Ok Dear Readers,

I was given two money dilemmas in the last few weeks (off the back of my recent car related money dilemma) on cars, leasing and upgrades. I was going to squash them into one, but on refection, they have different considerations - so I am going to just tackle this one standalone today.

Regular readers will know I am in a loving and committed relationship with my GoGet membership. I haven’t had a car for years, but I have seen them derail many a person's budget!

A few initial things here:

* Your savings is no doubt in place for security (emergency fund, cash buffer...etc) and other important goals you have.

* If you buy a new car how much of your savings would it chew up? What impact will have that have on your other goals? Think about how long it will practically take to save that amount again. Months? Years? You certainly don’t want to drain your savings and be left with nothing.

* By using that money on a depreciating asset (something that loses value over time), instead of something that will grow in value (like investments), you should also consider the ‘opportunity cost’. What money did you not make because you weren’t invested?

* Going into debt for a car has 2 problems, interest & repayments. Our friends at MoneySmart have actually made Cars App, that helps you understand costs to consider, hidden costs, ways to finance a car and remove the heartstrings from the process.

* Interest rates: A quick google tells me these range from 5% - 16% (yikes!)… so you are going to pay more back in total repayments for an asset that will be worth less than what you bought it for by the time the debt is paid off.

* Repayments: If you have plans to get a loan in the future (for an owner-occupier or investment property), the banks are likely to lower your borrowing capacity based on the fact you have another debt that has a repayment obligation. Consider that if you were hoping to have the maximum borrowing amount. Better to know this than be disappointed in the future for not factoring that in!

* Leasing is an interesting option and one that can set up in different ways, novated, finance and operating. Here is a link that explains the differences for you to review and consider.

* If you run a small business, also ask your Accountant about the Instant Asset Write off options (these have recently changed so you want to get up-to-date advice).

Ultimately, when you are building wealth and saving for your big dreams, remember we live in a society that normalises car-based debt which is totally bizarre and often emotionally charged. It shouldn’t be, stripping out all the emotions, cars are simply tools that get us from A to B (hopefully) safely. So, unless you have bucketloads of cash, meaning any purchase won’t impact your other goals, we want the cheapest, safest car our ego can afford.

Have a money dilemma?

Money dilemmas can be a nightmare! They can leave you up all night ruminating about what to do, have you feeling alone and isolated or just plain ol' stuck. So, we are here to help. I am going to tackle one a week and give you my unbiased, no BS general thoughts on how to tackle your conundrum. We would love for you to send yours (or someone you know) in. 

Obvs all of this is general advice only... especially important to note any and all of the comments above do not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs.