Convince me not to take out a 30k car loan

G'day Scott,

Convince me not to take out a 30k car loan.

My 2012 Hyundai is on its way out. It's been a great first car, but it's time for a new one. Now I reckon you'll tell me to hold onto the junk car longer, save up, and buy a reliable second-hand beater while saving for something nicer down the track.

My question: wouldn't that cost me more in the long run?

I've found a great low-interest variable secured loan (People's Choice Credit Union) and can afford the fortnightly repayments over 4 years while still saving comfortably and contributing to all those accounts you "made" me set up.

My income is $80k (and will only go up) working in defence. No other loans, repayments, or financial burdens whatsoever. I plan to pay the loan back early (lower fortnightly repayments let me save more to reinvest into the loan if no unexpected expenses pop up).

So go on Scott, maybe taking on a little loan now and then isn't such a bad idea? ;)

Trent

Hey Trent,

My standard take on cars is that you should always buy the cheapest car your ego can afford.

(Which is why so many influencers drive around in leased Lambos).

Fun fact: I once gave my speaking manager a lift to a gig in my ute. She was shocked when she saw it ”I thought you’d drive a Tesla … or something ‘nice”.  Still, when she jumped in  my 1980s inspired wool seat covers totally won her over.

It’s the ultimate anti-flex dude!

Okay, let’s run the numbers.

Let’s say you buy a vanilla slice Hyundai for $30k.

After four years the total repayments are $36,000 (so you’re paying $1,500 a year in interest).

Fast forward four years, and what’s it worth?

According to Redbook, it’ll be worth around $21,000 on the private market (which is actually bloody good as far as new car depreciation goes).

Not so fast. Let’s pull on the handbrake Trent!

This little four year roundtrip has burned $15,000!

You paid $36,000 and now own a $21,000 car …  that is rapidly falling in value.

That’s brutal.

And all for a car that you’d lose in a Kmart parking lot because EVERYONE ELSE HAS ONE.

Yet it’s your money dude! 

So to your question: what would I do?

Well, as long as the car was mechanically sound, I’d keep it, and put your money towards three things:

A house deposit. 

An adventurous holiday you’ll look back on  when you’re in your 50s and smile.

And some woolen seat covers. Seriously man, they’ll keep you cool in summer, and toasty in winter.

Oh, and a $3 bumper sticker that says: ‘Honk if you’re still making payments’.

Scott