Joseph, a personal finance YouTuber, recently explained why individuals earning a monthly income of Sh100,000 should think twice before purchasing a car for personal use.
In one of his videos, Joseph illustrated his point with a case of a couple earning Sh90,000 monthly. The duo eventually had to sell their vehicle due to the financial burden it caused, leaving them with no ability to save.
“I spoke with a couple earning nearly Sh90,000 a month. After breaking down their income and spending, it was clear that buying a car was a mistake. Ultimately, they chose to sell it,” he shared.
Joseph emphasized that many people acquire vehicles through loans, which require monthly repayments. For someone with a Sh100,000 salary, roughly Sh30,000 would go toward repaying the loan, while necessities such as rent, groceries, and general shopping could cost over Sh40,000.
On top of that, there are recurring expenses such as fueling the vehicle and covering maintenance and other bills, which can quickly become overwhelming.
“Don’t be hasty. Approach this decision wisely and cautiously, or you might end up losing your car to repossession,” he warned.
However, Joseph added that purchasing a vehicle for commercial use is a smarter financial decision, as it has the potential to earn income rather than simply serving as a means of transportation.
Financial experts also suggest that people should only consider buying a car when they are in a strong financial position. Unlike land, which usually appreciates quickly, a vehicle is a depreciating asset. Owners must also account for the cost of fuel, regular maintenance, tyre replacements, and part repairs.
Moreover, a car’s value typically drops by around 10 percent as soon as it leaves the dealership. If the vehicle is older and you’re paying it off through financing, its value can decrease even faster. This could lead to a situation known as negative equity—when the car’s market value is less than the remaining loan balance.
As explained by Money254, if you owe Sh900,000 on a vehicle currently worth Sh600,000, that leaves you with Sh300,000 in negative equity. This often occurs when the buyer makes a minimal down payment or takes out a high-interest loan.
In such cases, if the car owner loses their job or income source, they might be unable to make payments and would still owe money even if they sold the car.
