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  • Writer's pictureVictoria Wallis-Smith

Your most important purchase

I'm calling it - the most important purchase of your life is... your first car!

Buying a Car. Financial Decisions. Most Important Purchase. Money Coach. Goals. Nutshell Money

Buying your first car is a big deal.

And we all remember it… the thrill of independence… the responsibility… the price tag! It's a coming of age and for many people, their first big financial decision.

The problem is, too many people stuff it up – and in doing so, set themselves on a rough course, financially, for many years to come.

My first car

My first car was at around age 25. I was working as a site engineer on a construction site on the outskirts of Glasgow, and public transport wasn’t an option. I bought a small second-hand car that cost a few thousand dollars… I can’t even tell you how I scrapped that money together, but it was a big stretch.

Roll on a few more years and hubby and I bought our first ‘family’ car – a purchase that was all about fitting a pram in the boot, and all the other baby stuff you need as a parent.

We bought a new Ford Territory. And boy did that car serve us well. We finally sold it a few years ago, having owned it for almost 15 years.

My decision about what car to buy – and our decision on the family car – was based on our goals, our values, and the opportunity cost.

While there's no right or wrong answer, it's worthwhile reflecting on the budget you set for a 'new' car – and the impact of that decision on your financial goals.

A tale of two cars

Let’s looks at two workmates – Elon and Warren.

They both start their first job on the same day – they each have $5,000 in the bank, have the same living costs and can save $750 every month.

They’re feeling good, and just need a set of wheels to top it off.


Elon’s always liked the newest shiny toy and so rushes out to buy a brand new car for $30,000 – draining his savings and leaving him with a car loan of $25,000.

The monthly loan repayments of $750, will eat up all of his savings capacity for the three years that it will take to repay the loan.


Warren also needs a car, but he decides to put it off for a year – and gets by borrowing his mum’s car, carpooling and using public transport. After 12 months he’s increased his savings from $5,000 to $14,000 (we’re keeping things simple and not including interest earnings).

But Warren doesn’t spend every cent. Instead, he decides to keep a savings buffer and buys a second-hand car for $10,000. He’s paid cash for the car, still has savings in the bank and importantly, can still maintain savings of $750 per month.

After three years

Let’s look at how they fare at the end of three years:



Savings at start



First car cost



Monthly loan repayments



Savings after 3 years



The extra $22,000 in the bank is just the beginning of the differences for Elon and Warren.

The difference

Now that he’s cleared his car loan and the shine is starting to wear off the car, Elon is starting to think about upgrading… he’s back to having a spare $750 every month and feels pretty flush. And he deserves it right?

With the trade-in, he only needs to borrow $20,000 for the new car – so now his repayments are only $600 a month and he’s still able to save $150 a month.

Meanwhile, Warren is happy with his car and decides to keep it for another three years. He can see that his savings are mounting up and decides to move most of his savings into an investment fund instead of keeping everything in a savings account. (But for our example, we’re still keeping things simple and ignoring the higher investment earnings compared to typical bank interest rates).

And of course, being the solid saver he is, Warren still has a regular savings plan of $750 each month.

Our workmates continue on for another six years....



Savings after 3 years



Second car cost



Monthly loan repayments



Savings after 6 years



Warren now has $43,600 more in savings than Elon (excluding investment earnings). They've been spending exactly the same amount on their general living expenses and lifestyle – they just bought different cars!

But the difference isn't just the dollars

Elon is getting by okay, but he feels like he’s never really getting ahead, and the idea of saving for a house deposit seems impossible. He’s already developed an unhealthy relationship with debt, feeling comfortable borrowing money for day-to-day items.

Warren feels great, and can see that by deferring satisfaction for just a short while, and spending within his means, he can build his savings – a habit that is now entrenched. He hates the idea of debt – other than a home loan, which he is starting to think about.

Sliding door decisions

The impact of these sliding door decisions can be viewed in two ways...

The raw numbers show that the reward for being prudent is significant. No surprises there.

But I believe the bigger difference comes from the habits that we form, and maintain, over time. These differences are life-changing!

Need help with your money habits?

If you’d like to improve your money habits, and have a fresh set of eyes on your money management approach, working with a money coach helps you get the results you want.

Schedule a complimentary call using the link below, and we can discuss if Nutshell Money is the right fit for you.


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