The 1/10th Rule For Car Buying - Toyota GR86, 86, FR-S and Subaru BRZ Forum & Owners Community

ayau · 06-05-2014, 01:09 PM

http://www.financialsamurai.com/the-...e-must-follow/

Essentially, you should be spending 1/10th of your gross income on a car. According to this principle, you should be making 250-300k annually to considering buying a twin.

Thoughts?

ihaskrayon · 06-05-2014, 01:31 PM

My thoughts are who ever wrote this article is an idiot.

Although, I didn't read it and comepletly based my opinion on what you stated.

King Tut · 06-05-2014, 01:33 PM

Quote:

Originally Posted by ayau

Thoughts?

He should look into seppuku.

finch1750 · 06-05-2014, 01:35 PM

No. Its stupid. Talks about maintnance and high stress. So my $4000 car that costs a shit ton to maintain and stresses me out cuz its unreliable is a better deal?

And yes, i could have doubled the $24k in the market, if I had that kind of money. Do people get loans to go gamble in stocks like I took to buy this car?

gramicci101 · 06-05-2014, 01:37 PM

That article is outstanding. If you earn $50-$75K a year, you should be looking at a used Hyundai Accent, Nissan Sentra, or Scion xA.

He's worried about maintenance costs and stress for a more expensive vehicle? What about the stress of wondering if you can't make it to work because your car might shit itself at any moment? Or maintenance costs of a ten-year-old subcompact?

His method is great if you want to scrub every penny until it gleams before spending it, but enjoyment of life is worth a little more money to me, and I have no problem paying for it.

Dadhawk · 06-05-2014, 01:38 PM

Quote:

Originally Posted by ayau

http://www.financialsamurai.com/the-...e-must-follow/

Essentially, you should be spending 1/10th of your gross income on a car. According to this principle, you should be making 250-300k annually to considering buying a twin.

Thoughts?

My guess is the author lives in the city, and doesn't own a car.

I like Dave Ramsey's rule better. Never have more then 50% of equivalent of your annual income tied up in things that have engines in them. Oh, and pay cash.

That is a little more reasonable.

I agree that every dollar spent, no matter what it is spent on, is a lost investment opportunity. That said, if you can't enjoy your money within reason, what are you investing for?

King Tut · 06-05-2014, 01:39 PM

Quote:

Originally Posted by ayau

Essentially, you should be spending 1/10th of your gross income on a car. According to this principle, you should be making 250-300k annually to considering buying a twin.

In truth though, if you finance your $30k twin out over 6 years with a 2% APR then you are really only paying $5,316 a year so you would only need to be making $53,160 a year to afford one.

gramicci101 · 06-05-2014, 01:41 PM

Quote:

Originally Posted by King Tut

In truth though, if you finance your $30k twin out over 6 years with a 2% APR then you are really only paying $5,316 a year so you would only need to be making $53,160 a year to afford one.

The article said purchase price though, not yearly expense. So you'd have to make $300,000+ to buy one.

If I made $300K+ a year, I'd buy a BRZ with cash because it's Tuesday.

edit I'd take pictures of the entire process, the briefcase full of cash, and my middle finger, and send them to this guy as a "fuck you."

strat61caster · 06-05-2014, 01:45 PM

>80% of the country makes less than $100k/year, according to this 80% of the country would not be able to buy a new vehicle for the foreseeable future.

It sounds like a great rule if you're paying off debt or are trying to build investments but like he said in the intro to the article it's simply too onerous. However I do like his second table describing how much you spend and how it reflects on your financials: up to 50% is fine but not ideal.

Edit: this was a stupid paragraph, someone living paycheck to paycheck might be pulling down >$200k, they probably shouldn't plop down on a brand new car, meanwhile there's people bringing back $50k with nearly half of it being 'disposable' who can probably afford a car 1x his income with some planning and saving without much strain.

This kind of advice is great for someone who wants to 'turn pots of money into bigger pots of money' but like everything else that's on the internet should be taken with a grain of salt, I don't think it applies to the majority unless I have a distorted view of what that majority is (cue the Americans are dumb brigade).

chrisl · 06-05-2014, 01:45 PM

He's way too focused on using money to make more money, in my opinion. He also sounds like he's approaching it from a strictly utilitarian perspective, viewing the car as an appliance to get you from A to B (and not valuing the enjoyment at all). Also, not once in the article does he talk about replacement times - someone who buys a car worth 50% of their annual income and drives it for 10 years is spending a lot less on their car than someone in the same financial situation who buys a car worth 15% of their income every single year.

I actually do think he makes a good point that a lot of people overspend on their car, but he goes much too far in the other direction, in my opinion, unless you really do get zero enjoyment from cars and purely want an appliance to transport yourself from one point to another.

King Tut · 06-05-2014, 01:46 PM

Quote:

Originally Posted by gramicci101

The article said purchase price though, not yearly expense. So you'd have to make $300,000+ to buy one.

If I made $300K+ a year, I'd buy a BRZ with cash because it's Tuesday.

Yeah because you would have to make $300k to most likely have $30k to drop the cash to buy a car and not finance it. He is correct in that it makes best financial sense to pay cash for a car, but that is also true of the housing market. This article also isn't written for the automotive enthusiast who gets more enjoyment out of a car than just getting from point A to point B. It is like a hobby to us so we are willing to spend more of our income on it.

ayau · 06-05-2014, 01:48 PM

If everyone followed that rule, car makers would be out of business. Or they'd start making Geo Metros again. However, I don't think the rule is totally outrageous given the amount of debt people have and the amount they've saved for retirement.

OrbitalEllipses · 06-05-2014, 01:50 PM

Quote:

Originally Posted by King Tut

Yeah because you would have to make $300k to most likely have $30k to drop the cash to buy a car and not finance it.

False. My dad's LS460 was bought outright and he does not make $300K. It's just a matter of having liquidity.

gramicci101 · 06-05-2014, 01:51 PM

Quote:

Originally Posted by King Tut

Yeah because you would have to make $300k to most likely have $30k to drop the cash to buy a car and not finance it. He is correct in that it makes best financial sense to pay cash for a car, but that is also true of the housing market. This article also isn't written for the automotive enthusiast who gets more enjoyment out of a car than just getting from point A to point B. It is like a hobby to us so we are willing to spend more of our income on it.

I completely agree with you.

But I feel like he's approaching the whole idea from a gleaming white pillar without taking into account that the rest of us aren't up on that pillar with him. So yes, in a vacuum, his advice makes the most sense monetarily. But we don't live in a vacuum, and I don't think he realizes that.

06-05-2014, 01:09 PM	#1
ayau Senior Member Join Date: Nov 2011 Drives: Some rust bucket Location: Polar ice cap Posts: 3,058 Thanks: 312 Thanked 1,045 Times in 556 Posts Mentioned: 37 Post(s) Tagged: 0 Thread(s)	The 1/10th Rule For Car Buying http://www.financialsamurai.com/the-...e-must-follow/ Essentially, you should be spending 1/10th of your gross income on a car. According to this principle, you should be making 250-300k annually to considering buying a twin. Thoughts?

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06-05-2014, 01:31 PM	#2
ihaskrayon The Comedian Join Date: Jun 2012 Drives: SWP BRZ Limited Location: Irvine Posts: 969 Thanks: 94 Thanked 642 Times in 266 Posts Mentioned: 12 Post(s) Tagged: 0 Thread(s)	My thoughts are who ever wrote this article is an idiot. Although, I didn't read it and comepletly based my opinion on what you stated.

06-05-2014, 01:35 PM	#4
finch1750 Undisputed El Presidente Join Date: Jun 2012 Drives: Zenki 37J ZN6 Location: Stockton, CA Posts: 11,571 Thanks: 9,382 Thanked 9,397 Times in 5,261 Posts Mentioned: 374 Post(s) Tagged: 33 Thread(s)	No. Its stupid. Talks about maintnance and high stress. So my $4000 car that costs a shit ton to maintain and stresses me out cuz its unreliable is a better deal? And yes, i could have doubled the $24k in the market, if I had that kind of money. Do people get loans to go gamble in stocks like I took to buy this car?

06-05-2014, 01:37 PM	#5
gramicci101 Off Topic Join Date: Feb 2014 Drives: 2014 Subaru BRZ Limited Location: Vegas, baby! Posts: 4,610 Thanks: 2,369 Thanked 4,243 Times in 2,170 Posts Mentioned: 43 Post(s) Tagged: 3 Thread(s)	That article is outstanding. If you earn $50-$75K a year, you should be looking at a used Hyundai Accent, Nissan Sentra, or Scion xA. He's worried about maintenance costs and stress for a more expensive vehicle? What about the stress of wondering if you can't make it to work because your car might shit itself at any moment? Or maintenance costs of a ten-year-old subcompact? His method is great if you want to scrub every penny until it gleams before spending it, but enjoyment of life is worth a little more money to me, and I have no problem paying for it.

06-05-2014, 01:45 PM	#10
chrisl Senior Member Join Date: May 2013 Drives: 2006 Cayman S, 2007 Outback 2.5i Location: Colorado Posts: 1,116 Thanks: 116 Thanked 455 Times in 303 Posts Mentioned: 8 Post(s) Tagged: 0 Thread(s)	He's way too focused on using money to make more money, in my opinion. He also sounds like he's approaching it from a strictly utilitarian perspective, viewing the car as an appliance to get you from A to B (and not valuing the enjoyment at all). Also, not once in the article does he talk about replacement times - someone who buys a car worth 50% of their annual income and drives it for 10 years is spending a lot less on their car than someone in the same financial situation who buys a car worth 15% of their income every single year. I actually do think he makes a good point that a lot of people overspend on their car, but he goes much too far in the other direction, in my opinion, unless you really do get zero enjoyment from cars and purely want an appliance to transport yourself from one point to another.

06-05-2014, 01:48 PM	#12
ayau Senior Member Join Date: Nov 2011 Drives: Some rust bucket Location: Polar ice cap Posts: 3,058 Thanks: 312 Thanked 1,045 Times in 556 Posts Mentioned: 37 Post(s) Tagged: 0 Thread(s)	If everyone followed that rule, car makers would be out of business. Or they'd start making Geo Metros again. However, I don't think the rule is totally outrageous given the amount of debt people have and the amount they've saved for retirement.

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