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Car loan - to take or not?
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chemirocha
#61 Posted : Wednesday, March 09, 2016 7:30:03 AM
Rank: Member


Joined: 1/30/2016
Posts: 332
Location: Rift Valley
Mike Ock wrote:


If the loan was a reasonable, single digit percentage, then yes, your reasoning would hold up. But if the loan is the typical Kenyan double digit shark loan, then no thanks.


It should be criminal to say something this ignorant on a forum that concerns irself with investing.

Even assuming the most expensive loan on the market, that money burning a hole in your pocket can be put to better use elsewhere.
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bird_man
#62 Posted : Wednesday, March 09, 2016 8:02:18 AM
Rank: Veteran


Joined: 11/2/2006
Posts: 1,206
Location: Nairobi
Option 1:
-Save the 1M and buy the car on cash basis.You forgo any returns on the 1M.

Option 2:
-Take 1M loan from bank for 4yrs @24%pa.
-Total interest after 4yrs is 564K ie 11.7K/month
-Monthly loan repayment (includes interest component) is 32.6K
-Invest the 1M on 4Yr TBill at say 13%pa = 10.8K per month return
-Thus net interest expense is 11.7K-10.8K=900sh

Option 2 makes mathematical sense right? Emotionally though you will be very stressed if you don't have a high income.Paying 32K plus rent plus parking plus fuel plus maintenance and spares plus insurance for a depreciating jalopy is no fun.The Option 1 guy is at more peace. You decide.
Formally employed people often live their employers' dream & forget about their own.
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Swenani
#63 Posted : Wednesday, March 09, 2016 10:10:27 AM
Rank: User


Joined: 8/15/2013
Posts: 13,237
Location: Vacuum
Cornelius Vanderbilt wrote:
how exactly in your right mind do you buy a car through a loan that you are paying interest.unless is a vintage car that will appreciate in value over time it doesnot make financial sense to buy a car through a bank loan


Even a 2016 Prado VX will be a vintage car come 3016!
If Obiero did it, Who Am I?
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bird_man
#64 Posted : Wednesday, March 09, 2016 11:00:32 AM
Rank: Veteran


Joined: 11/2/2006
Posts: 1,206
Location: Nairobi
bird_man wrote:
Option 1:
-Save the 1M and buy the car on cash basis.You forgo any returns on the 1M.

Option 2:
-Take 1M loan from bank for 4yrs @24%pa.
-Total interest after 4yrs is 564K ie 11.7K/month
-Monthly loan repayment (includes interest component) is 32.6K
-Invest the 1M on 4Yr TBill at say 13%pa = 10.8K per month return
-Thus net interest expense is 11.7K-10.8K=900sh

Option 2 makes mathematical sense right? Emotionally though you will be very stressed if you don't have a high income.Paying 32K plus rent plus parking plus fuel plus maintenance and spares plus insurance for a depreciating jalopy is no fun.The Option 1 guy is at more peace. You decide.


Problem actually is that most people I know never have the 1M in the first place.
Formally employed people often live their employers' dream & forget about their own.
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