1. While buying your first car after earning a good stable income for a couple of years, you may be tempted to buy a bigger and more expensive model than you had originally decided.
2. You may get further lured into such a buying decision due to easy repayment options being offered by car dealers through pre-structured car loans.
3. Once you fall for this bait, it can have an impact on your overall financial health in the long run in three ways:-
4. Firstly, you are considering a higher investment in an asset that'll depreciate the moment you buy it.
5. Secondly, you are tying yourself to an obligation for a longer period, which may seem affordable now, but may change once you've other commitments in the near future.
6. Thirdly, the money you're planning to use for making the extra down payment and the additional amount that you will pay as EMI can be invested, and help in building a big corpus over the same period, instead of losing value.
7. Given your current income, buying a bigger car would imply longer loan tenure, and in the initial years, a large portion of the EMI would go into paying interest rather than the principal.
8. If you decide to sell the car after a few years, you will probably realize that its value is not even sufficient to pay the outstanding loan.
9. You, therefore, need to find a via media, which will help you indulge your expensive tastes without compromising your future financial position.
10. One way for you would be to buy the car that you had originally intended to by taking a loan for a short tenure.
11. Since you have a good income with no commitments, you should be able to shell out a higher EMI and pay off the loan.
12. In a few years, when you need a bigger car and have a higher income, you can trade the old one, which will be free of encumbrances, and use the amount as down payment for the new
vehicle as your financial situation would also have become stronger by then.
13. Thus, you would have to postpone fulfilling your desire by a few years, but would have managed to start an investment portfolio that would stand you in good stead in the long run.
2. You may get further lured into such a buying decision due to easy repayment options being offered by car dealers through pre-structured car loans.
3. Once you fall for this bait, it can have an impact on your overall financial health in the long run in three ways:-
4. Firstly, you are considering a higher investment in an asset that'll depreciate the moment you buy it.
5. Secondly, you are tying yourself to an obligation for a longer period, which may seem affordable now, but may change once you've other commitments in the near future.
6. Thirdly, the money you're planning to use for making the extra down payment and the additional amount that you will pay as EMI can be invested, and help in building a big corpus over the same period, instead of losing value.
7. Given your current income, buying a bigger car would imply longer loan tenure, and in the initial years, a large portion of the EMI would go into paying interest rather than the principal.
8. If you decide to sell the car after a few years, you will probably realize that its value is not even sufficient to pay the outstanding loan.
9. You, therefore, need to find a via media, which will help you indulge your expensive tastes without compromising your future financial position.
10. One way for you would be to buy the car that you had originally intended to by taking a loan for a short tenure.
11. Since you have a good income with no commitments, you should be able to shell out a higher EMI and pay off the loan.
12. In a few years, when you need a bigger car and have a higher income, you can trade the old one, which will be free of encumbrances, and use the amount as down payment for the new
vehicle as your financial situation would also have become stronger by then.
13. Thus, you would have to postpone fulfilling your desire by a few years, but would have managed to start an investment portfolio that would stand you in good stead in the long run.