Surge in indebted consumers

The_MAC said:
As opposed to buying a piece of $hit for cash?

What is wrong with buying a new car within budget, over a short period (i.e. 3 years) with the intention to keep it for the next +10 years?
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I agree, nothing wrong with buying a car on credit! As long as you can afford repayment terms. In fact car and house are the only things I have bought on credit! Unless you have R350k lying around of course!

In fact, buying a new car which is within all the warranties and maintenance plans will save you a lot of money and frustrations down the line...
 
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The_MAC said:
I think the real problem is the whole "get a brand new BMW 3 Series for just R4999", with residual etc. Thats when things begin to get messy.
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Yeah! While living with mommy and daddy or in a one bedroom flat.
 
The_MAC said:
I get your point. But in my case, all the demos were not that much cheaper and I was able to get a really good deal on a brand new car. It depends on the situation. But yes, I agree, if you can avoid the loan than do so.

I think the real problem is the whole "get a brand new BMW 3 Series for just R4999", with residual etc. Thats when things begin to get messy.
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I ended up one day at a selling agents desk at bmw. I almost had a heart attack while we were 'assembling' my car. the base model has nothing. you have to add all those extras. I was thinking like donner-dag how big is this residual gonna be. im driving paid off cars so ill maintain those and try to ignore the allure of the gti.
 
The_MAC said:
I get your point. But in my case, all the demos were not that much cheaper and I was able to get a really good deal on a brand new car. It depends on the situation. But yes, I agree, if you can avoid the loan than do so.
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Ah yes, if there isn't a significant saving between new and Demo then sure, go for a new car. Not usually the case. Which car did you get as a matter of interest?

The_MAC said:
I think the real problem is the whole "get a brand new BMW 3 Series for just R4999", with residual etc. Thats when things begin to get messy.
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Totally agree, those with big eyes and a penchant for ignoring fine print get suckered in too easily.

zululami said:
I agree, nothing wrong with buying a car on credit! As long as you can afford repayment terms. In fact car and house are the only things I have bought on credit! Unless you have R350k lying around of course!

In fact, buying a new car which is within all the warranties and maintenance plans will save you a lot of money and frustrations down the line...
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Bear in mind we're talking about people here who can't really afford these things (hence the rise of indebted consumers). Buy a car on credit only if you have to, and even then weigh up your options. If you are an affluent individual who has better things to do with your capital, buy all means buy on credit.

Warranties and maintenance plans can help yes, but once again compare depreciation vs. the cost of maintaining the car yourself, and I'm pretty sure that unless something catastrophic happens, you'll end up ahead financially when maintaining the car yourself. This is why I went for a Honda Accord 2.4 (N/A, manual) instead of an Audi A4 2.0T (Turbo, potentially stronic), to limit possible issues that one can face out of motorplan.
 
The_MAC said:
As opposed to buying a piece of $hit for cash?

What is wrong with buying a new car within budget, over a short period (i.e. 3 years) with the intention to keep it for the next +10 years?
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There are plenty of awesome 1 - 5 year old second hand cars out there with prices that are 30% - 50% cheaper than the original sale price of the car. I have no problem with borrowing money for that. But it doesn't make sense to plunge yourself into debt for a brand new vehicle that's going to depreciate the moment you drive it off the showroom floor.
 
TehStranger said:
Ah yes, if there isn't a significant saving between new and Demo then sure, go for a new car. Not usually the case. Which car did you get as a matter of interest?
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I ended up settling on an Opel Corsa Essentia for R140,000 (2 years ago, this price has increased drastically in the last year), and was able to put down a 20k deposit. I got a pretty decent interest rate of 8% and took it over 3 years. So in my case it made sense for me.

I have no intention of buying anything new anytime soon, even though I can afford it. My primary goal is to kill off the home loan ASAP.
 
The_MAC said:
I ended up settling on an Opel Corsa Essentia for R140,000 (2 years ago, this price has increased drastically in the last year), and was able to put down a 20k deposit. I got a pretty decent interest rate of 8% and took it over 3 years. So in my case it made sense for me.
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You got 8% despite going for a 3 year term? Nice, sounds like a good deal.

The_MAC said:
I have no intention of buying anything new anytime soon, even though I can afford it. My primary goal is to kill off the home loan ASAP.
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Can you really though, considering you have a homeloan? I think that's the trap most people fall into. Not talking about you specifically here, but with most people I know they have a homeloan which takes a fair bit of their salary a month, as well as things like water and lights, cellphone accounts, insurance etc. Then due to what affordability calculators say, they can "afford" a new car by burning a portion of their disposable income instead of saving it. My question is, can they afford it if they get retrenched and are jobless for 6 months? That's how I base my finances, can I afford my lifestyle if I had to lose out on an income for 6 months.
 
TehStranger said:
This. Borrowing the bank's money to spend on a fast-depreciating asset, yes yes that makes sense. :rolleyes:

....

Why not save up to 20% by buying a demo/second hand year old car with low mileage with the same intention? Is "that new car smell" worth 15 to 20% of the purchase price?
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When I bought my new I10 2 years ago there was not even a 10% difference between new and 2 yr old second hand with 25K km on the clock. And those were previous models.

But then again I took my car without risidual and got a good rate unlike another mate who bought a VW with a 40% residual.

Our other car is paid off and will only be replaced when mine is paid off.
 
deweyzeph said:
Yip, exactly. I know guys who are earning over R50k a month who are up to their eyeballs in debt because of the neverending quest to keep up with the Joneses.
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We are in the process of unblinging our lives.

We live comfortably but simple lifestyles. All non essential purchases have been put on hold like my PS4 and 60" TV.

I realise the importance to return to the older generations way of working with money.

If it ain't broke, don't replace it and it cannot be bought on cash then you just have save until you can.
 
cbrunsdonza said:
We are in the process of unblinging our lives.

We live comfortably but simple lifestyles. All non essential purchases have been put on hold like my PS4 and 60" TV.

I realise the importance to return to the older generations way of working with money.

If it ain't broke, don't replace it and it cannot be bought on cash then you just have save until you can.
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Its very satisfying when you can find a nice balance between enjoying the fruit of your labour while making sure your financial future is safeguarded. I noticed that many people get it wrong especially when the husband and wife don't share the same outlook regarding their finances.
 
The_MAC said:
Its very satisfying when you can find a nice balance between enjoying the fruit of your labour while making sure your financial future is safeguarded. I noticed that many people get it wrong especially when the husband and wife don't share the same outlook regarding their finances.
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It is important to understand each other's situation, wants, needs as well as the wants and needs of both (e.g. new house, new car). Not talking about, not planning, cheat buying etc. puts more strain. I've seen couples divorce because of finances.
 
creeper said:
It is important to understand each other's situation, wants, needs as well as the wants and needs of both (e.g. new house, new car). Not talking about, not planning, cheat buying etc. puts more strain. I've seen couples divorce because of finances.
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They say that finances are the biggest reasons for divorce, and I can see why. It caused huge strain in my parents marriage - my father put nearly everything he earned into paying off his debt, while my mother wanted to spend money on the family.

It is a very difficult balance to strike. It's hard to keep your ego down and settle for cheaper things. I'm not always good at it, but I try.
 
In my case, the fact that we both work obviously helps, my wife understands the worth/value of our income. Secondly, sitting down and budgeting together can really solve a lot of issues, once both parties see the raw numbers on paper, it often instills a sense of sanity, as opposed to the other not having a cooking clue as to how much disposable income there really is. I get headaches when I hear of friends and their spouses who think that their bank account (and often the credit card too) is a bottomless pit of never-ending cash..
 
The_MAC said:
In my case, the fact that we both work obviously helps, my wife understands the worth/value of our income. Secondly, sitting down and budgeting together can really solve a lot of issues, once both parties see the raw numbers on paper, it often instills a sense of sanity, as opposed to the other not having a cooking clue as to how much disposable income there really is. I get headaches when I hear of friends and their spouses who think that their bank account (and often the credit card too) is a bottomless pit of never-ending cash..
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Budgeting, cost monitoring and saving. 3 things that need to be done. I am able to track my expenses and income back to 2004 if need be. (useful to analyse spending trends). Debt management is also included in the calculations and I'm able to optimise my debt to minimise interest, also indicating where 'extra money' should be positioned (interesting, it changes). We have done scenarios as well in the event something happens e.g. New job, one or both lose their jobs, kids, help out family etc. We even budget for luxuries etc. holidays, new gadgets.

It all comes down to what one knows. But most people don't want to know, are naïve or don't want to face up to the facts.
 
I'm close to paying all off all my debt. I reckon in 6 months time I will have no debt at all (unless something unexpected happens).

Feels good :)
 
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