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Finance: You don’t have to buy that car

By - Veronica Cherop | July 28th 2013 at 00:00:00 GMT +0300

By Veronica Cherop

About six years ago, a colleague, who was newly employed in the private sector, took a car loan. With a new car, he had to ‘upgrade’ his residence to a more expensive neighbourhood, where he would get parking for his acquisition.

He was inadequately prepared for the new financial pressure. With a huge chunk of his salary going towards servicing the loan and paying the higher rent, he was left with hardly enough to fuel the car or feed his young family.

One day, I found him borrowing Sh200 to fuel his car so that he could go home. I asked him what would happen if he failed to raise another Sh200 to get the car to the office the following day, or drive it home in the evening, and he replied, “Tomorrow will take care of itself,” and walked away.

A few months later, he was so deeply indebted that he had to sell the car and pay off the bank loan as well as the friends he had borrowed from to stay afloat. His wife took off with their baby; they could not stay with a man who ensured their stomachs rumbled with hunger every night.

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To avoid getting into such a trap, it is important to prepare yourself financially for that car purchase. Unlike buying land, which appreciates in a short time, a car is a liability. You will fuel it, service it, change its tyres and replace parts, among other costs.

Since it has a major implication on your family finances, it is advisable that you discuss this investment with your spouse before you put your money into it. Look at a variety of cars and settle on the one you are both comfortable with. Discuss the cost implications and where you are going to get the money.

There are some companies that give employees interest-free car loans to consolidate loyalty. If you are lucky to land such a job, take advantage of this facility. The repayment of such loans is not as straining as bank loans, which have fees that will eventually make the car obscenely costly.

If you buy a car due to peer pressure, you are likely to be disappointed. One man was driving home from work with his wife in their new Toyota Vitz when a friend passed him in a BMW and lowered his window, shouting, “What are you doing driving your wife’s car?”

The man’s ego was crushed.

I know another who has an old station wagon. When his friends tell him to ‘upgrade’, he says his car is vintage. He is not thinking of buying a fuel guzzler or any other car for now as he and his wife are saving for a major investment in real estate.

Some children force their parents to invest in certain cars and, surprisingly, some parents cave in.

“My children said their father’s car was embarrassing them; their school friends had a name for it as it was old and ‘out of fashion’,” said a woman in one of our training sessions.


Toyota Vitz family finance BMW
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