Why two cars can be two too many

Why two cars can be two too many

Posted on Monday, May 28 2012 at 3:29 PM

Most couples and families can’t handle the thought of living without two cars and instead coping with one or perhaps even worse – catching the slow bus or the noisy train.

But if you’re
trying to get ahead when it comes to property investing, you could be making a
huge mistake. Lots of people try and cut back on spending or make an effort to
save a deposit. Have you considered selling a car though?

millionaire and creator of Somersoft, Jan Somers, says couples who sell one car
can probably borrow another $100,000. This is because when you apply for a
loan, the bank will look at all your expenses and a car costs about $7000 per
year, including petrol, registration and insurance.

However, if you
borrow $100,000 at an interest rate of seven per cent, the interest on that
loan would also be $7000 – the same as a car.

“You don’t need
to rely on a second car these days and it will depreciate by a few thousand
every year anyway,” Somers says.

“It doesn’t take
much to spend $7000 on a car and you don’t get anything for it.”

Somers adds many
people often buy a property further out of the city centre because it’s much
cheaper. But if you buy in the outer suburbs, there’s less public transport and
you’ll actually rely more on a second car. On the other hand, if you spend an
extra $100,000 on a property closer to the city, you could sell your car and
use public transport instead.

“If you buy
something closer to the city, you won’t need the second car. You should get
something closer in, where you won’t need that car, otherwise it creates a
false economy.

“Take the bus and
buy something with potential for capital growth, which will probably be close
to public transport. Years ago I would have said ‘buy anywhere’ but I now think
being close to public transport is more important.”

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