How much would you need to be earning...

M0T · 24 Apr 2008 at 23:22

To drop £40k on a car?

I suppose its more a question of how much you can let go from your monthly income on finance/loan (unless you can afford the full whack at once), so what would be a reasonable level of income to consider spending £40,000 on a car?

Muncher · 24 Apr 2008 at 23:31

It's an impossible question, but to be prudent it I don't think the value of your car even if financed should be any more than 50% net of your salary absolute tops. I think 30% of net salary is more prudent.

So, £125k. The people I know who have their heads screwed on right and spend that much on a car are taking home £140k after tax.

I fully expect many people here to say far less than that, but when you do the sums and have a house to pay for it all adds up.

ironman · 24 Apr 2008 at 23:36

Muncher said:
It's an impossible question, but to be prudent it I don't think the value of your car even if financed should be any more than 50% net of your salary absolute tops. I think 30% of net salary is more prudent.

So, £125k. The people I know who have their heads screwed on right and spend that much on a car are taking home £140k after tax.

I fully expect many people here to say far less than that, but when you do the sums and have a house to pay for it all adds up.

That's if you want to pay off the car in one year.....I don't think you need to be anywhere near earning £125k to comfortably afford a £40k car over a few years...

[TW]Fox · 24 Apr 2008 at 23:36

I would have thought less than 10% of people driving a £40k car earn £125k a year.

Morba · 24 Apr 2008 at 23:37

quite agree with muncher there, needs to be quite a lot to do it comfortably from a personal pov rather than business.

Corasik · 24 Apr 2008 at 23:38

Based on my own income, mortgage, and other outgoings, I guess I could probably afford a 40k motor if I had 45k per year. But I would have to be quite a petrol head to consider that

. Personally I'd rather get a bigger house, which means bigger mortgage, and less spare cash for an expensive motor.

On the other hand, if you live at home, have no debt at all... you could probably drop 1k a month on a car loan even if you only earned 20-25k, and still have enough pocket money for insurance/fuel/running costs, and a fair social life.

Morba · 24 Apr 2008 at 23:39

i guess MOT needs ot be a bit more clear about how he means 'drop'. are we talking long term finance or short term or even paying it off in one lump sum.

[TW]Fox · 24 Apr 2008 at 23:40

It also depends on where a car lies on your priority list.

If a car is transport, it's harder to justify a higher proportion of your income on it, especially if you've other leisure pursuits to pursue.

But if a car is more important to you, and is a hobby, then its easier to justify more money on it. Many people spend £2-4k a year on holidays. If cars are a big thing for you, thats extra money for cars..

Corasik · 24 Apr 2008 at 23:42

Fox has a good point there, my GF would rather go on caribbean cruises than go crusing with me in a flash car.

M0T · 24 Apr 2008 at 23:44

I'd rather have a car, I don't like to fly

Muncher · 24 Apr 2008 at 23:51

[TW]Fox;11566828 said:
I would have thought less than 10% of people driving a £40k car earn £125k a year.

The absolute minimum you'd need to be earning to finance it is pretty low.

However...

Assume you salary is £40k, you take home £2,200 per month after tax and pension contributions.

You'll spend about £1,500 of that per month on a half decent house with a repayment mortgage.

£200 on food, £100 on utilities, £130 council tax, leaves you with bugger all left to spend!

mjt · 24 Apr 2008 at 23:54

chances are people that are on £100k+ tend to have a company car anyway, thus negating the need to blow £40k on (another) car..
unless it's a second car, but either way, £40k on a wife's/husband's or a weekend car is absurd

ironman · 24 Apr 2008 at 23:59

Muncher said:
The absolute minimum you'd need to be earning to finance it is pretty low.

However...

Assume you salary is £40k, you take home £2,200 per month after tax and pension contributions.

You'll spend about £1,500 of that per month on a half decent house with a repayment mortgage.

£200 on food, £100 on utilities, £130 council tax, leaves you with bugger all left to spend!

That's if you want to live in a £400k house.....by yourself. A lot of those costs may well be shared with your partner (perhaps true if you have a mortgage on a house?).

BigglesPiP · 25 Apr 2008 at 00:04

Depends what your paying in the way of a mortgage.

Muncher · 25 Apr 2008 at 00:05

gurdas said:
That's if you want to live in a £400k house.....by yourself. A lot of those costs may well be shared with your partner (perhaps true if you have a mortgage on a house?).

Where did you get £400k from? £1,500 a month assuming an interest rate of 1%!

A £225k mortgage over 25 years will cost you £1,500 per month @ 6%.

willd58 · 25 Apr 2008 at 00:06

Muncher said:
The absolute minimum you'd need to be earning to finance it is pretty low.

However...

Assume you salary is £40k, you take home £2,200 per month after tax and pension contributions.

You'll spend about £1,500 of that per month on a half decent house with a repayment mortgage.

£200 on food, £100 on utilities, £130 council tax, leaves you with bugger all left to spend!

Whilst that is a hell of allot to be spending on a mortgage, this adds up about right.

[TW]Fox · 25 Apr 2008 at 00:11

Muncher said:
The absolute minimum you'd need to be earning to finance it is pretty low.

However...

Assume you salary is £40k, you take home £2,200 per month after tax and pension contributions.

You'll spend about £1,500 of that per month on a half decent house with a repayment mortgage.

£200 on food, £100 on utilities, £130 council tax, leaves you with bugger all left to spend!

That means that, according to your calculations, people on £40k a year couldn't even afford to run a Focus TDCi.

Hmmm.

And as gurdas correctly pointed out why would you buy a house and live on your own? I can't think of anything more depressing. You'd live with your girlfriend/wife, and halve that mortgage..

Muncher · 25 Apr 2008 at 00:11

willd58 said:
Whilst that is a hell of allot to be spending on a mortgage, this adds up about right.

UK average house price is £194,893 based on the latest HBOS report, get to an area where London is remotely commutable and you'll go way above that.

ironman · 25 Apr 2008 at 00:14

Muncher said:
Where did you get £400k from? £1,500 a month assuming an interest rate of 1%!

A £225k mortgage over 25 years will cost you £1,500 per month @ 6%.

If you are paying £1,500 a month for 25 years, that's £450k......

willd58 · 25 Apr 2008 at 00:14

Muncher said:
UK average house price is £194,893 based on the latest HBOS report, get to an area where London is remotely commutable and you'll go way above that.

But then, your trying to pay off that mortgage at a rate of 18k a year :eek:

, I would only be trying to do that if the mortgage I had gotten was terrible.