Purchasing a car is not an investment; it is a dream for many people. And this is the reason, 117,000 new cars registered in 2019, which is much more as compared to 2018. It cannot deny the fact that buying a vehicle can affect your financial life.
If you purchase a car without any proper planning, then you may find yourself in trouble. Many people start savings five or even ten years before acquiring a vehicle so that they can save their money life. Still, there are many hidden expenses that the buyer could not include in the budgeting.
Nevertheless, many buyers direct hidden cost by availing loans in Ireland. But still, it could be possible only when you have enough money without pushing your finance into trouble.
There are specific methods that you can follow to make the purchasing with influence money life. But, the most affecting one is 1/10th Method of car purchasing.
Let’s understand more about this technique.
What Is The ‘Rule Of 10’ For Car Buying?
It is one of the most excellent methods, and most people leverage it. It is the rule where the car you purchase should not more than 10% of your gross yearly salary.
If gross earning is €40,000, then the threshold of the car purchase price is €4000. Or you can save this amount of money every year to fund the car. In this, you can add your part-time income too, like:
- Selling unnecessary stuff
But, make sure that these earning sources must exist to your purchase your dream car. Violating this technique may lead you to several financial problems, and it can stay for a more extended period.
There are many advantages that you can get from the 1/10 Rule.
Benefits of 1/10th Rule of Purchasing A Car
We have discussed a few major ones, which show that you should follow this rule.
1.Help to bear the additional expense
Purchasing a car or any other vehicle may be easy to buy, but the most vital thing is to manage the “maintenance cost”. Several times people fail to deal with such cost, and then the entire investment becomes the move in the wrong direction.
There are many other hidden expenses, too, such as:
- Parking Cost
- Insurance expense
- Road tax
- Traffic tickets
Summing all of them may lead you to face higher cost. But, with this 1/10th technique, you can easily bear the expenses with time and can save money for it.
2. Saves from negative compounding
Investing money in a car is always considered as a negative investment. But, people purchase because it is a dream. Still, money plays an imperative role to live a stable financial life. But, the car asks for a substantial investment that may kill the opportunity to earn more.
Here, 1/10th rule will aid you to save enough money from which you can make a better investment. With this, you do not have to kill your dream, and besides you can earn money too.
3. Free from anxiety
Investing too much money can push you into deep trouble. And, whenever you drive, you will feel stressed by imaging situation, like “what will happen if someone scratches my car?”
It all happens because you invest a large part of your income. If you purchase a car with saved money (following 1/10 rule) or with options, like car loans in Ireland, then you will feel less stress.
These are the three significant benefits that you can get from the 1/10th rule of car purchasing. Conversely, it has some negative points too, like:
- Strict Budgeting
- Stop unnecessary purchasing
- Applicable for long term
If you make significant purchasing, then you may disturb this 1/10th rule. So, make sure you do not perform hefty buying. Follow it for at least four to five years, and then you will quickly acquire your dream car without putting the onus on finance.