Emeka is an upwardly mobile young man who has just gotten a well-paid job with an Investment banking firm on the highbrow Victoria Island. As a young man, he feels the time has come for him to buy his own personal car and probably deploy it on any of the ride-hailing platforms while he uses his staff bus to work daily.
In a country where the interest rate from banks is not friendly to acquire a loan scheme, he is not sure which strategy to adopt while saving to get a new car at least a clean foreign Tokunbo vehicle.
For him, to continue saving with the traditional banks that offer an insignificant growth on his savings, the dream of owning a car will continue to be a mirage.
Desmond Ugochukwu, an operator of an online car sale platform, said the first thing to put in mind when planning to buy a car is to have an idea of the type of car to want and also put into consideration the cost of maintaining the car vis-à-vis its fuel consumption.
“Depending on how much you earn, if you are an average earner, it might take you more than a year to save up for your dream car. However, while you are saving for the car, you should also consider the fact that the car price can go up before you are ready to buy it” he said.
According to him for a medium income earner with one stream of income, there might need to get another one (side hustle) to make the savings easier.
“The money you make from your regular 9-5 job and the side hustle could help you get your dream car earlier than you expect,” he added.
Car brands and their unique proposition
According to Desmond, the Toyota Corolla brand is reliable in terms of maintenance and affordability. This explains why a growing number of Nigerians have a crush on the car. It’s the least expensive car to service and fuel efficient an attraction for many young medium income earners in the country. He further added that the Honda Accord brand is another sedan car that has caught the attention of some young Nigerians.
“Although Honda has its own peculiar problem such as the joint and upper arm problems,” he said.
Interestingly, there are some savings/investment options available for a medium income earner like Emeka on a (150k-200k) salary monthly looking for an investment scheme that could take him faster his dream of buying a car.
Online lending platforms
In recent times, financial technology (FinTech) platforms are gradually filling the lending gap by commercial banks by creating a new way to save and also grow their deposit with appreciable interest.
For example, Piggyvest (Formerly PiggyBank) has a savings product called Safelock, an investment product that allows users to earn up to 13% per annum upfront. Users can have more than one SafeLock and give them different names such as SafeLock to buy a car.
Another lending platform, Cowrywise also has an investment plan, Life Goals, which helps savers to meet commitments to long term financial goals with a minimum maturity period of 1 year. Cowrywise offers a minimum of 10% per annum and this return accrues to savers on a daily basis. Interestingly, users can earn as high as 15% per annum on longer durations. This compares with 4.2 percent that banks give on savings account which savers can only get if they don’t withdraw more than four times within a month.
RenMoney is another online savings/investment platform, with its Target Savings Account product, savers earn a 10% interest per annum on deposit to achieve a goal such as buying a car, also an investment in its Fixed Deposit product, savers earn up to 21percent interest per annum with the tenors ranging from 30 days to 360 days.
Investments in Equities and Fixed income instruments
An equity investment generally refers to the buying and holding of shares of stock on the capital market by individuals and firms in anticipation of income from dividends and capital gains. On the other hand, Fixed income investment is a type of investment whose return is usually fixed or predictable and is paid at a regular frequency like annually, semi-annually, quarterly or monthly.
Compared to the uncertain returns from equities, commodities and other investment classes, the predictable and regular returns from fixed-income investments can be used to efficiently diversify one’s portfolio.
Investment in the equities market could also be an option for a medium income earner seeking to grow his savings to execute a major target such as buying a car. Although risks associated with investing in the equities market are higher compared to the fixed income instruments, the good thing is that the riskier an investment, the higher the returns on investment. Investors must carefully select stocks with very strong fundamentals with a history of growth and value.
It is always advisable to seek advice from a reputable stockbroker when investing in the equities market.