Читать книгу Sort Your Money Out - Glen James - Страница 16

I'm not a fan of taking on car loans. Here's why.

The problem with a car is that as soon as you drive it out of the dealer's car yard, click the seatbelt on and put it in ‘D for drag’, the car is likely to be worth less than the amount you borrowed for it — and that's not even taking into account the interest you'll pay over the loan term. In addition to that, the vehicle will decrease in value every single day. I can hear the big D (Trump), who wrote a book called The Art of the Deal (which I haven't read), saying, ‘It's a bad deal’.

Not only are you getting screwed from day one in terms of the amount you owe versus the car's depreciating value, but you've also given yourself no psychological pressure or resistance for borrowing to purchase it, which can amplify the negative financial effect.

For example, paying $18 000 upfront for a car might be a lot of money for you, but $92 per week sounds very doable. If we lived in a world that didn't have car loans, you probably couldn't stomach saving up that much money and transferring it in one transaction to an item that will immediately decrease in value, and possibly be dinged and treated like crap (I've seen how some of you look after your cars!).

You're likely to end up paying less for a car that you pay cash for due to the psychological hurt from the process of coughing up $18 000 of savings. You might decide that $10 000 is more reasonable and that you can invest the rest and make it grow.

I used to be pretty hardline with my view on car loans. When it comes to getting your habits and behaviours sorted, I would prefer that you try and change your other major money habits first rather than me insulting you and turning you off by saying you can't have a near-new or brand-new car that stinks of plastic and toxins curing (I mean, that ‘new car’ smell). I'd rather win the war with your total financial picture as opposed to losing a battle on cars.

While it might be beyond the scope of getting out of debt completely, if you ‘must’ have a ‘good, safe car’, I would use these rules of thumb.

 A car that is approximately three years old with fewer than 60 000 kilometres on the clock is usually a good deal. This is because the car's value has already had a huge hit in terms of depreciation.

 Ensure the car is worth no more than 50 per cent of your annual after-tax income. This is a good guide to stop you having ‘too much car’. If you have a spouse or partner, the total motor vehicle capital value combined (i.e. the total worth of the car/s owned by both of you) should be less than 50 per cent of your combined after-tax household income. To be frank, this should also include boats, motorbikes and any other toys with motors.For example, if you earn $60 000 per year, you would pay approximately $10 000 in tax, leaving you with a $50 000 annual after-tax salary. You certainly wouldn't want your car to be worth more than $25 000. This is the maximum limit and will keep you from tying up too much money in assets that are decreasing in value. You may choose to be more conservative and set a limit of spending only 25 per cent of your gross annual income. On an annual income of $60 000, 25 per cent would be $15 000.Choose whatever formula you like for your vehicle spending limit, but either way, have a rule for your life and stick to it. What if you averaged both of the above rules out? Now the car shouldn't be worth more than $20 000. I may have created a new formula for myself just now!

  If you ‘must’ (!) have a car loan, I recommend not having one for more than four years (48 months) to ensure you're not paying off your car forever.Most car yards and car finance providers generally quote the weekly or monthly repayments over a five- or seven-year term. They do this because a longer loan term lowers the weekly repayment amount, making the car sound more affordable and getting you emotionally invested into buying it.

 If you're thinking ‘Screw you Glen, I still want a loan for my next car’, put down a 20 per cent deposit (i.e. only borrow 80 per cent). This will generally ensure your car isn't worth less than what you owe on it because your deposit should cover the depreciation. This approach will also slow you down a little bit and ensure you don't spend too much on your car.