A group of local actuaries recently crunched the numbers on what a fancy car will cost you over the course of your working life. If you buy a R500,000 expensive car now, assuming that you’re in your 30s, then by the time you reach 65 and have had to replace that car several times, the actual total cost would be almost R10 million. If that’s a frightening prospect
Robert Kiyosaki, author of the famed “Rich Dad Poor Dad” book and franchise, explains that a car is a doodad – which is defined as a frivolity that depreciates in value, a nice-to-have, not a money maker. In fact, some theorists have suggested that a new car automatically depreciates by 25% the minute you drive it off the showroom floor. Of course, some cars appreciate in value, like a Rolls Royce or a Jaguar. Chances are that if you maintain such a car, it could actually become an asset.
But it is true that you might get some Ben 10 or a recent graduate who must have a great car, even if it means 90% of his salary is going to be spent on it. Hey, who doesn’t like nice shiny new things?
Of course the other massive money hole is the HP car – and we’re not talking about a computer brand here. Buying a vehicle on hire purchase is possibly the worst expenditure of money. A few years ago, when you could still get an entry level brand new VW Golf for R70,000 (these days you’d be hard pressed to find a new car for under R100,000), after the deposit and the residual and the monthly repayments and all those nice things, the actual repayment was about R105,000 – so the car cost 50% more. That’s a lot of money.
If a nice car is a deal breaker for you, then just make sure that you buy something you can actually afford. Don’t become like the stat which suggests that up to 55% of new cars are repossessed.