Next to a home, buying a car is one of the most important financial commitments you could ever make. There are many factors to consider when getting a car: the brand, the model, the pricing, tear rubber or tokunbo, and of course the payment plan. The interest paid back on loans should make anyone cautious about using a loan to purchase a car. But, the allure of that new car might find you filling out the next available loan form. Is a car really worth getting into debt for?
Before you answer that, we know a car is important! The average urban Nigerian spends a lot of time commuting. The Punch Newspaper says that the average Lagosian could spend up to a quarter of a day on the road. If you are going to spend so much time in traffic, you might as well do so in the comfort of your own car. So, let’s examine your options.
Taking on consumer debt is simply put, double spending. In the case of a car, you have to pay back the loan as well as maintain the car. Your monthly expenses will increase significantly after taking a car loan.
There are cases where people purchased a car with a loan, only to have the car sit at home because there wasn’t enough money to fuel it. God forbid, one Danfo should then bash the car when you haven’t finished paying for it. Gbese!
A Loan You Cannot Afford:
There is an income verification process involved in getting a car loan. Many people find ways around this and end up with a loan they simply can’t afford. If you do apply for a loan, please ensure you do not take one beyond your reach. It’s a double-edged sword.
So, what can you do instead of taking a car loan?
You might be thinking, “I just want my own car. Saving on my current income would take me 4 years to buy the car I want. Meanwhile, taking a taxi is inflating my budget.”
Well, let’s switch to the ‘buying with cash’ lane and see where that leads.
1. Define your Car Needs:
Properly define what you need from a car. Even if you live in a high-class city like Abuja, don’t neglect the fact that the main purpose of a car is to get you from point A to point B. Thinking of the cash you’re going to spend, should help you narrow down your needs.
2. Budget and Plan:
How much do you earn and how much is the car you want? Once you assess your car needs, you can come up with an ideal budget to match. When you have a clear budget, you will be faced with three options to raise the money: cut down expenses, increase income or do both.
3. Save! Save! Save!
Yes, save! However, don’t use a regular savings account. Instead, check out Investment One’s Abacus Money Market Fund, which offers higher interest rates on your savings with your principal guaranteed. This product from Investment One is especially suited for long-term savings and would be ideal for your car goal.
4. Your Fully Owned Car
With your successful savings plan and interest earned, you are now ready to purchase your car!
So, wouldn’t you rather save towards your next car?