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Saving Money with your Vehicle

Saving money with your vehicleSaving money with your vehicle.

Recently, a client found himself off the road thanks to a starter motor problem on his vehicle. He drives a not-very-new used import European car, which he has had very little trouble with in the five years he has owned it.

Now, though, it’s starting to cost him money – and with a young family he has little to spare. 

He decided perhaps the best thing would be to buy a new car. He worked out that he could withdraw up to $40,000 on his home loan, enough to buy a brand new vehicle. But when we talked through the figures we showed him that he would be paying an additional $2,400 per annum on his mortgage repayments. We also advised that the depreciation on the vehicle would be around 30% over the first year of ownership, a whopping hit to take on its value.

As an alternative, he investigated buying a similar car that was a year old but about $12,000 less. This reduced the home loan interest payment over a year to just $1,680 with a much lower depreciation loss over the following years of ownership.  This was a figure he felt the family could afford.

The lesson here is to work out the benefits of a brand new car as opposed to one that is a year or two old, which might represent much better value over its lifetime and still do everything you need of it.

As with all wealth, it is not what you earn that is always the major factor but how little you spend of that earning that creates savings.

Simple logic but so often ignored.

 

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