It’s almost normal for a potential car owner to do this: they’ll look at the monthly installment of a car, add $100 or $200 per month for petrol and that’s the monthly expense of a car.
They can sell it if they lose their job or decide not to drive. Well, on the surface, it might look that way, but once you’ve signed the papers and got your car, you’re in for a shock.
To put it bluntly, once you have a car, you can’t let go of it. It’s like marriage—you can’t just marry someone and divorce as if you’re refunding a wife. I won’t go in depth into the numbers because it’ll bore you to tears, but I’ll touch on the very basics.
Most car purchases are made with a bank loan. The new rule states that you can now only loan up half of the total amount, but we’re looking at other loans that bypass the system (e.g. personal loans from banks).
So let’s say a car is $100,000, and you loan $100,000 for ten years. That’s about $833 per month before interest, right? Let’s say it’s $900 per month.
Okay. So one year later, you decide to sell the car. By then, it’ll fetch, maybe, $80,000. You’ll have paid about $10,000, and get $80,000 from the sale of the car.
But you need to pay back the bank a total of $100,000…before interest and early repayment fees that can be crazy.
So, in this highly exaggerated yet very real scenario, you’ll lose at $10,000 for selling a car—I guess no one would be able to fork out $10,000 within days, or even months.
This is the exact reason why people would sometimes say that “I’m stuck with my car because of the loan”. A hidden, real truth that many potential car owners might not have thought of.
So, if you’re going to buy a car, do reconsider. After all, we’ve yet to include the expenses of petrol, maintenance, etc…
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