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How to buy a car for FREE using mutual funds


The top three dreams of most Filipinos are buying their own house and lot, buying a car and have an amazing vacation and travel with their families. 

Today, let us look at different ways to buy a car. 
Different ways to buy a car
Different ways to buy a car
1. Take a car loan.
This is the usual approach. Since buying a car is expensive, the most practical way is to take a car loan. And with the trending decrease in the down-payment, almost everyone can now afford to drive home a car. 9k and you get a Kia Picanto or with 5k, hello Hyundai Eon! (this maybe the reason why the roads are getting high traffic) 

But by doing math, buying a brand new car is often the biggest expense that loses its value very fast. A new car loses 50 to 70% of its value in the first four years.

Example:
Car: Model X
Unit Price: 735,000
Down-payment: 147,000 (not including insurance + LTO + chattel fee)
Monthly Payment: 14,877
Payment Period: 5 years

Total Spent: 1,039,620
Car Value after 5 years: ~ 300,000 only!

In buying a 735K worth of car, you spent around 1M but after 5 years its value is now 300K! That doesn't look practical to me especially if right now we are not yet financially stable. 

2. Buy a second-hand car.
The better option then would be is to buy a second-hand car. When budget is still tight, instead of paying for the monthly mortgage payment, you save it up to buy in cash a second-hand car. Basing on the data above, it is practical to look for 4 or 5 year old cars, and pay in cash to get the same exact value for your money. 

3. Pay a brand new car in cash.
We are not discouraging people not to buy brand new cars. Who doesn't want one? But again, if you are in a tight budget, don't force it. However, if you do now have a surplus of money, then go ahead. Better yet, if it's worth doing, it's worth overdoing it. Might as well pay in cash in buying a brand new car, you might even get a major discount. 

Just like buying a phone, T.V. or appliances, more often than not, they offer a zero-interest scheme if you pay through credit cards. "Zero-interest" may sound so enticing, but try asking the price if you are going to pay in cash, (most of the time if not all) paying in cash is cheaper than in credit. And I believe so is in buying a brand new car. 

4. Buy a car for FREE via mutual funds
Again, if it's worth doing, it is worth overdoing. Another brilliant idea is to buy an asset that will pay your liability. Your car mortgage is the liability, and if you have enough funds, you can invest in mutual funds (an asset) and using its interest or growth, it will pay your car mortgage. 

Using the example above: 
The monthly payment is 14,877
Therefore, you need to save and invest 1.8M pesos

Assuming your investment is in a Bond or Balanced Fund and giving you an average rate of return of 10% per year, then:
1.8M * 10% = 180K per year
180K / 12 = 15,000 per month!

Disclaimer: some bond and balanced funds can give out a negative return, it is best to understand the risk in investing.

So with 15,000 per month in interest or growth, your car will be paid in full in 5 years for FREE. Your 1.8M is intact and you get a FREE car.

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