Owning a car has its ups and downs. Many working-class Kenyans have cars, and a good chunk of them would agree that it is a considerably huge expense.
Before you make a vehicle purchase, it is important to sit down and do a personal assessment, considering all factors at play. Ask yourself whether its a truly viable option and if it aligns with your current needs and circumstances.
Getting this step right can potentially have reverberating effects on your financial stance in the future. A wrong decision holds the potential for a money pit that can be incredibly difficult to resolve.
In hindsight, while owning a vehicle may offer numerous benefits, it’s important to recognize that it is a depreciating asset that requires maintenance, fuel, and accessories.
In a bid to avoid getting into a money pit because of it, here are some clear indicators that it may not be a wise move considering current circumstances:
1. No Emergency Fund
Before the turn of the 21st century, owning a vehicle was preserved for the elite with blue-collar jobs.
Right now, millennials and even some Gen Z’s are hoping from one yard to the next seeking to make purchases. This can be attributed to the great economic growth Kenya has witnessed over the last 2 decades.
However, this unchecked routine has led to inconsiderable ‘pressure’ among peers.
Before you can even buy a car to match the status quo, you need to build up an emergency fund. This should be very intuitive from a financial expertise standpoint.
It does not make sense to buy a car worth Sh. 750,000, yet when a Sh. 100,000 emergency pops up, you don’t have a buffer to protect you. Create this buffer first before buying a car.
2. You fail the 20/4/10 rule
Much like the 50/30/20 rule to help you manage your money and achieve your financial goals, there’s a rule that can govern you in getting a car to fit your budget.
It is advisable to pay close attention to it. Now, in most cases, people have dream cars. Some are unaffordable and others are affordable, in the long run.
When buying that (dream) car, this is the formula you should stick to; 20% on the car, take out a 4-year loan, and spend no more than 10% of your monthly income on transportation – 20/4/10 rule.
If this doesn’t work to your taste, another rule you can consider is spending no more than 35% of your annual income on a car.
If you fall short of these two rules, perhaps holding off until a more suitable time would be the best course of action.
3. Living beyond your means
Living beyond your means, regardless of the level, is a recipe for disaster.
If purchasing a car would drain your finances, savings, and potentially lead to taking out more loans, it’s wise to refrain from buying one until your finances are stable enough to handle the expenses associated with car ownership.
It is very possible to cut down costs to finance a car but in the case of living from paycheck to paycheck, something must give, and this should be what’s heavily draining your finances.
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4. Subscribing to ‘pressure’ to own a car
In today’s world, social media has made it easier to stay updated on the achievements of friends, acquaintances, and family. This can sometimes create pressure to acquire things simply because others have them.
If your main push to purchase a Toyota Prado is because the boys in your club have it, you’d probably need to reexamine your position. Yes, this pressure is very surmountable.
Human ego plus peer pressure gives rise to the infamous FOMO (Fear of Missing Out). There is nothing wrong with treating yourself, but consider the financial implications and whether it will affect your propensity to enjoy life and cater to your other priorities.
Other signs that you may not be ready to own a car include:
- Having many expenses
- Having an unsteady/irregular income flow
- Facing huge life transitions.
In totality, most experts would say that the best time to buy a car is when the years is drawing towards a close and salespeople are trying to meet their quotas.
On the other hand, acknowledge that the best time to get a car is when your financial prospects would be able to cater for the needs of the car and your personal needs. That is when you will be ready for a car.
