How much to spend on buying a car?

what should be the budget one should stick to when going for purchase of a car,like say,how many months or years' salary can be the total cost of the car,i always had and have this querry in mind,people for example say you can spend two years of salary on a marriage,so how much for a car????????

1.5-2 years of salary but would also depend upon your other liabilities (loans/repayments etc.).

Of late, I would say, one year salary is sufficient if there are no other liabilities. People are earning a lot more and the annual pay packages have raised a lot (if you discount the current year on the count of recession).

Regards,

K Prasad

yeah,correct,but i have seen stingy people who earn rs.40,000 a day buy a M800 and relatively lesser earning people buying fiestas,so i always had this question in mind and limited my purchase to 5 months income

It would also depend upon the income.  5 months income for some may be equivalent to 10 months income of other - while the requirement/preference may be same.

Yeah, Pankaj tidied up his response just in the nick of time... (as if I know better... but still, not bad as a comment )

Bala, do not look at budgeting your car in the manner you have tried to approach it... Try the following instead:

1. Look at your requirement, then methodically decide upon what is the vehicle that will suit your needs
2. then look at how much it costs - choose the minimum cost vehicle that meets your requirement. (requirement is x people, x distance per day, x amount of luggage. etc. It is not a list of fancy features you would want in the car. That, except for an odd exception, is not covered in requirements)
3. if the vehicle is overbudget, see how you can water down your requirement, but mostly choose a used vehicle that will suit your cutoff budget.
4. When considering a used vehicle, keep in mind that the interest rates for the used car loans are insane, so adjust your budget to still stay over water, re-iterate the exercise till this point.
5. then look at how much you can pay as downpayment
6. while deciding on the final downpayment, also consider if you get some advantage in terms of perks  (some companies pay part/full interest on vehicle loans)
7. Then choose the duration of payments for the vehicle. If the interest is no matter (perks as above), choose as long as possible. Otherwise choose as early as possible.
8. It is technically good to pay off your loan naturally in the period you chooose to use vehicle for. So if you are going to sell your vehicle after three years (usual / extended warranty period expires, so car maintenance suddenly has the potential to bother you. Also you have your sights on the next higher bracket because of increase in liquidity, social status etc ) choose your loan tenure as three years.
9. If the EMI comes to be over budget, adjust your parameters accordingly.
10. Choose SBI for loan, as they will always have the lowest interest rates, so they can compete with the more agile private lenders. Also their recovery would tend to be more humane, God forbid just in that odd case you may be required to undergo the scenario.
11. Then choose the vehicle dealer, accessories with the help of CW forum, and enjoy driving (and running errands, ferrying family and friends, and other odd obligations that come with it )

I almost forgot to summarize response to your main query - Never decide beforehand that you are going to spend x amount for a vehicle, and then go scouting for a vehicle meeting it. In that scenario, you will ALWAYS end up spending all the budgetted amount (even more, as you would come to accessorize it later, and have a separate budget for it), even if it may not be necessary to do so.

Think of the need, and satisfy it with the car model and state. think of luxury when you accessorize, There you have an obvious limit to how far you can go, and feel really pampered within a defined budget..

By the way, the quantum of car loan normally extended/sanctioned by the banks are 30 times the NMI (Net Monthly Income) OR 2.5 times the NAI (Net Annual Income) - subject to total monthly deductions (including the car EMI) not exceed 50% of NMI.

sometimes its also the flair for a particular brand that counts! If you r in love with a car, you just need to have that, irrespective of its cost,style,brand etc.

e.g The MD of Wipro still drives a Maruti Esteem

Really true vikram.

in my case also... Dzire was my dream car since its launch. Now, even it became an old model, iam going for that, irrespective of the budget.. Really mad na?

True - Esteem is a wonderful car & so is Dzire.  But the subject matter is how much one should spend - maximum (nothing to do with the choice of the car - cheap or expensive)