What to consider when buying your next car

Is Your Car Quietly Destroying Your Retirement Wealth?

For many people, purchasing a vehicle is simply a monthly affordability decision.

“Can I afford the instalment?”

But that may be the wrong question.

A vehicle can be essential. It provides mobility, convenience and, for many families and businesses, enables them to earn an income. The problem is not necessarily owning a car.

The problem is how we finance, upgrade and replace our vehicles.

In this insight discussion, Wick van Schalkwyk from Netco Risk Managers explains why the way many people purchase vehicles can become a major, often overlooked destroyer of long-term retirement wealth.

The biggest financial blind spot?

We see what a vehicle costs us today, but rarely calculate what that same money could have become in the future.

The R720,000 Toyota Hilux Question

Imagine purchasing a Toyota Hilux for R720,000, financed over six years.

Most buyers focus on questions such as:

· What will the monthly instalment be?

· Can I afford it based on my current income?

· How much deposit do I need?

· Can I reduce the instalment with a balloon payment?

These are important questions.

But there is another question that could completely change your decision:

What is the future value of the money I am committing to this vehicle?

If the equivalent monthly amount were invested and earned an average return of 9% per year, it could potentially grow to approximately R4.4 million by age 65, depending on the investor’s age, contribution period and actual investment returns.

That is the opportunity cost.

Your vehicle may cost R720,000 today.

But the real cost could include millions of rand in future wealth you never had the opportunity to build.

This does not mean you should never buy a new or expensive vehicle.

It means you should understand the full financial trade-off before making the decision.

Financial Blind Spot #1: The Monthly Instalment Trap

A monthly instalment can make almost anything appear affordable.

A R720,000 vehicle may sound expensive.

But divide the cost into a monthly payment over several years, and suddenly the question changes from:

“Should I spend R720,000?”

to:

“Can I afford R12,000 or R15,000 per month?”

That change in perspective can be dangerous.

The monthly instalment does not show you:

· The total amount you will repay.

· The interest you will pay.

· Insurance and maintenance costs.

· The vehicle’s depreciation.

· The opportunity cost of not investing the money.

· The effect of repeatedly financing vehicles over your working life.

Affordability is not the same as financial suitability.

You may be able to afford the monthly payment while the decision still has a significant impact on your ability to build wealth.

Financial Blind Spot #2: The Upgrade Trap

One of the biggest wealth traps is the habit of continuously upgrading.

You finance a car.

Three or four years later, you trade it in.

Any equity becomes the deposit for the next vehicle, while any shortfall can potentially be carried into the next deal.

Then the process starts again.

New instalment. New finance term. New interest. New depreciation cycle.

The result?

You can spend decades paying for vehicles without ever reaching the powerful financial position of owning a reliable, paid-off car and redirecting that monthly cash flow towards wealth creation.

A paid-off vehicle can become a financial turning point.

The question is:

When your vehicle is paid off, do you upgrade your lifestyle—or upgrade your financial future?

Financial Blind Spot #3: The Balloon Payment Illusion

Balloon payments can make an expensive vehicle look more affordable.

By leaving a large portion of the purchase price outstanding until the end of the finance agreement, the monthly instalment can be reduced.

But this creates an important illusion:

A lower monthly instalment does not mean the vehicle is cheaper.

The cost has simply been shifted into the future.

At the end of the agreement, you may still face a significant amount that needs to be paid, refinanced or managed through another transaction.

Before choosing a balloon payment, understand:

· The final balloon amount.

· The total amount payable over the agreement.

· Whether you are likely to have sufficient funds to settle it.

· The potential effect of refinancing the outstanding amount.

· Whether the lower instalment is encouraging you to purchase a more expensive vehicle than you would otherwise choose.

A balloon payment should be a conscious financial decision—not a tool that makes an unaffordable vehicle appear affordable.

Financial Blind Spot #4: Depreciation Never Takes a Holiday

While you’re making monthly payments, your vehicle is generally losing value.

That creates another important wealth consideration.

You may be paying interest on an asset that is depreciating.

This doesn’t make vehicle ownership wrong. Vehicles have a purpose beyond investment returns.

But it does mean the financial decision should be viewed differently from purchasing an appreciating or income-producing asset.

The objective is not necessarily to avoid depreciation.

The objective is to avoid paying more than necessary for it.

Keeping a reliable vehicle longer can help you get more value from the original purchase and potentially reduce the number of times you enter a new depreciation and debt cycle.

Financial Blind Spot #5: What Happens When the Instalment Ends?

This may be one of the most powerful questions in the entire vehicle-buying process.

Imagine your vehicle is finally paid off.

You now have an extra R10,000, R15,000 or more available every month.

What happens next?

Option 1: Upgrade immediately

You use the available cash flow to finance another, more expensive vehicle.

Your monthly debt cycle continues.

Option 2: Keep paying yourself

Instead of paying the bank, you redirect all or part of the former instalment into investments.

That could become one of your most powerful long-term wealth-building habits.

The car is paid off.

But you keep making the payment—only now, the payment goes towards your future.

Five Rules for Conscious Car Ownership

Before purchasing or upgrading your next vehicle, consider these five rules:

1. Look at the Total Cost—Not Just the Monthly Instalment

Calculate the full financial commitment, including interest, insurance, running costs and expected depreciation.

2. Be Careful With Balloon Payments

A balloon payment can reduce today’s instalment, but it does not make the vehicle cheaper.

Understand exactly what you will owe in the future.

3. Keep Reliable, Paid-Off Cars Longer

If a vehicle remains reliable and suitable for your needs, keeping it longer can help you avoid unnecessary depreciation and repeated debt cycles.

4. Keep Paying Yourself Once the Vehicle Is Paid Off

Consider investing the amount you previously paid as an instalment.

You have already demonstrated that you can live without that money each month.

Why not turn that cash flow into future wealth?

5. Calculate the Future Value Before You Upgrade

Before signing for your next vehicle, ask:

What could this monthly payment become if I invested it instead?

You don’t always need to choose one extreme or the other.

But knowing the numbers allows you to make a conscious trade-off.

And a conscious financial decision is usually better than a financial blind spot.

Clear Your Financial Blind Spots With MyGenie

Sometimes the biggest financial risk isn’t making a bad decision.

It’s making a decision without seeing the full picture.

You may not know what you don’t know.

A vehicle purchase can affect far more than your monthly budget. It may influence your:

· Cash flow.

· Debt levels.

· Emergency reserves.

· Investment opportunities.

· Retirement planning.

· Insurance requirements.

· Tax and business considerations.

· Long-term financial priorities.

This is where MyGenie from FinancialConsult can help.

MyGenie helps you turn complex financial situations into clear insights, priorities and actionable next steps.

Instead of looking at a financial decision in isolation, you can start identifying the connections and blind spots across your wider financial situation.

Before purchasing, financing or upgrading your next vehicle, ask yourself:

What am I not seeing?What does this decision mean for my future?And is there a better way to achieve what I want without unnecessarily sacrificing long-term wealth?

Connect and Discuss This Insight

Want to discuss vehicle ownership, financial blind spots or the long-term impact of your financial decisions?

Connect and discuss this insight with Wick van Schalkwyk through MyGenie:

https://mygenie.financialconsult.co.za

Sometimes You Don’t Know What You Don’t Know.

MyGenie turns complex financial situations into clear insights, priorities and actionable next steps.