Buying a new car ranks as the second most significant financial decision for many after purchasing a house. However, with proper financial planning, it's possible to acquire a new car without resorting to bank loans and dealing with the hassle of EMIs.
Financial planning offers the dual advantage of saving money and facilitating car purchase. The key aspect to consider is the timeframe for acquiring the car, as it directly impacts the investment duration and potential growth. Delaying the purchase allows investments to mature and accumulate.
Over a span of five years, the cost of the desired car is likely to appreciate. For instance, a car priced at Rs 7 lakh today may exceed Rs 10 lakh after five years. Hence, adequate planning is crucial. Equity mutual funds may not be ideal due to their volatility over the medium term. Instead, investments should be directed towards avenues offering stable returns surpassing inflation, typically around 7-8 percent.
Systematic Investment Plans (SIPs) prove beneficial in preparing the required funds. With an expected return of 8 percent, the SIP amount over the next five years should be approximately Rs 14,018, or Rs 13,301 with a return of 10 percent. Monitoring the investment goal is essential, adjusting SIP amounts or funds if necessary due to market fluctuations or budgetary changes.
Opting for this approach not only helps save on interest payments associated with bank loans but also generates returns through SIP investments. Consequently, postponing the decision for a few years yields double benefits, enabling significant savings and investment growth.
click and follow Indiaherald WhatsApp channel