Can I Afford A Car?

[firstgear]

Geetings to everyone.

First up, thanks admin for validating my account; being waiting endlessly.

Going to my question next, please bear with me if I sound odd. I know my question is very personal but I will try to be more detailed so that some of you might be able to give me your opinion based on your experience and general feelings. Since my pseudonym is anonymous, I feel OK in proceeding.

Lately this idea of buying a car has been buzzing me. Mainly because of friends and family members who are suggesting me to buy one as I have just got married. But I am not sure if I am fit for the buy in terms of financial capacity (it's been more than a decade since my immediate family owned a car and I don't have a good knowledge about the expenses coming along with owning a one).

If I am going for a car, I think I would go for something below Rs. 1.4 m and for that budget what is available for my taste is Perodua Kelisa or Ford Laser 1998 among other options.

But the problem is, at the moment I have Rs. 70k take home (with at least 8k annual increment) and Rs.0.00 savings .

Do the majority of the people here think I can be an owner of a car?

If NO, then problem solved; see you all in couple of years

If YES, what are the ways of getting a full lease for a Rs. 1.4m car? I can only go for something like Rs. 25k per month installment. With the balance Rs. 45k could I be able to lead a decent life?

(At the moment I don't have house rents, utility bills, schooling fee for children etc and only have the expenses of food and cloth for about 3 persons)

My monthly run would be less than 500km.

Awaiting your replies.

Thanks

FG.

[Hoonigan]

Yes. I have been working for about 4 years now. My first salary was 20k

And I believe the main reason for my lack of savings is these credit cards. I still have about 80k in outstanding balance with 2 banks. So every month I pay about 15k to credit cards in addition to the 20k bike lease. Everyting else is covered from the balance 35k . If everything goes well, in about 5 months I would be able to pay off the outstanding balance in credit cards and bike lease. By then I will have my first kid. Only then I will be able to start to make a saving.

The other thing is, I never felt anytime that I need to make a saving nor did anyone advised me to make a saving. So I grew to the habit of spending to zero towards the end of the month.

I don't have a kid yet but I doubt that a child will let you save better than you can now. Looks like you have a plan to settle the cards and get out of the debt you have at the moment. Stick to the plan and clean the slate first. It's easy to spend away every dime without having nothig to show for it. I did the same back then pretty much the same way Crosswind mentioned. The bad habbit continued when I moved abroad and after a few months i realised something had to be done.

Start by keeping a log of all your spending for a few months..groceries, fuel, medicine etc. After a while you will get an idea of how much you need for the month. Then you can set yourself a budget. Transfer everything else to a different account as soon as you get the salary. I'm not saying you should become a lobaya, just keeping track of where your money is going alone will set you on your way to build a good saving account. Worked for me

[Rumesh88]

Yes. I have been working four about 4 years now. My first salary was 20k

And I believe the main reason for my lack of savings is these credit cards. I still have about 80k in outstanding balance with 2 banks. So every month I pay about 15k to credit cards in addition to the 20k bike lease. Everyting else is covered from the balance 35k . If everything goes well, in about 5 months I would be able to pay off the outstanding balance in credit cards and bike lease. By then I will have my first kid. Only then I will be able to start to make a saving.

The other thing is, I never felt anytime that I need to make a saving nor did anyone advised me to make a saving. So I grew to the habit of spending to zero towards the end of the month.

Well that tells a good part of the story. What really matters is not what you get but how you manage what you get. I know a guy who has been a seafarer all his life. When he was jobless he was not in any kind debt. But after working for few years on a salary of USD1000 he had accumulated debts of around LKR 1.5m by the time he got married. Today his salary is USD 5000 but his debts are around LKR 8m. Lucky for him his wife is now managing his finances.

[hrm]

Yes. I have been working for about 4 years now. My first salary was 20k

And I believe the main reason for my lack of savings is these credit cards. I still have about 80k in outstanding balance with 2 banks. So every month I pay about 15k to credit cards in addition to the 20k bike lease. Everyting else is covered from the balance 35k . If everything goes well, in about 5 months I would be able to pay off the outstanding balance in credit cards and bike lease. By then I will have my first kid. Only then I will be able to start to make a saving.

The other thing is, I never felt anytime that I need to make a saving nor did anyone advised me to make a saving. So I grew to the habit of spending to zero towards the end of the month.

Well in that case, I suggest you to wait a bit. I had 2 credit cards and cancelled one and I use the other only once a month. For all other transactions I use my debit card. I had a 5 years loan for my Lancer and 2 more years to go. But in my case I have my wife's Alto to use so I let Lancer go. At that time I thought of selling both cars at once and go for a newer ride but second thought was to wait until the loan pays off so risk would be minimal.

[iRage]

Thanks for the welcome

The reason I thought to go for a car with that amount is because I thought that after paying lease for 5-6 years, I should have to have something valuable at the end that could be considered as an asset.

Cars depreciate. PERIOD !!! Unlike a house or a plot of land a car is an asset that starts depreciating the minute a number plate gets slapped on/driven off the lot/ownership transferred. So I think you need to have a bit of more definition/clarity of what you want as a "valuable" asset at the end of your debt period. Some cars depreciate faster than others. I seriously doubt the cars within your price bracket and those you have mentioned are going to retain that much value in 5-6 years. The thing with the older cars is that the previous owners have grunted out the depreciation and you have less to lose and will be in debt less.

The whole credit card obsession is going crazy in SL...get rid of those evil cards of doom. If you must have a CC have one and/or lower limits.

[LashNeo]

Yes. I have been working for about 4 years now. My first salary was 20k

And I believe the main reason for my lack of savings is these credit cards. I still have about 80k in outstanding balance with 2 banks. So every month I pay about 15k to credit cards in addition to the 20k bike lease. Everyting else is covered from the balance 35k . If everything goes well, in about 5 months I would be able to pay off the outstanding balance in credit cards and bike lease. By then I will have my first kid. Only then I will be able to start to make a saving.

The other thing is, I never felt anytime that I need to make a saving nor did anyone advised me to make a saving. So I grew to the habit of spending to zero towards the end of the month.

OMG!! If you’re already on a lease of 20k and credit card payments of 15k per month how can you afford another loan or a lease for a car with the remaining 35k? I don’t think financial institutes will allow you a loan or a lease according to your current credit score. Even if they do, how can you manage all other expenses with the remaining amount? especially when a kid is also coming aboard soon?

Just forget about the Car for the moment and any other investments (such as buying a land as I mentioned in my previous post) for the time being and get out of that credit card debt ASAP!!.

Start saving now. With your current situation if you have to incur an emergency and have to spend a large amount from your monthly pay you’ll be in trouble. I guess you know the penalty fees you have to pay in case you miss even one monthly credit card payment.

What you need is a Budget. It’s fairly simple. Do a bit of internet research and learn how to setup a budget and do that for the next 1-2 years and see whether you can actually afford a car considering all the other mandatory expenses that will occur in near future.

Edited March 12, 2015 by LashNeo

[firstgear]

OMG!! If you’re already on a lease of 20k and credit card payments of 15k per month how can you afford another loan or a lease for a car with the remaining 35k? I don’t think financial institutes will allow you a loan or a lease according to your current credit score. Even if they do, how can you manage all other expenses with the remaining amount? especially when a kid is also coming aboard soon?

Just forget about the Car for the moment and any other investments (such as buying a land as I mentioned in my previous post) for the time being and get out of that credit card debt ASAP!!.

Start saving now. With your current situation if you have to incur an emergency and have to spend a large amount from your monthly pay you’ll be in trouble. I guess you know the penalty fees you have to pay in case you miss even one monthly credit card payment.

What you need is a Budget. It’s fairly simple. Do a bit of internet research and learn how to setup a budget and do that for the next 1-2 years and see whether you can actually afford a car considering all the other mandatory expenses that will occur in near future.

As I said my bike lease and CC balance would be finish in 5 months max. I was planning to go for a car only afterwards.

One thing I have realized now is that how terrible I am in managing finances.

[firstgear]

I don't have a kid yet but I doubt that a child will let you save better than you can now. Looks like you have a plan to settle the cards and get out of the debt you have at the moment. Stick to the plan and clean the slate first. It's easy to spend away every dime without having nothig to show for it. I did the same back then pretty much the same way Crosswind mentioned. The bad habbit continued when I moved abroad and after a few months i realised something had to be done.

Start by keeping a log of all your spending for a few months..groceries, fuel, medicine etc. After a while you will get an idea of how much you need for the month. Then you can set yourself a budget. Transfer everything else to a different account as soon as you get the salary. I'm not saying you should become a lobaya, just keeping track of where your money is going alone will set you on your way to build a good saving account. Worked for me

Well, that sounds scary for me now

Thanks for the tips, noted down and will surely follow.

Well that tells a good part of the story. What really matters is not what you get but how you manage what you get. I know a guy who has been a seafarer all his life. When he was jobless he was not in any kind debt. But after working for few years on a salary of USD1000 he had accumulated debts of around LKR 1.5m by the time he got married. Today his salary is USD 5000 but his debts are around LKR 8m. Lucky for him his wife is now managing his finances.

Well in that case, I suggest you to wait a bit. I had 2 credit cards and cancelled one and I use the other only once a month. For all other transactions I use my debit card. I had a 5 years loan for my Lancer and 2 more years to go. But in my case I have my wife's Alto to use so I let Lancer go. At that time I thought of selling both cars at once and go for a newer ride but second thought was to wait until the loan pays off so risk would be minimal.

Cars depreciate. PERIOD !!! Unlike a house or a plot of land a car is an asset that starts depreciating the minute a number plate gets slapped on/driven off the lot/ownership transferred. So I think you need to have a bit of more definition/clarity of what you want as a "valuable" asset at the end of your debt period. Some cars depreciate faster than others. I seriously doubt the cars within your price bracket and those you have mentioned are going to retain that much value in 5-6 years. The thing with the older cars is that the previous owners have grunted out the depreciation and you have less to lose and will be in debt less.

The whole credit card obsession is going crazy in SL...get rid of those evil cards of doom. If you must have a CC have one and/or lower limits.

Thanks for all of your valuable advises, as soon as I settle the outstanding, surely I will ditch them forever.

[LashNeo]

As I said my bike lease and CC balance would be finish in 5 months max. I was planning to go for a car only afterwards.

One thing I have realized now is that how terrible I am in managing finances.

Ah! I see.. My bad. I missed that part. Anyway, learn a bit about budgeting. That’s the best way of knowing where your money goes and controlling your finances. Ah and by the way, you are not the only one who is bad in managing finances. Most of us are the same. I also learned it the hard way as there was no one to teach me when I started my carrier. I just don’t won’t to see you getting in the same mess.

[VVTi]

I believe that...during a #@$ 5 minute drop-by you made both my kid and dog-hyper active for the whole #@$# DAY ! Kid keeps asking when you are coming back to run with the dog. Shortly followed by questions of you taking the dog with you

Ha ha ha ha ha. Well if you ever need a sitter for the kid or the dog, you know who to call...

I am actually the official baby/dog/house sitter for both family and friends...

Edited March 12, 2015 by VVTi

[The Don]

Some very good advice out there. Let me also share a little bit of my own life experience.

Credit Cards

One of the most useful things to have, particularly to use in emergencies, special offers and for safety when buying online. Just note that credit cards are meant for short term borrowing. If you can't settle it within the interest free period, usually from 30-60 days, then it will attract interest as high as 30%. I can tell you there is nothing legal you can invest in that can provide the same sort of return (apart from winning the lottery) so it is can become a serious drag on finances. Use them, but only up to a limit where you can settle in full within a couple of months.

Finance

Another killer though interest rates have come down significantly. Note that interest related to high economic volatility (its a meassure of risk the bank or financial organisation is under taking) and around 10% I still think its a bit on the high side, particularly for a loan/lease that lasts multiple years. Think about the total amount you have to pay vs just the affordability factor (the bank or finance company will give you an illustration of the total you have to pay over the period). Consider the value returned by the cost incurred by you. For example some professions benefit from sporting the latest vehicles (professions where image matters) but for most its a simple modern convenience and need to be seen as such.

Investments

I strongly feel your investments need to be a combination of assets that can be liquidated quickly and assets which can't be liquidated so easily but for part of your long term investment portfolio. In Sri Lanka land is considered a safe haven and lots of people invest in them, and while as long term growth procespects are good, they cannot be liquidated quickly and some require management and can be a liability as well as an asset.

Short term fixed deposits (3 month) offer an excellent method of short term investment and will at least keep your money inline with inflation. Most importantly you can access your money every 3 months. Long term fixed deposits are a lot better for medium term investment.

Ironicallly the most liquifiable investment in SL seems to be Gold though the prices do go up and down.

Cash Buffer

If you are responsible for elderly people (parents for example) or young children, its important to keep some money as buffer for unexpected costs particularly illness. I know you said you had two Insurance policies but they are not likely to pay at the same time due to the insurance concept of contribution. So they will only pay up to 100K in some cases. I'd say its good to have at least double that amount on the side. My last hospital bill for a family member for a medium complexity surgery and a weeks stay including ICU at a private hospital was close to 400K.

Also saving starts small, and never discount the power of small savings.

If I may share a personal story, my parents managed to pay for me to go to University for 1 year in the UK. They paid for both tution and accomodation, but I don't come from a well to do family. My father at the time was on a very moderate salary for his skills and my mother worked for the government as a teacher. Our combined income was less than your single salary in 2002 and they had two kids (one doing her A/L and one at a private Institute learning IT) and a small mortgage and a fairly rusty not so great car. They have no other income other than their salary. Yet they managed to pay for both me and my sister to study abroad (she thankfully got a schol, I had a partial schol which was a discount) from the small amount they had put aside every month anticipating these expenses from about 1997 (so for 5 years. Building our house had depleted most of our savings from before).

So the moral of this story is start small, and don't underestimate its power or effectiveness.

[Luckyj]

Wow…what an epic thread. Beside buying cars, there are many great insights been discussed.....life, marriage, financing & budgeting, kids etc. Thanks everyone!!!! Some great points which were mentioned are;

1] Prior to making the buying decision its very much important on identifying the real requirement, availability of budgets, evaluating other expenses & commitments and keeping room for possible future scenarios.

2] Save & spend....not spend & save.

3] Buying should be necessity driven. Not desire driven.

4] After marrying, its always better to delay the arrival of kids for few years

5] Debt management is so critical & credit card is a killer. If a credit card is really required, try to keep it at home.

[sasika]

Rent a car for the weekend.. What would it cost?? 1000-2000 per day?

[Devinda_Z]

Very much so...

easy guess then

[Clark's son]

Wow…what an epic thread. Beside buying cars, there are many great insights been discussed.....life, marriage, financing & budgeting, kids etc. Thanks everyone!!!! Some great points which were mentioned are;

A lot of life advices are given in this, including marriage

But it dosen't explain how to find someone to marry which may be useful for me.

[Hoonigan]

<blockquote class='ipsBlockquote'data-author="Clark's son" data-cid="274197" data-time="1426183565"><p>

A lot of life advices are given in this, including marriage<br />

But it dosen't explain how to find someone to marry which may be useful for me. </p></blockquote>

Some buy a car to attract the honeyz. Not many success stories though

[Clark's son]

Some buy a car to attract the honeyz. Not many success stories though

I'm an example

[MasterDon]

A lot of life advices are given in this, including marriage

But it dosen't explain how to find someone to marry which may be useful for me.

Some buy a car to attract the honeyz. Not many success stories though

Ahhh but you have to have the right car my grass hoppers...

As per my experience.One sure fire way is to get a classic white convertible in mint condition.Then go park it at a porch of one of those posh hotels and see the magic happen...Now that won't get a girlfriend by itself but it'll help in attracting the female kind to you and to break the ice.The rest is up to you.

I have now passed my wisdom on to you my padawans...Use it wisely.

[Hoonigan]

Aaah too late for me MD, Clark's Son..go get em

[sathyajithj99]

Ahhh but you have to have the right car my grass hoppers...

As per my experience.One sure fire way is to get a classic white convertible in mint condition.Then go park it at a porch of one of those posh hotels and see the magic happen...Now that won't get a girlfriend by itself but it'll help in attracting the female kind to you and to break the ice.The rest is up to you.

I have now passed my wisdom on to you my padawans...Use it wisely.

Sounds like it might attract the wrong kind of females. Some expensive hookers No offence MasterDon

[MasterDon]

Sounds like it might attract the wrong kind of females. Some expensive hookers No offence MasterDon

If you say so...

[Kavvz]

....One sure fire way is to get a classic white convertible in mint condition.Then go park it at a porch of one of those posh hotels and see the magic happen...Now that won't get a girlfriend by itself but it'll help in attracting the female kind to you and to break the ice.The rest is up to you.

I have now passed my wisdom on to you my padawans...Use it wisely.

lol !! And if one has multiple classic convertibles at hand, does that mean that the said individual is planting multiple baits and running simultaneous 'honey-come-hither-traps' at multiple hotels?

[Kavvz]

Sounds like it might attract the wrong kind of females. Some expensive hookers No offence MasterDon

And that's a bad thing...er..why? Hookers need to eat too. Please go read the why vesi is bad why-vezel-is-bad thread for further clarification and details.

Edit: Oh wait, like a complete idiot, I over looked the fact that you may have meant that you prefer cheap hookers? Ah! Shape. Especially as this thread is all about living within one's means, that makes total sense. Righto, point taken.

Edited March 13, 2015 by Kavvz

[sathyajithj99]

And that's a bad thing...er..why? Hookers need to eat too. Please go read the hoda vesi is bad why-vezel-is-bad thread for further clarification and details.

Yeah! I'm quite enjoying that thread. P00r Honda Ve$1.

Edited March 13, 2015 by sathyajithj99

[Jor-el]

<blockquote class='ipsBlockquote'data-author="sathyajithj99" data-cid="274212" data-time="1426208282"><p>

Yeah! I'm quite enjoying that thread. P00r Honda Ve$1.</p></blockquote>

I saw a HV spreading her wheels to a freaking three wheeler, so I kinda lost all interest in hiring one.

[sathyajithj99]

<blockquote class='ipsBlockquote'data-author="sathyajithj99" data-cid="274212" data-time="1426208282"><p>

Yeah! I'm quite enjoying that thread. P00r Honda Ve$1.</p></blockquote>

I saw a HV spreading her wheels to a freaking three wheeler, so I kinda lost all interest in hiring one.

lol She has gone cheap ,even doing it in public

Edited March 13, 2015 by sathyajithj99