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Smart Shopper Percentage of monthly income spent on a car?
390 messages, Last post on Mar 21, 2009 at 5:50 PM
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since we went on tangent in the Sales Stories board, I'm reposting this here so we can continue the discussion, if folks so wish: jlawrence - When it comes down to it, why **NEEDS** to buy a NEW car? And you can get a pretty decent vehicle for well under $10k. Well, hold on, let's think about this. When I made my statement, it was not to indicate what people are spending, but what is available for them to buy. If the majority of vehicles made are over $20k and the majority of incomes are under $60k, then we obviously have an imbalance here. If the majority of people were to suddenly switch to buying used cars .... then what happens when those used cars are bought? Demand would outstrip supply. And if the minority are buying new, where would the majority get their used cars? So isn't it possible that, to some extent, buyers are FORCED to go in over this imaginary cost/salary line? Ok, ok, I know I'm really stretching the term forced here, but, look at it this way, IF everyone were to suddenly start living by this rule, there would be a huge run on Hyundais, Kias, Mazda3s, Civics, Corollas, Fits, Yariss, etc, and, once again, you have demand outstripping supply and price increases, as a result. I'm not sure I see any winners here (except the car companies that make inexpensive cars, that is).
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Replying to: qbrozen (Aug 15, 2006 11:52 am) |
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Replying to: qbrozen (Aug 15, 2006 11:52 am) Also, I have been hearing these doomsday predictions about overextended consumers for years, but I have yet to see the sort of widespread carnage that has been predicted come to fruition. For example, high gas prices have had a large impact on many commuters, especially those with vehicles that get poor fuel economy, and gas prices are affecting car purchasing decisions, but many people who own these vehicles are keeping them until they're paid off and trying to spend less in other areas to offset the cost of fuel. |
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If the majority of people were to suddenly switch to buying used cars .... then what happens when those used cars are bought? Demand would outstrip supply. And if the minority are buying new, where would the majority get their used cars? That is already happening. This entry from Wikipedia describes how the average age of a car on the road in the U.S. has been gradually increasing. People are keeping their cars longer and/or buying used. -------------------- In the year 2001 National Automobile Dealers Association conducted a study revealing the average age of vehicles in operation in the US. The study found that of vehicles in operation in the US 38.3% were older than ten years, 22.3% were between seven and ten years old, 25.8% were between three and six years old and 13.5% were less than two years old. According to this study the majority of vehicles, 60.6% of vehicles were older than seven years in 2001.[5] This relatively high age of automobiles in the US might be explained through gradually declining sales figures since 1998.[6] The median and mean age of automobiles has steadily increased since 1969. In 2005 the overall median age for automobiles was 8.9 years, a significant increase over 1990 when the median age of vehicles in operation in the US was 6.5 years and 1969 when the mean age for automobiles was 5.1 years.[7] Of all body styles, pick-up trucks had the highest mean age (9.4 years), followed by cars with a mean age of 8.4 years and van with a mean age of 7.0 years. As SUVs are part of a relatively new consumer trend originating mostly in the 1990s, SUVs had the lowest mean age of any body style in the US (6.1 years). The average recreational vehicle was even older with a mean age of 12.5. The mean age has increased continuously for all body styles from 1969 to 2005.[7]
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Replying to: biancar (Aug 15, 2006 3:34 pm) I mean, one could argue that cars have become more reliable, hence the increase in mean age. Also, just because the vehicle is operational does not mean it was not bought new by the current owner. Do you have a link to that? or tell me what you plugged in to wikipedia to get it? I'd like to see the reference for that declining sales figures statement. I find it really difficult to believe that fewer new cars were sold in, say, 2005 than 1998.
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Replying to: qbrozen (Aug 16, 2006 6:30 am) Oddly enough I couldn't find anything (on a five minute search, I didn't spend a lot of time at it) that gave exactly the numbers of new and used cars sold in the U.S. Still, the mean age increasing does tell you something. It's probably a combination of people keeping their cars longer, because they're more reliable, combined with the fact that car loans are getting longer, and many people want to have their car paid off before buying a new one. And then add whatever number of people are buying cars two or three years old coming off leases, and owning those cars for several years. All of it of course gets back to reliability. It's no longer unusual to have a car that's 10 years old still be in good working order. Also - just thinking out load here - it makes it more feasible to have a second car, in some cases. For myself, I'm still very pleased with my 6 year old Maxima, now with 86,000 miles on it, for which I paid cash in the summer of 2000. A few months ago I treated myself to a new 350z, which I wouldn't have done if I had thought the Max was on its last legs. Looking forward to having a reliable, even if aging, sedan for another several years made it seem like an excellent idea to buy a fun, impractical roadster. 
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http://www.libertypost.org/cgi-bin/readart.cgi?ArtNum=154655 - interesting article on car sales declining in Japan http://www.referenceforbusiness.com/industries/Retail-Trade/Motor-Vehicle-Dealer- s-New-Used.html - long article. Includes these points: "New auto sales for 2001 reached a total of 17.1 million units. That total included a little more than 8.4 million passenger cars and about 8.7 million light-duty trucks. .. The total number of cars in operation continued to rise. According to the NADA, the total number of vehicles in use in 2001 was 216.7 million—approximately 128.7 million cars and 88 million trucks. Of these, more than 38 percent were more than 10 years old, almost 26 percent were between 3 and 6 years old, more than 22 percent were 7 to 10 years old, and almost 14 percent were less than 2 years old." |
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well, while trying to find something to support declining sales since 1998 (as stated in the wikipedia entry quoted above), this is the first thing I stumbled upon. It obviously shows that sales INCREASED in '99 over '98 and again in '00 over '99. http://www.bea.gov/bea/articles/NATIONAL/NIPAREL/2001/0201mv.pdf If we combine that with your last link, biancar, it seems there may have been a decline from '00 to '01. And, i'm not sure, but I think it went back up to roughly 17.9 mill in '02. http://www.bea.gov/bea/dn/gap_hist.xls then a drop again in '03. Then back up over 18 mill in '04. Seems to be a seesaw, but, again, definitely seems to contradict that info about the decline since '98 that I originally suspected to be incorrect. Anyway .... what were we talking about? |
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Replying to: qbrozen (Aug 16, 2006 9:15 am) I think we were talking about your comment about "If the majority of people were to suddenly switch to buying used cars .... then what happens when those used cars are bought? Demand would outstrip supply. And if the minority are buying new, where would the majority get their used cars?" ANY-way - back to how much people should spend on a car - I still hold that for most people, it's wise to keep your car payments to no more than 10 - 15% of your take-home pay. Do whatever that takes to get the numbers there, whether it's putting down a big down payment, buying used, or whatever. Or working hard to increase your salary, going about it from the other direction! Still, there are a lot of variables. A young family stretching to buy a house and feed their kids and pay school expenses needs to stay on the low side, and us old codgers with a paid-off mortgage, no kids at home, pension plan kicked in, can maybe splurge some without worrying. I'm biased in favor of paying cash, actually, which isn't as hard as people might think it is. If you get a 3 or 4 year loan on a reliable new car, then drive it for 8 years and just keep paying yourself that same payment after it's paid off, chances are good to excellent you'll have enough to pay cash, or close to it, for the next one. Sometimes if interest rates are really low it might be advantageous to take a low-rate loan and keep your other money invested, of course. But having the wherewithall to do it either way is a real strong peace-of-mind position. |
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Replying to: biancar (Aug 16, 2006 5:06 pm) And if everyone started paying off their credit cards every month, Chase and Citibank would go broke. I am sure that they are holding their breath in fear! Pay cash for a used car. Put aside $300 a month until the used car dies (and take care of the car) and you will be able to pay cash for a new one.
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