough to be able to afford that. At least not for long. I'd be able to borrow against my assets but there is no way I'd be able to afford to pay it back without my assets getting repossessed. How much you should spend on a car is dependant on your net income. A good number is around 20-30% of your annual net income for financing. 150-200% of your annual net income if it's an outright purchase.

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corkscrew-duckpenis@reddit

this question scales terribly over time, haha

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wtfandy@reddit

Yup, I don't understand the point of this unless it is specified to be like... Collector cars or speculative investments in cars. Commuter cars aren't worth calculating into net worth and having it tied to income makes more sense.

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sleepyguy007@reddit

depends how old you are. I bought a 30k car when I was 24 20 years ago and had no assets and thought that was fine. I own a 50k car today and its probably worth 5% of my assets

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dacjames@reddit

You should consider your daily driver as worth $0. It's an expense, not an asset. Any value you retain on the car is a bonus. If you're a collector and buying cars that retain value, you can reasonably count the full value as an asset in your net worth.

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AidofGator@reddit

Another way to think about it, is I don’t want my car to drag down my finances. So I predict total cost: depreciation, taxes, insurance, gas, maintenance. Then I only buy cars that will be financially neutral when compared to my investments. For example, the annual cost of 2023 civic is about 10k, so I need 200k to have a safe withdrawal. This means my money is growing faster than it is depreciating/costing

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DerAlex3@reddit

None if possible, under 10% preferred.

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breakfreeCLP@reddit

Cars that "have no value" should of course be as little as possible. Most cars are what I consider "worthless." Currently my daily driver is a 2009 Toyota Camry with 230k miles that I picked up for $3,000. My wife drives a 2007 Rav4 V6 AWD with 199k miles that we bought some years back for $5,000. But there's also cars that tend to hold their value. I don't call them investments, but they get a different analysis. I think before you even consider getting something like that, at least be maxing your retirement accounts and have at the very least 3x more invested. That would be my very minimum.

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dezumondo@reddit

No debt if you care about building wealth and life experiences. If you just care about cars, by all means.

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joepierson123@reddit

It's your life you decide the percentage

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wtfandy@reddit

I would say 25% for a new vehicle at time of purchase. New vehicles cost a lot to buy, operate and maintain. Average family isn't making a lot, and don't have deep savings, but a $50K SUV with a $250K house and reasonable salary should work. Obviously that will change over time due to depreciation, the note being paid off and hopefully more being saved. Personally, I would have targeted sub 10%. I liked buying cash cars that were $3-5K, but I think that era of getting something cheap and dependable is gone. Parts costs are double or triple what they used to be and insurance is silly.

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strongmanass@reddit

IMO meet your goals for housing, healthacare, retirement, and other investments first (and to me that doesn't mean delaying retirement to age 80 for a sports car now). If you have children also set aside funds in a 529 - essentially they shouldn't have to go into debt in the future so you can have a cool car now (just my opinion as I don't have children, but if I did that would be my approach). Then if you're in a relationship have a budget for things that make your relationship better. Non-car partners don't consider a 7:30 AM drive or trackday to be relationship-building. Whatever is left over can go 100% toward cars if you want.

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turb0_encapsulator@reddit

Most recently I spent 1.5%. When I was young it was like 50%.

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GoBeWithYourFamily@reddit

If you’re making payments on your car, you should base it off of % of net income, not net worth. If you’re paying cash for your cars, you’re rich enough that it probably doesn’t matter what % of your net worth the cars are. Just try to buy ones that appreciate in value.

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jawnlerdoe@reddit

I follow the guidance of keeping my car related expenses of less than 10% of my gross income. That said, about 10% of my net worth is tied up in my vehicles, but they’re cheap, and my net worth isn’t very high. Perhaps that will change in the future, but until my net worth is higher, my vehicles will remain cost conscious.

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bandito12452@reddit

Yes, mods go in the "entertainment and recreation" budget lol

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JSKindaGuy@reddit

Don't bother. If you're car guy, be the car guy. I live in regrets without jumping on a handful of cars I came across. You wouldn't drive 100mph past a children's school zone, likewise, you know you shouldn't buy a lambo with Starbucks money.

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withsexyresults@reddit

Negligible

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Bruce-man-Bat-wayne@reddit

Idk that you should calculate it by total of your net worth. The answer will vary greatly at different points in your life. When I was young my car was my net worth, now it is a very small percentage.

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FriedEldenRings@reddit

Bought my first nice car recently and I guess it was like 20% of my net worth. Kind of a weird metric to go by though. It's better to just make sure you can pay cash and have a good emergency fund left over.

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snakekid@reddit

I think less of it should be about net worth. But 8% of your take home goes to car for basic needs, anything more removes budget from your guilt free spending. Do you value other things more than car if so do the other things.

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Handyandy58@reddit

I don't consider my car part of my net worth at all.

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thesecretpotato69@reddit

Less than 3 percent of

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norcalnatv@reddit

1-3%

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redditsucks401@reddit

as close to zero as humanly possible without driving a deathtrap that being said i drive garbage on purpose for fun and it feels good to not care

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Maximilianne@reddit

if you genuinely like cars and you have habituated yourself mentally to not just chase trends or the latest fads in automotive matters, then you can probably dedicate a decent chunk of your income towards a car. Like the problem with personal finance or frugality is it becomes an identity onto itself. Being frugal is good because by saving money on less important things, it frees up money for you to splurge on stuff that is important to you

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