Plunging into Debt
I got some bad news on Tuesday. It’s going to destroy my saving goals and put me in debt. I’ve been agonizing over the issue but figured I should share and see if anyone has some good advice for me.
I’ve mentioned from my first post that my car is in my father’s name. I’ve been driving this car for the past four years. Although I am the one who drives it, and usually think of it as my car, the reality is that it’s his car. My father had originally purchased it to be our driver’s car and it was - for a year or so. But we had to let our driver go and that meant we had an extra car in our garage. It happened around the time I was looking for a car to buy and my father persuaded me to avoid taking on debt and use the car we already had.
Now my father wants to sell the car I drive. He took this decision for a number of reasons and he says it’s about time that I got my own car. This is where my emotions and logic start sending conflicting signals. I have KWD 968 saved up. Other than that amount, I haven’t got anything to pay towards a downpayment unless my father helps me out. I’m not sure how I feel about that. We’ve discussed using some of the money from the sale of the car towards my downpayment. It will be taken as an interest-free loan that I will have to repay. I will need to get financing in order to buy a car so any money would be a help even though the whole purpose of this whole blog thing is to quit depending on my parents and manage my own finances.
He’s willing to share his car (the one he uses daily, not the one he’s selling) until I save up enough money to make a downpayment. That means the second I reach my emergency fund goal that 3,000 is going to be spent on the car. Not only will I lose my emergency fund but I will also have to go into debt. The degree of debt will depend on what car I choose to buy. I’ve spent the past two days thinking about this and it’s made me realize a lot of things about myself that I wasn’t aware of.
- I have an aversion to buying a second-hand car. I don’t like the idea of someone having used the car before me. That’s a general hangup I have about all things second-hand, whether it’s clothes or cars.
- If I’m going into debt I would rather buy a car that’s from a reputable company and with great service.
- I’m superficial when it comes to cars. I want to drive a car equal to the standard of what I’ve been driving all those years. I don’t want to downgrade. I would rather go into higher debt than buy an affordable Honda or Toyota. I know it’s crazy but I’m thinking if I do go into debt why not go into debt for a car that’s worth it? I’d rather have a car that I’ll appreciate and enjoy for years to come even if I will need to pay off the balance for 4 years.
I have to start visiting showrooms and see what type of car I can afford. Then I’ll have to figure out how much I will have available towards the downpayment and how much I’ll have to take out on a loan. The next step would be to talk to my bank or check out other financing options.
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I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.
Tim Ramsey
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Why don’t you buy your car from your dad instead? I’m sure he’ll consider your financial situation and would be soft on your monthly payments
Thank you Tim!
Tasha that’s a great suggestion but unfortunately I can’t because he needs cash in hand, I can’t give him that since I’d have to pay in installments.
I’m sorry you’re going through this at this time! This sucks!
I totally understand and respect that you’re seeking to be financially independent.
Questions:
– How long will you be driving the car?
– How far in debt are you will to go? Advice: Set a ceiling price before you go to showrooms, because they have very shiny cars and it’ll be tempting.
Getting into a high debt will the worse option u can go for just to meet your standards…
I feel you are caring here more of what people will think then what u have in your pocket!! this is a typical thing happening here..Ppl dont have enough and they get into debt with kd15000 or kd 20000 n then keep paying for 7 years!!
Sorry thats my view!! but rem the more higher u go for the less u save and the more expensive car u buy the more u pay for the service… so where does your savings go then?? your aim and your blog both become pointless?
Good Luck
Sorry to hear that, KW, I can only imagine how this news made you feel. I’m sort of going through the same thing. But as bad as this news is, if you buy a more expensive car, like a Benz or a BMW, then you are going to keep digging into your savings more and more to maintain the car. Either that or you would have to change your goals. I have used Japanese cars before and I can tell you that they are worth it, they are extremely low maintenance, Parts are cheap, service is cheap, the car keeps a decent market value and in your case, you wouldn’t have to pay that much for the down payment. Even if you wanted to sell the car after 5 years, then you would still get a good deal. I sold my 2001 Toyota Camry, which I bought for 4500KD to Alsayer for 1500KD. I only lost 3000KD and had over 6 years of Great Japanese dependability
My adive to you is visit different type of dealerships and test drive different cars. Ask the seller how much is the first service gonna cost, and the second and thrid, Try to read reviews on the net about the car that you are interested in. Dont be shy, after all, you are going to paying for this car for some time. It took me so long to choose a car. I hope this helps.
Well, this is your first temptation and your first test. Did you think that saving money is as easy as setting some money aside? It’s not, saving money is setting some money aside AND resisting the temptation to blow it away on you newest object of desire. Regarding cars, trust me I understand what you are going through, although I may be at a different point on the price scale, but I think the same principles apply. I have a 2 year old Optra that I am still paying for (3 more years to go, ugh!), and I have been lusting after a Charger for about a year now, it’s about 6,500KD and I have about 1,500KD saved, so I certainly can buy it, but a couple of things made me decide against it: 1) If I buy it, I will be blowing away all the money I have saved over a car AND increasing the monthly installment, so decreasing my ability to save.
2) I remembered when I bought the Optra, being my first car and all, how happy I was with it, then over the course of two years I have grown used to it and looking at it as just a car, and I realized that if I buy the Charger, I will be happy with it for a year or two and then start looking at a Mustang or a Lexus with envy and so on, so if I go down that road there is no end to my desires, only an end to my money
My suggestion to you is to buy a car based on what you can afford, not what the bank or credit company want you to believe you can buy. Trust me you will not be happy with your new car if one year down the road you felt that you are trapped with it because you cannot achieve your savings goals and at the same time you cannot sell it without losing so much money over it, and trust me again when I tell you this will not be the last thing you want to buy, there will always be new clothes, new jewelery, a vacation somewhere in a tropical island (hmmm, dare I to dream
). Secondly, I suggest that before going to the showroom you recalculate your salary and see how much of it you can spare for a car installment and still have something left for savings, say 150KD, for how long, say five years and how much money you want to put as a downpayment, say 1000KD, then you can buy a car with cash value of 8,000KD and not a fils more(the finance people at the showroom can run the calculations for you). Now stick to that figure, understand and accept that it’s what you can afford and that you cannot afford more than that, it’s just the way things are and you should accept what you have and be happy and grateful for it, if you want a more expensive car find a higher paying job, or wait untill your salary increases and you can set more of it for the car installment. And don’t let those shiny cars dazzle your eyes, believe me after two years that shiny new car will become just “the car”, and after four years it will become “the damn car”, and after six years it will become “the useless old good for nothing car” 
I hope this was not too long, and I really hope it will help.
Did we all give you a heart ache?
You asked - and you got some tough answers.
I have bought a one year old car, “lady driven”. I get comfortable with one car and I hang on to it as long as it still runs well. We do all the services, and more - frequent oil changes, etc. You will be amazed how competant it makes you feel to buy your own car and take responsibility for its maintenance.
Do you really care that much what people think? If so, you are always going to have a problem with funds. As Mustapha said, this is a true test of your commitment to your financial future.
Buying a new car is not such a bad thing in that you establish your own credit history as you make your payments. Which car you buy . . . Hmmmmm.
There ARE some sporty Toyotas!
I am a debt free person too
I’d always advise people not to take a loan! The thing that I used to transfer 500KD from my Salary every month to my second account, and convince my self to forget about the other account and never use the saved money what matter it happens! My purpose before behind my saving is to travel “wana marta7a” and buy what ever I want during my vocation.
Then I wanted to buy a luxury car (my dream car) and didn’t want to have a loan! And to be honest I did it.
At the beginning I spent like about 2400 KD to buy new different shares -> (Alqurain, Bobyan Bank, and Oila fuel) and kept using an economy car which is really good (quality, service, etc..) the most important thing that its price never go that much down when it comes on selling it!
Last year I didn’t travel as usual and instead I kept my saving account for the new care which was 6 moths X 500KD = 6000 KD
I sold my car for 4000 KD (via q8car ads)
I waited till the shares goes into their higher price and sold them all for 11500 KD
So 4000 KD + 6000 KD + 11500 KD = 21500 KD which was the precise price for my car.
Recently I own this car without any loan or interest or any monthly payment.
You can buy an economy car for now, save your money, there will be shares for a new telecommunication company on March get the much you can and within two years or less they will be in Kuwait stock market, don’t miss them up! And hopefully you will get the car you deserve, just be patient.
My next saving account will be for AUM
sorry I did a mistake on my previous post!
“new care which was 6 moths X 500KD = 6000 KD”
instead of 6 months it was 12 months (one year) :/ and there was another typo mistake instead of care => car
Kuwaiti Woman, I keep checking back for an update, and hoping you are doing OK. I hope we weren’t too tough on you. It’s always so hard when you really have to have a car/house/big ticket item and it wasn’t on the budget. Please come back and tell us how you are doing?
Ya, KW, We miss you, I hope everything is good.
Toyota or Honda is not a downgraded car
Try the Camry you will save a lot later
:/ you still alive?? update us!!
I kept checking your blog from time to time.. but I wonder what make you disappear all this time! I hope you are doing fine.
G.E&B - I will be driving this car for at least 5 years. That’s why I was willing to pay a higher price on a quality car.
Amu - Thank you for your comment but I think you assumed the wrong thing about me. Yes, I said I’m superficial but I meant that I love beautiful things. I don’t care about what people think about the car that I drive. I just enjoy luxurious cars. I love their interiors & exteriors. A luxury car is an object of beauty to me and after driving them since I turned 18 I wasn’t open to the idea of driving a car that wasn’t to the standard I’m used to. It’s a common problem in Kuwait. We grow up used to our parents standard of living and forget that we cannot have all they have yet. We have to work towards that financial liberty.
Personally I feel I made a responsible choice with the amount of debt I chose to take and the car I settled for. I went for a loan that will let me save as well as pay off my debt. No matter what mistakes I may make financially, as long as I am honest about my finances and work towards improving them I don’t believe my blog will ever be pointless. Thank you for your input
Bader - You gave me the same advice my father did. I appreciate it! The test driving process was tiring! It was difficult making up my mind about what car I was going to get but I’m glad I finally did that I was convinced 110%!
Mostafa - Welcome to the blog! I enjoyed your comment tremendously. In reply, no, I don’t believe saving money is that easy. That’s why at age 28 I virtually have no savings! I believe now that I’m finally aware of what I’m doing I can be more responsible that I have been in the past and learn from my mistakes in order to have a better financial future. I was good at resisting buying the latest bag/shoes but a car proved to be a necessity. Your advice was great. I based my car purchase on exactly what I could afford. All of us have different amounts of debt that we can afford taking. There is good debt and bad debt and I hope I am on the good debt side. That remains to be seen!
Amu - the car hunting gave me a heart ache!
Intlxpatr - Yes, in the end this is going to be my car and not my father’s so I took a lot of time and put a lot of thought about what I was getting. I took into consideration that a car’s value never appreciates and went hunting for a car that matched my sensibilities. I’ve replied to Amu above about my differentiation between superficial for the sake of beauty/quality/luxury & superficial for the sake of people. I wanted a car with standards that I would be comfortable with and not one that I would resent.
After going through the exercise I realized that buying a car is one of the most defining moments of an adult’s life. To make a choice about something that you will be financially responsible for is tremendous! I had to go through with it and now that I have I wish my parents had made me buy a car with my own money earlier so that I would have placed more value on our dirty dinar.
Technogal - Thank you for your encouraging comments! I loved your story about stocks. Right now I am trying to learn as much as I can about stocks and any advice you can give me would be great. I have to save up money to put into my Investing Account first but in the meantime I want to learn all I can learn.
Rejoy - Thank you!
Thank you all for your kind comments! I appreciate the time you took into responding!