Sunday, February 2, 2014

Buying a car with 100% cash and no debt

It's the second day of Chinese new year and I hope all of you had a wonderful time with your loved ones especially your family members. The past few days I've been hanging out with my family and relatives. Its a good time to catch up and every Chinese New Year, it always seems to be a family gathering event.

My relatives seem to be getting richer every year. Recently, one of my uncles bought a new car paying $140k in cash. Its a higher end car but well they are rich enough to afford it. I also had the chance to ride in it. Most of my relatives have been paying full cash for their cars ever since many years ago. I am not very familiar with the interest rates of car loans in Singapore as i do not own a car but I did a rough check online for car loan rates. UOB indicated that they are offering an effective interest rate of 6.31% p.a for a five year loan tenure for new cars. Wow, 6.31% p.a is rather high. Am I seeing it correctly? Maybe those who have experience in buying a car can advice?

If interest rates are indeed at the 6% range p.a, then it makes sense to pay for the car in cash. If not, the interest that is compounded can amount to quite a substantial amount. It looks like what my uncle did was a wiser choice.

This brings me to the point that if you cannot afford a car, do not buy one. Period. Why succumb yourself to massive debt just to own a car? Paying monthly petrol, parking, insurance,  road tax is already taxing enough. With monthly loans to service also, it'll be an even greater burden. Think wisely before buying one. Are you rich enough to pay for the car? After paying, are you still able to live your life indefinitely? A wrong choice will lead to misery afterwards.

Like my articles? 
You can Subscribe to SG Young Investment by Email 
or follow me on my Facebook page


  1. Buying a car is definitely a liability. If you are an employed worker with fixed salary, a car will definitely makes you worse off, that's provided ceteris peribus. However if a car can enhance a family's standard of living, or even create business opportunities, I'd think it will be a wiser investment. Just need to weigh both options carefully. Will the monthly extra payment brings more joy to you, or help you earn that extra cash which can cover your extra overheads? If the answers above are true, and a car is somehow "value for money", I don't see any problem in owning one. But then again, which car is decent to you? Some may wish to stretch into continental, others may be happy with a picanto. At the end of the day it'll still boils down to what kind of lifestyle you wish to have.


    1. Hi Charles,

      I would say a car would definitely enhance a family's standard of living and bring added convenience. It's a luxurious item anyway. For business, its another totally different case. Even a cheap car now in Singapore cost quite a lot.