A thought: percentage of household income spent on a vehicles, and the psychology of car-buying

"Dr. Zoidberg - RIP Oppo" (thetomselleck) 04/03/2016 at 17:20 • Filed to: thinkin' 'bout stuff

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No, I am absolutely not asking for your information. But national statistics on this would be very interesting to me.

Does the average working class family pay more or less than 50% of their annual income per vehicle? How does each additional child affect the percentage? Does the upper middle class pay the highest due to their likelihood of attempting to ascend into new upper class? Does the old upper class pay the least because they have so much damn money? Which demographic owns their vehicles the longest? Obviously, geography would be a huge factor. Someone making six figures in southern California has less spending power than someone making a little less in a place with lower costs of living. For homeowners, what is their ratio of mortgage compared to car payments per month?

I also like thinking about why people buy what they do. I see people who make less than me, with children, buying new cars. How can they do it? Well in some minds, how can they not? They need a reliable vehicle at any moment because of their job and family. Stuff like that. One opponaut said their parents chose to buy a Dodge Caravan to haul around their Newfoundland dogs. I bought something with four seats because I have a puppy and a nephew on the way that I anticipate baby-sitting often.

Obviously, there would need to be tons of controls and adjustments. For example, buying outright vs making payments to own vs leasing, etc. Access, type of career, multiple sources of income, and so on...

These are the kind of things I think about when the dog naps.

Any hypotheses from you folks?

Birddog > Dr. Zoidberg - RIP Oppo 04/03/2016 at 17:27

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That’s way too deep for a Sunday afternoon.

Dr. Zoidberg - RIP Oppo > Birddog 04/03/2016 at 17:28

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Oh. Okay then.

[looks up oppo notes]

... No... Not that one... Ah hah!

*ahem*... Celica.

Birddog > Dr. Zoidberg - RIP Oppo 04/03/2016 at 17:31

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I think about that stuff too. But I just finished a marathon wrench session on Crusty and can’t seem to assemble a coherent reply..

Trunk Impaired 318 > Dr. Zoidberg - RIP Oppo 04/03/2016 at 17:32

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I think a better way would be to figure out how much they spend on a car i.e gas, maintenance, and payments and that percent of household income. For example if I buy a $50,000 car and keep it for 15 years that’s a bit different than buying a $25,000 car every 5 years.

slipperysallylikespenguins > Dr. Zoidberg - RIP Oppo 04/03/2016 at 17:35

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People are willing to put a premium on convenience and the security of a “reliable” new car. As someone who is very thrifty, it boggles my mind to spend more than 25% of income on a vehicle in a year (I’m about 10% including insurance).

Dr. Zoidberg - RIP Oppo > Trunk Impaired 318 04/03/2016 at 17:40

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But of course. That kind of data just seems harder to track down though, compared to “what do you make and what did you buy.” And it’s all a messy connected web. High maintenance costs are probably inversely proportional to duration of ownership. Something like a career change or divorce affects those too.

I just like how I can look at someone, without even knowing them, and what they drive, and make all kinds of absurd assumptions about their lives (in the privacy of my brain).

Dr. Zoidberg - RIP Oppo > slipperysallylikespenguins 04/03/2016 at 17:44

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Priorities can be all over the map as well. My best friend lives in one of the, politely, crappiest areas of town at this apartment complex, yet you see leased CLAs and late model cars all over the parking lot. As for me, I think of myself as very thrifty, but if I had children of my own, I imagine my outlook could change on vehicles.

slipperysallylikespenguins > Dr. Zoidberg - RIP Oppo 04/03/2016 at 17:53

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That is what happened to a lot of my old friends. They had kids and almost immediately bought a new family car that was as safe as possible. I just hope I never catch that expensive disease.

V12 Jake- Hittin' Switches > Dr. Zoidberg - RIP Oppo 04/03/2016 at 17:59

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I work hard and make pretty good money for my age and I wanted a car to reward myself , so I bought a used V12 S class. I could have leased or bought a newer more expensive car but I wanted a W220 S600/65. Also, repairs notwithstanding it is insane value for money .

TheRealBicycleBuck > Dr. Zoidberg - RIP Oppo 04/03/2016 at 18:02

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The American Community Survey has some information, but not as detailed as you are asking. You have to scroll to the last few pages to see answers to the income/transportation questions. The first part tackles community type, distance commuting, and race questions.

http://www.census.gov/hhes/commuting…

Dr. Zoidberg - RIP Oppo > TheRealBicycleBuck 04/03/2016 at 18:04

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Cool beans!

Gone > slipperysallylikespenguins 04/03/2016 at 18:09

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I think the rule of thumb is total cost (car, ins, fuel, etc) is that it should be less than 20% of your income. Which is crazy high IMO.

Shankems > Dr. Zoidberg - RIP Oppo 04/03/2016 at 18:22

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Just did some quick maths for fun and don’t mind sharing. Car is 15% of my yearly net income. That is gas/insurance/loan, not including depreciation.

That is after a moderate down payment and good trade in. Without those 2 things it would have been 27% of my net income.

One more Edit to extrapolate to household!:

Going to household net income and two vehicles, leaves me with 11% of our net household income on our vehicles, without depreciation and maintenance.

Not too shabby as the cars are a 2014 and 2016!

Jordan and the Slowrunner, Boomer Intensifies > Dr. Zoidberg - RIP Oppo 04/03/2016 at 18:25

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I plan on buying a new car that is a considerably large amount of my income, but I also plan on keeping it for a long time. Also, my income is about rise before the end of the year. Also, being not married and living with my parents (and pretty much being okay with that for a while), I can afford it.

Gone > Dr. Zoidberg - RIP Oppo 04/03/2016 at 19:14

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I’m not sure why other people do what they do (ever). We own outright and overall cost (fuel, ins, maintenance, taxes, fees, etc) isn’t much.

We’re replacing both our vehicles and selling the bike this year. We will buy used and spend around $20-22k for both vehicles combined w/TTL. We will finance both because we’re staying cash heavy in case one/both of us get laid off (again). We’ll pay them off when things improve.

We drive a ton of miles and have no reason to spend much on transportation that will depreciate at light speed. Even if we drove very little we’d probably keep cheap daily transportation. Door dings, fender benders, weather, etc are always a concern. Heated leather ass massaging seats don’t do a damn thing if someone rear-ends me and ruins my expensive car’s value. But if my $10k crapbox loses 50% of its value, I’m only out $5k...

People tend to push their ability to afford cars and houses. Either wanting new, safest, biggest, nicest, Jones’-ing, warranty, and/or mpg. And they can justify it many ways. If it works for them, that’s fine -it’s their money. I just don’t put a lot of stock in “investing” much in a depreciating asset personally.

N51fanatic > Dr. Zoidberg - RIP Oppo 04/03/2016 at 19:37

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Your mortgage, property taxes and homeowners ins should be less than 25% of your gross HHI. Your car should Gould be nowhere near that.

Dr. Zoidberg - RIP Oppo > N51fanatic 04/03/2016 at 19:48

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“Should” be, but allegedly most Americans live paycheck to paycheck after all.

Dr. Zoidberg - RIP Oppo > Gone 04/03/2016 at 20:17

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We just bought our first “grown up” car last year. The plan is to keep it until Kingdom Come, so we won’t sleep over depreciation over a car that had already lost half its value before we bought.

We are like you guys — we are fairly risk averse financially. We have a doomsday fund (sudden unemployment buffer), and try keep our bills to a minimum if possible. I really liked the idea of a nice new car for myself, but I have enough anxiety over little things as it is without worrying about that first windshield chip, scratch in the paint, or vomit on the seat. Perhaps one day...

Gone > Dr. Zoidberg - RIP Oppo 04/03/2016 at 21:09

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Kids make way more vomit than is sensible for their size. Although the pets do the same. Rear seats of the car are so bad, ugh. *barf* ;)

We have almost 420k combined on our two 4wheeled vehicles. We will be improving to 80k combined or so (woo! lol). We put off the change for a year due to employment concerns. I’d do that again, but I feel we’re starting to push the limits considering our commutes.

As you’ve concluded we are fairly risk adverse overall and we try to spend a lot less than most in our income bracket (from what I can tell). But we do day trade as a hobby, so I can’t pretend we’re that high and mighty in regards to risk.

Gone > Dr. Zoidberg - RIP Oppo 04/03/2016 at 21:23

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I would bet most actually do. It’s less of a concern if you think your income is steady. Not necessarily smart though.

Dru > N51fanatic 04/04/2016 at 10:06

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I am below that percentage! Huzzah!

Dru > Dr. Zoidberg - RIP Oppo 04/04/2016 at 10:11

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We spend less than 10% of our gross HHI on cars. That includes one car payment, insurance, and property taxes. We have three cars. My daily and my beater/project truck/collector are both paid for. My wife's car will be paid for in +/- 20 months. After that I am itching for an enthusiast car. No idea what it will be, but I am shooting for less than 10% GHHI again.