An analysis by Daily Investor showed buying an affordable car, like a Toyota Corolla Quest, instead of a luxury BMW X3, can make you R1.2 million richer.<\/p>\n\n\n\n
In South Africa, a car is seen as an important status symbol, and many people cannot wait to buy their first luxury car.<\/p>\n\n\n\n
Showing off your new BMW or Mercedes-Benz portraits that you are financially secure and have achieved career success.<\/p>\n\n\n\n
However, buying an expensive luxury vehicle comes at a tremendous cost. It is a poor investment which destroys wealth.<\/p>\n\n\n\n
Daily Investor compared the difference between buying a luxury vehicle and opting for a cheaper alternative and investing the savings in the S&P 500.<\/p>\n\n\n\n
For this comparison, we selected two of the most popular vehicles in their respective categories and considered their financial impact over six years.<\/p>\n\n\n\n
We assumed that the two buyers had the same budget. The first one spent his full budget on a car, and the second selected a cheaper car and invested the rest of the money.<\/p>\n\n\n\n
Both vehicles were purchased in 2019 with loans covering 100% of the purchase price at an interest rate of 13%, repayable over a 6-year term.<\/p>\n\n\n\n
Both cars were insured using a constant insurance profile to make the insurance premiums comparable.<\/p>\n\n\n\n
It should be noted that insurance is subjectively applied to individuals and will differ from person to person.<\/p>\n\n\n\n
In this case, the insurance profile was kept the same for both vehicles, which means the insurance premiums can be compared.<\/p>\n\n\n\n
Insurance quotes were obtained from Naked Insurance for brand-new models of the same vehicle and proportionally applied to their 2019 prices.<\/p>\n\n\n\n
We assumed the insurer’s risk profile remained constant over the 6 years, and the premium was adjusted for inflation to cover the vehicle’s replacement value.<\/p>\n\n\n\n
For the sake of simplicity, it was assumed that both vehicles were sold with a complete service plan covering all maintenance expenses over their 6-year financing period.<\/p>\n\n\n\n
Only the fixed costs of the vehicles were compared. This means that costs such as fuel and tyre wear were not included.<\/p>\n\n\n\n
In 2019, a new BMW X3 xDrive 20d cost R789,000 and could be comprehensively insured for R2,001 per month.<\/p>\n\n\n\n
To own this car, the monthly repayment would be R15,668, paid from January 2019 to December 2024.<\/p>\n\n\n\n
This would bring the total fixed costs of the BMW to R17,669 per month, which gradually increased to R18,161 over the repayment period due to rising insurance.<\/p>\n\n\n\n
In 2019, a new Toyota Corolla Quest Plus cost R277,000 and could be comprehensively insured for R1,109 monthly.<\/p>\n\n\n\n
The monthly repayment on the vehicle for six years was R5,501 over the same period as the BMW.<\/p>\n\n\n\n
This brought the total fixed costs of the Toyota Corolla to R6,610 per month, which gradually increased to R6,883 per month due to rising insurance costs.<\/p>\n\n\n\n
This means that the owner of the Corolla saved R11,059 per month from the first month by not buying a BMW.<\/p>\n\n\n\n
Every month, the Toyota Corolla owner invested his savings in the S&P 500, which helped him accumulate wealth while driving a cheaper car.<\/p>\n\n\n\n
After six years, when both cars were paid off, the BMW X3 xDrive 20d owner can sell his car for R468,900. The car was his entire investment over the period.<\/p>\n\n\n\n
The owner of the Toyota Corolla can sell his car for R209,900. However, his S&P 500 investment with the excess cash grew to R1,423,942.<\/p>\n\n\n\n
This means the Toyota Corolla Quest Plus had assets of R1,633,842 after six years, much more than the BMW owner\u2019s R468,900.<\/p>\n\n\n\n
It shows that buying a more affordable car and investing the rest created wealth of R1.164 million over six years.<\/p>\n\n\n\n
The table below summarises the difference between buying a luxury and a more affordable car over six years.<\/p>\n\n\n\n An analysis by Daily Investor showed buying an affordable car, like a Toyota Corolla Quest, instead of a luxury BMW X3, can make you R1.2 million richer.<\/p>\n","protected":false},"author":10,"featured_media":809541,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11119],"tags":[5365,2041],"class_list":["post-810616","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-motoring","tag-bmw","tag-toyota"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/810616","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=810616"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/810616\/revisions"}],"predecessor-version":[{"id":810618,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/810616\/revisions\/810618"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/809541"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=810616"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=810616"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=810616"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Measure<\/strong><\/td> BMW X3 xDrive 20d <\/strong><\/td> Corolla Quest Plus<\/strong><\/td><\/tr> Car Value after 6 years<\/td> R468,900<\/td> R209,900<\/td><\/tr> S&P500<\/td> Zero<\/td> R1,423,942<\/td><\/tr> Total Wealth<\/strong><\/td> R468,900<\/strong><\/td> R1,633,842<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"