Second hand car + investment

[Nerhzelok]

Hi everyone, was hoping I could get some advice.

I'm 21 years old and I'm currently working as a Software Developer.
I have a car but I think it's a little excessive for what I need at the moment.

I'm looking at moving my car to my parents' account so I can be free'd up to purchase a new car.

Currently my instalments are about R1750 + half insurance (R275, as my parents are paying the other half).

What I would like to do is buy an older, cheaper second hand car priced within R50,000 - R60,000.
I've found quite a few which I'll be viewing soon enough.

The idea I'm having is to get this cheaper car, which would cut down monthly expenditure and allow me to actually
own the car in a shorter period of time. And I would like to put the difference in the savings + a little extra every month
towards a ~5 year investment plan, which would eventually go towards buying a brand new car (full payment).

Can anyone give me advice regarding this sort of move? Anywhere I can look at for this kind of investment?
I'm next to clueless about that sort of thing.

Any help would be greatly appreciated.

 

[brianj74]

Really depends on:
- how much you owe on your car
- What you can sell your car for
- What will you do with the extra cash
You may be better off with what you have.

 

[Nerhzelok]

Really depends on:
- how much you owe on your car
- What you can sell your car for
- What will you do with the extra cash
You may be better off with what you have.

I won't be selling the car. I'll just be migrating the car under my mother's name and she'll absorb payments.

Whatever extra money I'll have left over with the smaller instalments of a cheaper vehicle, I wanted to put it towards an investment plan which will go towards a brand new car over 3-5 years.
This as opposed to simply saving up money in my savings account. I don't want the money to sit there and do nothing.

 

[syntax]

I won't be selling the car. I'll just be migrating the car under my mother's name and she'll absorb payments.

Whatever extra money I'll have left over with the smaller instalments of a cheaper vehicle, I wanted to put it towards an investment plan which will go towards a brand new car over 3-5 years.
This as opposed to simply saving up money in my savings account. I don't want the money to sit there and do nothing.

nice parents.
I think you might be ambitious with being able to pay a car cash in 5 years if the amounts are in the region I think they are.

Still, its a pretty good idea. make sure you have money that is accessible to repair the much cheaper second hand car.

 

[VG008]

The idea of buying a cheaper second hand car is a great idea - I did the same.
However, spending your 5 year investment on a new car isn't a great idea.

I would rather put that investment towards a deposit on a house - maybe that's just me.

 

[mak2000]

Not sure if this adds up .
Your current repayments are 1750 and if you get a new car for 60000@10.5% the repayments will be 1370 so you will end up saving about 400 per month. That amount over 5 years is never going to be enough to get a new car.

Use a spreadsheet to generate your savings vs spend plan and see what is realistic. Also, buying a second hand car could mean unexpected repair bills which could wipe out your savings.

 

[Retnox]

Nerhzelok, you are getting some good advice here.
I would like to add to it.
Personally I never buy an "out of the box car" You can't chose your options then, but it doesn't cost you an arm and a leg.
Buying an old car for cheap may sound nice but can be very expensive.

• Maintenance
• Insurance
• Fuel Consumption

You can drive a Kia Picanto or a 400 SE Mercedes - On both you can do around 600km per tank. The Kia takes around 35l and the Merc around 100l

As for insurance I took out commercial insurance on my car when I was your age. It worked out cheaper than personal insurance.

As for parts costing an arm and a leg. Some parts you can no longer get for old model cars. I have an imported 323 BMW standing in the garage. I had to import a computer for it and it is still problematic. Don't do yourself that disfavor.

 

[Nerhzelok]

Thanks a lot for the replies. Already re-considering some things, but I'll do as mak2000's suggested, making a spreadsheet and perhaps analyzing my
current spending habits + creating a new spending and saving plan and see how that could work out.

Thinking over the possible losses when it comes to an old and cheap car and how it can eat away at my savings, perhaps it would be a better idea
to go for something a little higher priced and a little more recent then?

But this is where certain car brands and models come in I suppose. Some cars I've been considering are:

Chevrolet Spark 1.2 (2006-2009)
Hyundai Getz 1.4
Ford Fiesta
Ford Figo

What would roughly be a good car to go for if I'm looking at max R70,000?

 

[diabolus]

In the bigger scheme of things, going for a cheaper car and using the extra money in mid/long term investment is still the better thing to do.

What you do with your investment after x years is another discussion really. Whether you buy a new car or put down a deposit on a house or a deposit on a new car is kinda irrelevant. The fact of the matter is, if you can put away R1k a month into a 5-year investment plan, you WILL be better off than paying that same R1k into your current more expensive car.

However as was mentioned if you want to buy a new car cash in 5 years, you will have to do some calculations, but chances are you will at least need to put away R3k a month minimum to buy a decent car in 5 years. But chances are by then, if you got R200k cash available in 5 years, i can think of much better things to do with it than buying a new car

Chevrolet Spark 1.2 (2006-2009)
Hyundai Getz 1.4
Ford Fiesta
Ford Figo

Well the Getz always gets solid ratings. I assume the Fiesta there is the "old" Fiesta, which is actually identical to the Figo now. That implies the Figo = old Fiesta and would be a newer car than the old Fiesta, hence better? The "new" Fiesta is in a different class entirely than the rest of the list...

 

[Nerhzelok]

<snip>
However as was mentioned if you want to buy a new car cash in 5 years, you will have to do some calculations, but chances are you will at least need to put away R3k a month minimum to buy a decent car in 5 years. But chances are by then, if you got R200k cash available in 5 years, i can think of much better things to do with it than buying a new car

Well the Getz always gets solid ratings. I assume the Fiesta there is the "old" Fiesta, which is actually identical to the Figo now. That implies the Figo = old Fiesta and would be a newer car than the old Fiesta, hence better? The "new" Fiesta is in a different class entirely than the rest of the list...

Didn't know that, regarding the Fiesta and Figo, hah.
What about the Spark?

What would you suggest doing with 200k, if not buying a brand new car?

 

[Pavan]

deposit for you house + bond and transfer fees if you're not buying/building a new development

 

[diabolus]

Didn't know that, regarding the Fiesta and Figo, hah.
What about the Spark?

What would you suggest doing with 200k, if not buying a brand new car?

http://en.wikipedia.org/wiki/Ford_Figo

The Ford Figo was unveiled in New Delhi in September 2009.[2] It is based on the same small car platform used for the Ford Fiesta and resembles the mark 5 Fiesta but with revised front and rear treatments.[3]

As for the spark, i wasn't really impressed with the old spark, i would rather get an i10 / picanto than a spark.

With 200k? Buy property or continue investing . You must remember a car is a depreciating asset. This means your 200k will lose value the moment you buy that car, and it will continue to lose . Property at least increase in value, so that R200k will continue to grow.

It's simple really:

1. Buy 200k car, sell 5 years later, you get 100k.
2. Buy into property with 200k , sell 5 years later, chances are good you will get more than 200k back.

That said , you still need a car regardless. It will still be better to pay for your car cash than taking out a loan, unless you can earn more interest on your money than the loan interest rate.

 

[iAmThePope]

Definitely do your calculations and then do them again. If you're only going to be saving R400 a month, I would rather just keep the current car, depending on how long the payment term still is though, and save whatever else I can. You would be able to get a much better trade in or private sale on a newer car in 3-5 years than a car that is already 3-5 years old.

Also have a look at the Atos. My SO has one and hers has legendary durability and she drives it like a damn 4x4.
Anyway that's my 2c

 

[diabolus]

Oh, and don't disqualify a good old Volkswagen. As much as people seem to hate the brand on here, it's still one of the cheapest cars to maintain in SA and they're considered to be as reliable as can be. I'm now talking old Polo / Jetta type of car.

 

[Nerhzelok]

I failed to mention that, as time progresses, more and more money would be put into the investment p/m.
As it stands, I've got certain things that I need to pay off besides the car of course. Contracts/studies etc.
Also unnecessary expenditure on alcohol/things like take-aways. They're a luxury which can be cut down.

In two years I could be looking at an additional R1000p/m into saving/investing, for example.
But yeah, I'll do the spreadsheet and give a look through everything and figure it out.
Thanks.

 

[Nerhzelok]

Atos and VW. I'll add that to my list and continue my search. Thanks guys

I've seen some old Polo's going for relatively decent prices. One of them owned
by a woman. So I'll be viewing lots of cars over the next few weeks.

 

[brianj74]

Where are you? My SIL is selling her polo. One owner

 

[Nerhzelok]

Where are you? My SIL is selling her polo. One owner

I live in Cape Town, Southern Suburbs.

 

[patrick]

Not sure if this adds up .
Your current repayments are 1750 and if you get a new car for 60000@10.5% the repayments will be 1370 so you will end up saving about 400 per month. That amount over 5 years is never going to be enough to get a new car.

Use a spreadsheet to generate your savings vs spend plan and see what is realistic. Also, buying a second hand car could mean unexpected repair bills which could wipe out your savings.

Putting away R400 at 15% for 5 years, upping it every year for inflation would give you effectively just shy of R29k: http://www.investorchallenge.co.za/...thly_deposit=400&yield=15&years=5&inflation=6

 

[ChocolateBadger]

Atos and VW. I'll add that to my list and continue my search. Thanks guys

I've seen some old Polo's going for relatively decent prices. One of them owned
by a woman. So I'll be viewing lots of cars over the next few weeks.

In your case I would say go with VW. Anything imported is going to nail (time and money) you for parts, especially if its an older model. 50 - 60k would put you around the high mileage polo area. That's not a bad thing though. Polo's are strong and the parts are cheap and readily available. Also most mechanics have common parts in stock which will keep costs down and get your car back on the road sooner if something were to go wrong. Also stay far far away from dealerships. They are only meant for cars that are under a motor plan.