spend money on car

How Much Should You    Spend On 

 Your Car?

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important asset

An Important Investment

Buying a car is the second-biggest buying decision after a home. While it’s ok to invest in a quality vehicle, over-stretching your budget can cause more harm than good, financially.

CAR

thumb rule

The Thumb Rule

The thumb rule when it comes to purchasing a car is this: don’t spend more than half your annual household salary on your car.

Remember

Cars are depreciating assets, and over 5 years, its value drops to less than half (45%) of the buying price.

car loan

Car Loans: 20 / 4 / 10

 If you’re taking out a loan for your car, follow the 20/4/10 rule. Make a down payment of 20% of the car price.

Take a loan of not more than 4 years.

Keep your car payment to 10% of your salary, including EMIs and insurance.

used car sale

 Buy A Used Car

Inadequate public transport is one of the reasons people buy cars in the first place. If you’re on a tight budget, consider buying a second-hand car - it will be 30%-40% cheaper than a new one.

keep savings

Ensure you set aside more than your car EMIs (at least 10% of your income), in the form of savings. If not, consider delaying your car purchase till your financial situation improves.

Make Sure You Have Savings

 Spend only what is necessary and make sure it is not more than 6 months of your salary. Stretching your budget means you incur a significant opportunity cost.

 Spend Smart

 Spend Right

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.