Often when it comes to car purchases, the heart triumphs over the head. Otherwise, why would there even be a market for sports cars like this pocket rocket Renault or ‘Dutch’ Ferrari 612 Scaglietti?
It’s hard to beat the thrill of driving a nice car, but when the honeymoon period wears off and reality starts to set in – especially when maintenance bills start to add up – you can start to have second thoughts. Which is exactly what happened to this yuppie, who took to Reddit’s /r/AusFinance looking for some advice.
“So I did what was (in hindsight) a pretty silly thing,” he starts.
So far so boding badly.
“During COVID I purchased an expensive car ($45K) – half with my own money and half [with a] loan. I earn a six-figure salary, and at the time I was still living with parents – so the outlook on true life expenses was skewed severely.”
“I’ve since moved out (renting) and I am finding that on top of $300 rent per week, another $200 per week on the car is pretty painful. My ability to save, along with all other life expenses is hindered.”
“I have a lot of savings so I am not worried [but] I am about to start my investment journey in property… Moving out and renting has injected a lot of perspective into my life, so I am eternally grateful for that. The thing is, I love the car dearly. One part of me does not want to let go, and another part of me knows it doesn’t really make logical sense to have it considering my upcoming life goals.”
It’s a dilemma any car lover (if not sub 100k earner) would sympathise with, even without knowing what he drives. (He hasn’t revealed what car he bought – maybe a second-hand Maserati?)
But there were also a lot of would-be financial advisers ready to admonish him for his questionable money moves.
“If you’re struggling with paying 500 a week in rent and a car loan on a six-figure salary; you need to work on budgeting better,” one commenter matter-of-factly responded.
“Maybe cut out a lot of expenses and put together a budget guide for each pay cycle and stick to it if you want to keep the car and look at future property investments.”
Another commenter was even blunter. “You’re about to start your investment journey in property but take out the worst kind of loan, a car loan? No offence, but this is why they called property investors the least informed and least sophisticated kind of investor. Stay out of it until you know what you’re doing, or you’ll become a ‘mum and dad’ investor blindly following glorified media stories.”
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One commenter had a more holistic approach: “I would not be selling it, but rather paying out the loan if I can afford it as I’ll make a loss when selling and will have to purchase a car which may/may not be well maintained, which can potentially be equal or more expensive than the current car.”
“If you’re emotionally attached to the car, all the more you should not sell it as I’m assuming it’s well maintained and cared for. Saving and investing is important, but living a life with a little enjoyment is also important. There is no point have a billion dollars in the bank when you are scrapping and saving all your life.”
“I could’ve purchased this car a few times over with my savings,” our car-owning protagonist revealed, “but I went for a loan in order to retain my capital for property. Paying it off in full would mean $20K less capital I have to inject into a property deposit. Money is scarce when I have plans to accumulate multiple properties over the next 3 years. I need to think about it some more. Right now I am flipping back and forth between getting rid of it and finding a way to keep it (maybe I pay off half for now and reduce my payments, perhaps).”
This is where our sympathy has run out for our hero. Our rabid obsession in the Land Down Under with investing and speculating on property is well-established, but it seems the height of insanity to take out a loan on a car – when you can easily afford to pay in full – just so you can have more cash in your pocket on the off-chance you have an opportunity to invest in property. That’s some serious addictive behaviour… Or at least poor financial planning.
It’s a similar form of insanity as the 30-year-old Sydney man who made headlines for allegedly living on nothing but tuna and rice for five years in order to put a deposit down on an apartment, as news.com.au reported earlier this year.
We wonder what kind of landlord this dude will make…