# Target markets



## swchang (Oct 5, 2003)

Target market for the Infiniti M:

1) "She says the target audience of the M series is men in their 40s with annual household incomes of $150,000 to $175,000."

2) "Target buyers are married couples, with or without children at home, who are 40 or so years old and have annual household income of $175,000."

Target market for the Acura RL:

"Target is a 50-year-old married man with advanced college degree and $150,000 yearly household income."

I'd always thought the rule of thumb was MSRP of car ~ 1/4 of annual salary. These cars are close to 1/3 of the target annual salary, and that's assuming they don't have another car. Hmm... Anyone else find this weird, or am I way off base?


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## MaxBuck (Jan 30, 2005)

swchang said:


> Target market for the Infiniti M:
> 
> 1) "She says the target audience of the M series is men in their 40s with annual household incomes of $150,000 to $175,000."
> 
> ...


Do you believe the average person with income of $80K is buying $20K cars? I don't.


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## mng (Oct 15, 2003)

swchang said:


> I'd always thought the rule of thumb was MSRP of car ~ 1/4 of annual salary. These cars are close to 1/3 of the target annual salary, and that's assuming they don't have another car. Hmm... Anyone else find this weird, or am I way off base?


maybe you're confusing the rule of thumb...could it be the *monthly car* *payment* should top out at 25% of _monthly_ _take home (or gross :dunno: )_?


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## mtbscott (Jul 16, 2003)

I have a M3 which listed for around $53K and I can assure you that I don't make $212K a year. Neither am I "living for the car payment." Everyone has different needs and priorities for their vehicle to meet. I am in the basic age groups for the Infiniti and Acuras you named, but wouldn't be interested in buying either.


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## swchang (Oct 5, 2003)

mng said:


> maybe you're confusing the rule of thumb...could it be the *monthly car* *payment* should top out at 25% of _monthly_ _take home (or gross :dunno: )_?


I guess that's it. They don't equate?


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## ·clyde· (Dec 26, 2001)

mng said:


> maybe you're confusing the rule of thumb...could it be the *monthly car* *payment* should top out at 25% of _monthly_ _take home (or gross :dunno: )_?


 I know that people do it, but 25% of monthly income (gross or net) going to a car payment is way, way, way too much, IMO. I wouldn't even want to spend that on my mortgage.


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## swchang (Oct 5, 2003)

·clyde· said:


> I know that people do it, but 25% of monthly income (gross or net) going to a car payment is way, way, way too much, IMO. I wouldn't even want to spend that on my mortgage.


Even of gross (after taxes) pay? I forget the rule of thumb for a house payment, I think it was like 40% or something, but I'll have to look it up again.

A few months ago when I was looking up rules of thumb for car, house, etc. payments per month, everything added up to over 100% of pay. One site, or maybe it was several, said that the day your child is born, you should save 10% of pay for his/her future college tuition. The site said to do this for EACH KID. If you have 12 kids... :dunno:


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## Guest (Feb 8, 2005)

MaxBuck said:


> Do you believe the average person with income of $80K is buying $20K cars? I don't.


 You don't?

I suspect most people making $80K/yr don't spend much more than $20K for a car. Especially if they have families.

Strangely, the older I've gotten (in spite of making progressively more money each year), the less I'm willing to spend on a car.


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## Guest (Feb 8, 2005)

BTW, I recall the rule being something like only buying a car that costs 1/2 of your annual salary.

Of course, any "rule" doesn't fit accross the board. Everyone's circumstances are quite different. However, it's pretty safe to say that a lot of young people buy more expensive cars than they really should.


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## mng (Oct 15, 2003)

swchang said:


> I guess that's it. They don't equate?


they could. if you financed the car for 1 yr.

leasing and balloon pmt loans change the game a bit...


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## swchang (Oct 5, 2003)

My monthly payments are a little less than $800 for the car itself (doesn't include maintenance, repairs, insurance, etc.). At 4x that, it's $3200 per month take-home pay, x 12 is $38400. Assuming taxes take out half of pay (which I don't think they would at this bracket), that's an annual salary of $76800. My car was about $42k, give or take, before TT&L. Hmm, calculating on a monthly basis definitely buys you more car than if you did it on a yearly basis. To afford a $43.5k car (OTD price), you'd have to make $174k a year, otherwise.

I like this monthly basis thing.


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## swchang (Oct 5, 2003)

TD said:


> BTW, I recall the rule being something like only buying a car that costs 1/2 of your annual salary.
> 
> Of course, any "rule" doesn't fit accross the board. Everyone's circumstances are quite different. However, it's pretty safe to say that a lot of young people buy more expensive cars than they really should.


That sounds really high, but I guess that sorta equates. See my post below (#11).


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## Guest (Feb 8, 2005)

swchang said:


> That sounds really high, but I guess that sorta equates. See my post below (#11).


 But it sort of shoots down all of the kids making ~$40K/year who lease M3s after putting down the $10K they got in graduation money.


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## Kaz (Dec 21, 2001)

I always thought it was that the total cost of the car shouldn't be more than 1/3 your annual gross. And figured I was getting a bit over my head by buying my E46.


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## AsianImage (Oct 10, 2004)

Have you guys read the MILLONAIRE NEXT DOOR? and the follow up of the MILLIONAIRE MIND?

The state that the "average" millonaire..someone that has LIQUID assets of at least $1M over half...like a really really high percentage only spend about 15% of income on their cars. Many drive Buicks and Oldsmobiles and usually purchase them and drive them forever. They do not lease cars either.

On the hand they show examples of the many many lawyers and doctors that were interviewed and said they HAVE to drive the MBZ or the BMW and have to have the big home and be part of the country club. Part of doing business. So these guys are making 6 figures and are literally living pay check by pay check.

The book also states....to truly be "comfortable" you should have enough money saved up...that if you lost your job today, you could continue your lifestyle unchanged for a year. Making all your payments, eating the same etc. No changes.

A more realistic goal is try to save up 6 months worth of money. Can you survive for 6 months w/o any money coming in and still live the same life you are now? makes ya think!


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## Mr. The Edge (Dec 19, 2001)

TD said:


> You don't?
> 
> I suspect most people making $80K/yr don't spend much more than $20K for a car. Especially if they have families.
> 
> Strangely, the older I've gotten (in spite of making progressively more money each year), the less I'm willing to spend on a car.


once again you're out of touch with how far $80,000 goes in most of the country


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## Guest (Feb 8, 2005)

Kaz said:


> I always thought it was that the total cost of the car shouldn't be more than 1/3 your annual gross. And figured I was getting a bit over my head by buying my E46.


 That sounds pretty reasonable when you think about it. $50K cars for those making $150K. $25K cars for those making $75K.


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## swchang (Oct 5, 2003)

AsianImage said:


> Have you guys read the MILLONAIRE NEXT DOOR? and the follow up of the MILLIONAIRE MIND?
> 
> The state that the "average" millonaire..someone that has LIQUID assets of at least $1M over half...like a really really high percentage only spend about 15% of income on their cars. Many drive Buicks and Oldsmobiles and usually purchase them and drive them forever. They do not lease cars either.
> 
> ...


I always thought it was 3 months, not a year.

I guess everyone has different benchmarks...


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## Guest (Feb 8, 2005)

atyclb said:


> once again you're out of touch with how far $80,000 goes in most of the country


 Or how stupid many people are when they buy $45-50K SUVs when they only make $50K/yr.


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## swchang (Oct 5, 2003)

TD said:


> That sounds pretty reasonable when you think about it. $50K cars for those making $150K. $25K cars for those making $75K.


But he said annual gross. That means they'd have to make a lot more than that. More like $250-300k for a $50k car, no?


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## wheel-man (Sep 28, 2004)

I thought the rule of thumb was you can buy a car comfortably at 1/4 your yearly income, but can live with it being as much as 1/2.

Obviously, your other responsibilities will dictate how much you have to spend, e.g. mortgage, kiddies, credit, etc.


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## Guest (Feb 8, 2005)

swchang said:


> But he said annual gross. That means they'd have to make a lot more than that. More like $250-300k for a $50k car, no?


 Gross not net.

That means $150K salary for a $50K car.


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## swchang (Oct 5, 2003)

TD said:


> Gross not net.
> 
> That means $150K salary for a $50K car.


Er, yeah, my financial aptitude is a bit lacking. Gross = $150k means net = like $80k after taxes? :dunno:


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## Guest (Feb 8, 2005)

swchang said:


> Er, yeah, my financial aptitude is a bit lacking. Gross = $150k means net = like $80k after taxes? :dunno:


 That'd be roughly my guess as to net on $150K as well.


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## Mr. The Edge (Dec 19, 2001)

TD said:


> That'd be roughly my guess as to net on $150K as well.


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## Guest (Feb 8, 2005)

atyclb said:


> once again you're out of touch with how far $80,000 goes in most of the country


 And I'll add that "most of the country" does not buy high-end imported cars.

While you may have high-end car dealers in Texas, these demographic references do tend to refer to people living in the places where people who buy high-end imported cars tend to live. That would be the large metropolitan areas, not necessarily on the coasts. And in most of these metropolitan areas, the cost of living is similarly high.

Keep the conversation on an apples to apples level. When we're talking BROAD demographic generalities, remain in the land of BROAD demographic generalities.


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## ·clyde· (Dec 26, 2001)

swchang said:


> Even of gross (after taxes) pay? I forget the rule of thumb for a house payment, I think it was like 40% or something, but I'll have to look it up again.
> 
> A few months ago when I was looking up rules of thumb for car, house, etc. payments per month, everything added up to over 100% of pay. One site, or maybe it was several, said that the day your child is born, you should save 10% of pay for his/her future college tuition. The site said to do this for EACH KID. If you have 12 kids... :dunno:


Rules of thumb are just that, though...rules of thumb. The individual situation trumps everything.


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## AsianImage (Oct 10, 2004)

swchang said:


> I always thought it was 3 months, not a year.
> 
> I guess everyone has different benchmarks...


I know it was more than 3 months...but maybe not a year. I could be wrong. I have to re read the books!

But I guess I personally fall in the OVER EXTENDED category...

I make just a little over 50K a year...and I bought my 2001 5401 for about 36K otd. Too much? Probably....do I regret it? sometimes...but..when I am on the road and driving this car..it all fades away...I work hard so I can pay for it...so what.


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## swchang (Oct 5, 2003)

·clyde· said:


> Rules of thumb are just that, though...rules of thumb. The individual situation trumps everything.


Agreed. It's nice to have an idea of how to plan out expenses and everything, though.

BTW, anyone know why they're called "rules of thumb"? I'm sure there's a good military or outdoorsman origin of the phrase.


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## swchang (Oct 5, 2003)

AsianImage said:


> I know it was more than 3 months...but maybe not a year. I could be wrong. I have to re read the books!
> 
> But I guess I personally fall in the OVER EXTENDED category...
> 
> I make just a little over 50K a year...and I bought my 2001 5401 for about 36K otd. Too much? Probably....do I regret it? sometimes...but..when I am on the road and driving this car..it all fades away...I work hard so I can pay for it...so what.


While I probably wouldn't have done that, I'm definitely more risk-averse and conservative than the majority of people out there. As long as you're happy and you're making ends meet (and you don't have a wife and kids that you're starving just so you can make car payments...), then cool for you.


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## Guest (Feb 8, 2005)

swchang said:


> While I probably wouldn't have done that, I'm definitely more risk-averse and conservative than the majority of people out there. As long as you're happy and you're making ends meet (and you don't have a wife and kids that you're starving just so you can make car payments...), then cool for you.


 "Wouldn't have done that" is pretty kind. :lol:


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## Guest (Feb 8, 2005)

atyclb said:


>


 So maybe it's closer to $100K (assuming you do not have a litter of children and qualify for 9 exemptions).


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## lil' poppa (Oct 27, 2004)

swchang said:


> BTW, anyone know why they're called "rules of thumb"? I'm sure there's a good military or outdoorsman origin of the phrase.


Someone else feel free to confirm, but I believe the "rule of thumb" referred to the maximum size of a stick and/or blunt object a husband could use to beat (legally) his wife with. I'm not making this up, nor do I advocate a return to this rule, btw.


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## ·clyde· (Dec 26, 2001)

lil' poppa said:


> Someone else feel free to confirm, but I believe the "rule of thumb" referred to the maximum size of a stick and/or blunt object a husband could use to beat (legally) his wife with. I'm not making this up, nor do I advocate a return to this rule, btw.


 I've heard that before, but there are other theories.

http://www.word-detective.com/back-n.html

Last listed phrase on the page.


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## Mr. The Edge (Dec 19, 2001)

TD said:


> So maybe it's closer to $100K (assuming you do not have a litter of children and qualify for 9 exemptions).


http://www.moviewavs.com/0056218974/WAVS/Movies/Raising_Arizona/govtbite.wav


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## lil' poppa (Oct 27, 2004)

·clyde· said:


> I've heard that before, but there are other theories.
> 
> http://www.word-detective.com/back-n.html
> 
> Last listed phrase on the page.


Thanks for the reference, Clyde. I don't feel too confident relying on a deriviation that came from a letter from Ms. Magazine.

Addressing the general theme of this thread, I'll just say that I'm glad that I'm able to own my car rather than having to lease it. Makes me take better care of it, if nothing else.


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## swchang (Oct 5, 2003)

Determine what you can afford to pay per month. Most people find a car and adjust their budget to fit that car's payment. Smart people budget a payment instead. You need to determine your car payment threshold - the amount of money you can afford each month. One rule of thumb says your total long-term debt loan (car payments, mortgage or rent, taxes and insurance, student loans, and installment loans) should not exceed 36% of your gross monthly income. If you need help calculating your debt ration just let us know.


PRUDENT RULE OF THUMB
Your monthly car payment shouldn't exceed 8% of your monthly gross income. Less if you have other debt.


A new car should cost considerably less than a home mortgage. A good rule of thumb: your monthly payment for a car should be no more than 20% of your monthly net income. Remember that this rule of thumb applies to car payments as a whole. If you own two vehicles and make payments on both of them, the total of the payments for both vehicles should not exceed 20% of your monthly net income.


A better rule is to figure that your total monthly debt payments shouldn't exceed 36% to 40% of your total monthly income, says Bob Walters, chief economist for Quicken Loans.


The 8% rule. The average consumer pays 11% of their gross monthly income on a car payment, but as a rule of thumb, lenders want you to pay no more than 8% of your gross monthly income. Mortgage lenders don't like to see more than 36% of your gross monthly income devoted to debt, including car payments.


When buying a used car, start off knowing what you can afford. A good rule of thumb: Your monthly finance payment on a used car should be approximately fifteen percent of your monthly income.


A rule of thumb is your total monthly car payments - whether you own one car or more than one - shouldn't exceed 20 percent of your monthly take-home pay. 


A conservative rule of thumb for consumer credit is the "20-10 Rule." This means that total household debt including your housing payments shouldn't exceed 20% of your net household income. Remember your net income is how much you "bring home" in your paycheck and monthly payments on the debt shouldn't exceed 10% of net monthly income. Another conservative rule of thumb for mortgage debt is the "28/36" rule. This means that your non-housing debt shouldn't exceed 28% of your gross (your total) income, and your total debt - consumer debt plus housing debt - shouldn't exceed 36% of your gross income.


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## AsianImage (Oct 10, 2004)

Agreed....

again..I know I am over extended...but everyone's situation is different. So yes I can make my car payment...I am single, no kids, and I share a condo with my sister. So basically my two major payments every month are my car and my mortgage. The rest goes to misc crap, cell phone, utilities..and it leaves just enough for an occasional movie or nice dinner. So I am ok...but...as the year and time progress I do expect to make more money and pay off more crap.

But totally understood...on paper..Maybe I should of bought a nice KIA!


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## swchang (Oct 5, 2003)

AsianImage said:


> Agreed....
> 
> again..I know I am over extended...but everyone's situation is different. So yes I can make my car payment...I am single, no kids, and I share a condo with my sister. So basically my two major payments every month are my car and my mortgage. The rest goes to misc crap, cell phone, utilities..and it leaves just enough for an occasional movie or nice dinner. So I am ok...but...as the year and time progress I do expect to make more money and pay off more crap.
> 
> But totally understood...on paper..Maybe I should of bought a nice KIA!


According to the rules of thumb, a nice USED Kia. 

Granted, the rules of thumb don't account for progressive pay increases, though.


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## Guest (Feb 8, 2005)

AsianImage said:


> Agreed....
> 
> again..I know I am over extended...but everyone's situation is different. So yes I can make my car payment...I am single, no kids, and I share a condo with my sister. So basically my two major payments every month are my car and my mortgage. The rest goes to misc crap, cell phone, utilities..and it leaves just enough for an occasional movie or nice dinner. So I am ok...but...as the year and time progress I do expect to make more money and pay off more crap.
> 
> But totally understood...on paper..Maybe I should of bought a nice KIA!


 Actually, on paper you should be maxing out your employer's 401K and banking much of the rest. At $50K of income, you don't need to be down at Kia levels, but definitely Honda/Mazda/used non-M BMW territory.

Saving nothing when you don't have kids, spouse or a house payment is really pretty much stupid.


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## swchang (Oct 5, 2003)

TD said:


> Actually, on paper you should be maxing out your employer's 401K and banking much of the rest. At $50K of income, you don't need to be down at Kia levels, but definitely Honda/Mazda/used non-M BMW territory.
> 
> Saving nothing when you don't have kids, spouse or a house payment is really pretty much stupid.


TD, I will say this for you, you tell it like it is. No sugar coating for you. 

BTW, he did buy a used non-M BMW...


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## AsianImage (Oct 10, 2004)

swchang said:


> TD, I will say this for you, you tell it like it is. No sugar coating for you.
> 
> BTW, he did buy a used non-M BMW...


Yes..I also have a house payment!! I stated I have a condo with my sis...car payment and house payment...those two are hurting the most!


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## cwsqbm (Aug 4, 2004)

swchang said:


> I'd always thought the rule of thumb was MSRP of car ~ 1/4 of annual salary.


The rule of thumb I heard was 2/3 of your annual gross salary, but then taxes were probably lower when that rule was made, and people didn't have as much other junk to spend money on. Also, that rule was probably made by the car industry trying to sell more expensive cars.

Simplest rule: buy what you can afford, not more. :dunno:


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## Guest (Feb 9, 2005)

cwsqbm said:


> The rule of thumb I heard was 2/3 of your annual gross salary, but then taxes were probably lower when that rule was made, and people didn't have as much other junk to spend money on. Also, that rule was probably made by the car industry trying to sell more expensive cars.
> 
> Simplest rule: buy what you can afford, not more. :dunno:


 2/3rds?!?! That's insane.


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## ·clyde· (Dec 26, 2001)

cwsqbm said:


> Simplest rule: buy what you can afford, not more. :dunno:


Better rule...Buy less than what you can _comfortably_ afford.


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## Chris90 (Apr 7, 2003)

First of all, those "target buyer" figures from car companies are all purely bogus - they're a way to try to attract aspirational buyers, who think "wait, I can afford payment on a TL, so I can live like people who make $175k/year!" 

Compare annual sales of those cars to average salaries in the US, and you'll see the numbers are complete BS. 

America is a country that lives on debt, not wise finances - a good portion of Americans buy cars that are close the 4/4ths of their salary, not 1/4. The average new car is $30k, what is the average annual salary (of individuals) in the US? $40k?


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