What is actually the best way to buy a car in 2023? Like everything else affected by global inflation, car prices have largely increased in the market, making it difficult for the average man to afford them. Even the much-celebrated tokunbo and fairly used cars that were the best alternative to buying new cars that cost an arm and a leg these days, nothing is affordable when it comes to the automobile industry, from maintenance to even buying a car lately.
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That is why many people opt for other ways to buy a car or own one, either through leasing, getting a car loan, or even going the hire purchase route. But because these ways of financing a car are available doesn’t mean you should use them. Read this blog on why you should avoid financing your car through monthly payments.
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When you ask Nigerian how they want to buy their cars, they would likely tell you they want to buy them outright, but if you now ask them: If they can afford it, that is a different ballgame. As has been said, numerous cars are now indeed very expensive, and those waiting for a price drop may hold their breath. That is what possibly pushes people to get other means of car financing, but in retrospect, that isn’t their first choice, and even at that, it wouldn’t really be anyone’s first choice, because those means of financing are a long financial commitment, and if you can’t meet up, would make your car be taken away from you before you can even settle it.
We have written blogs on why getting this means of car financing is the best choice for some, but we can tell you that it isn’t meant for everyone. Buying a car itself takes a lot of planning and procedure, which anyone can get wrong. And if you add getting a loan with it, the end could be disastrous and it can take you a very long time before you get your car keys. So that is why you need to know that you should finance your car through monthly payments.
The typical monthly car payment is quite hefty
The typical monthly car payment in Nigeria is over N100,000 depending on the car you wish to finance, and this car is for a new one. A used car can be less than N100,000 if it is used and if you are going to be paying off this loan for a long time. The interest rates are not much better. Imagine the scenario in which you are earning only N200,000 in a month.
Do you think that making monthly payments to finance your car is the best idea, especially taking into account the fact that having a car would come with other expenses such as maintenance? Can you imagine living with such a low income given the recent inflation for over 12 months or more? The answer is in your hands.
The true cost of interest and monthly payments
Your monthly payment for an N5,000,000 car with a 60-month term at an average interest rate of 4.09% will be N85,000. This interest might even increase as it is based on the bank’s directive, and paying such an amount for five years might take a very long time.
To some Nigerians, that may not seem like a lot of money to add, but keep in mind that the car will lose value over time. Depending on the type and model, the average depreciation for a car during five years ranges from And what this means is that you won’t sell that car for the N5,000,000 you paid for it because it might be quite old, especially if it is used. This is why you should avoid making monthly payments because, most times, the interest rates tend to fluctuate, which leads to uncertainty.
You’ve probably heard that when buying a car, “cash is king.” The phrase mostly refers to the buyer’s financial leverage over the seller. Yet in this case, paying cash for a car is the best option because you won’t have to worry about interest payments. If you believe it will be difficult to save N5,000,000 in cash, consider the following advice:
Get a less expensive used vehicle. It’s acceptable to operate an N2,500,000 vehicle for a few years. Get a less expensive used automobile in the interim using cash if you can’t afford a gorgeous new vehicle.
If you intend to take out a loan at a monthly payment of N150,000, save that sum each month instead (if you have a car to get around in now). You’ll have N1,500,000 saved up after 10 months. Do that repeatedly until you have enough cash for the new vehicle.
It’s wonderful to show off your new car to your friends, but it’s not necessary. Additionally, even though many people are at ease with making monthly payments on an auto loan, that sum of money is a lot over the long run, especially because the automobile is depreciating. In conclusion, you don’t necessarily need to buy a new car just because you can afford the monthly payment.
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