Want a new car? Forget the Fiat. Own a Ferrari

If you’re young, want a new car, but don’t have enough money, it’s quite easy to still get the car you want. All you have to do is take out a loan.

Great news, you can now have some fresh wheels and it will ‘only’ cost you say £1,000 as a down payment, then £299 per month for 5 years.

Sure you’ll get the benefit of consuming more than you can actually afford to purchase today, using the benefits of finance, but what about the future?

At the end of those 5 years you would have paid out £18,940 and you will have ownership of a 5-year-old car that’s worth perhaps half of that figure at best, so say maybe £8,000, depending on model and condition etc.

So over that 5-year period, you’ve consumed approximately £10,000 of capital that could have been available to you, if you had made the decision to save, rather than consume.

After that 5 year period, you would probably wish to get yourself a new car again, with the corresponding new loan agreement.


Let’s look at a possible alternative.

Instead of obtaining the finance for a nice new car, you just spend maybe £1,000 on a car that get’s you from A to B in the same amount of time, just perhaps lacking a little style and modern luxuries.

You can then save and invest the £299 that is available to you each month. That may not sound like a great deal initially, but you need to understand how powerful capital can be, if used in the right way.

Investing can provide huge rewards to your life. It doesn’t necessarily have to be investment into the stock market.

Why not use it to enhance your skills and improve your lifelong earnings potential?

Why not invest into a side business alongside your existing job and try and create an income that provides returns for the rest of your life, possibly even becoming a new full time avenue for your life?

And yes, you could invest in the stock market, which means taking part ownership of numerous exciting and wide-ranging businesses all around the world, literally at the click of a mouse.

Here’s what could happen if you invested that money and benefitted from compound interest.

Let’s assume you save the 5-year car loan repayments of £299 per month and obtain a return of 5% a year by investing your savings, over a period of 30 years.

After the 5 years are up you will have £20,333 in savings.

Then you have a few choices.

  1. Dip into the money to upgrade your car. Let’s say you spend £5,000 on a car and then continue investing £299 each month.
  2. You decide to take out a 5-year car finance deal but keep your savings from the past 5 years invested for the next 25 years.
  3. Carry on getting by with older cars and keep putting away the £299 each month.

Here’s your bank balance in 30 years time from each chosen option:

Option Savings
1 £223,166
2 £68,855
3 £238,382

And remember, if you just do the finance car deal your whole life, in 30 years time you will have ZERO!

What truly would you prefer?

To own an average car just like everyone else today?

Or own a super car that is only accessible to the rich tomorrow?

Just imagine what kind of car would be available to you in 10, 20 or 30 years time. Your future super car may even be a flying car – Now that would actually be worth consuming!

Do you want to feel rich today, but actually end up poor? Or feel poor today but become rich?

We all want comforts and to feel wealthy, but forget trying to feel rich by using finance.

Accept that you are presently poor, but go and make the efforts to actually become rich.

Your future super car awaits you.

Get in touch today for a personal, independent, and comprehensive financial plan.

Mark Underdown | DipPFS IMC CeMap

Financial Planning Consultant


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