#4 Investment - How its Possible to BUY a Brand New Honda Fit for almost Nothing in SG

Before we begin, let me first state that this isn't for everyone. If you have Zero savings and are worth Zilch, then this article isn't really for you. No  harm reading if you want to change your lifestyle and begin saving and investing which is strongly recommended. For this whole system to work lets be clear that YOU will require three things and YOU MUST understand ONE simple point.

Things you need

1. $70,000 to $100,000 in Savings. It must be in CASH which you were intending to spend on a car anyway. If you DO NOT have this sum in cash, it would be ill advised to even consider getting a car as it would become a liability. This system will help you RETAIN your capital and still be able to pay off car.

2. You Need to be working. No (legal) bank anyways would offer you any sort of loan if you do not have a Monthly income. If you are Self employed, you will need to prove to the bank your yearly income assessment to get a loan "Approved".

3. Be Prepared to do some homework as you prepare to do some "Shopping".

Point to UNDERSTAND

A car is a cost. Any car YOU buy will be a liability. By even planning to BUY a car you are prepared to LOSE almost 90% of the entire COST of the car as it depreciates.

What this article will do is suggest ways you can reduce this OVERALL Drain on your asset or even at the end of the day PROTECT your ENTIRE savings of $70,000 - $100,000 which you were prepared to spend on a car in the first place.

The above screenshot shows a local Singaporean site which many car owners need no introduction to. We have removed the car agent's details for this article as only the purpose of the above image is to illustrate the current prices for a Honda Fit as of May, 2019. The price stands at $64,988.

If you have been saving for sometime and have between $50,000 to $100,000 budgeted for a car, this money will come in very handy and will be able to give you the added "OPTION" of paying off this car with almost NO LOSS to your capital.

As of 2019, the lowest Interest rate that a simple search turns up is by Standard Chartered Bank Singapore of 2.68% (Do verify with your banker for the latest rates). The Bank will Provide 70% of the loan with you having to pay off the first 30%.

So for a car of $64,988 you must pay $64,988 X 30% = $19,496

The remaining 70% of the car's cost will require a LOAN. Do not use your savings to pay off the car in CASH as money can be a very hardworking slave for you that will help YOU to repay the full cost of the loan. This would probably go against every advise you ever heard which always taught YOU to repay your loans ASAP. Let us explain further.

At this stage, lets pretend you are NOW in debt of = $45,491.60 which is the remaining 70% you owe the bank. Lets now add in your interest for a 7 Year Loan.

$45.491.60 X (1+(2.68% X 7)) = $54,025.82 is your final balance that the bank will be paid after 7 years of installments. This will mean a monthly repayment of $643.16​.

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Now assuming you have $100,000 in Savings to begin with. After paying down the down-payment for the car, lets assume you have a sum of $80,000 left. Once again do note that if you do NOT have a safety cash blanket, it's highly ill advised to commit to a car. A car is NOT a must in life. A Car should NOT take up 50% of your net-worth. It is absolute financial Madness to spend ALL the money you have on a car with no other savings for opportunities that may come along or for unexpected expenses. For a man in his 30s, a car should constitute no more than 10% and below of your overall net worth. The biggest asset one should own is a home as you can always rent rooms out or  partition rooms for more rental income.

Now prepare to put your money to work. You were prepared to lump the whole sum down on a car so this technique will help you preserve some if not ALL the remaining value.

Now it is time to put our money to work in order to use money to slave and make more money for us to repay the car. For this purpose we have chosen the company First REIT which is a medical REIT. You may have a better idea of a stock which you want to invest in but we will list our reasons for selecting this baby. (Remember the 3rd thing you need to start this journey was  you having to do your own shopping to find an investment that suits you in case you may have a better idea).

We have chosen First REIT for several reasons.

Firstly at the current price, the dividend yield is 8.69% per year. (See the illustration where we circled the dividend yield for 2018).

Check out its past distribution of dividends. It has steadily increased. For this reason it shows stability and has the potential to increase its dividend payouts even further down the line. (illustration above which shows escalating dividends : Source by First REIT Q1, 2019 report).

The Net Asset Value or NAV as seen in the illustration above. Net asset value is an important part of investing as this is the final amount the company owes its shareholders in the event of liquidation. All the company assets added together minus all its liabilities and creditors will give you the NAV. As you can see the NAV is above the trading price of 97 cents a share. This means by spending 97 cents you have $1.02 worth of assets slaving for you.

$80,000 invested will give you returns of $6,952 in cash for this year. This means you will get $579.33 Monthly. Assuming you have an installment of $643.16, you will find that FIRST REIT's dividend will help you cover most of the installment leaving you to pay only $63.83 which will come from your income from your job. 

Now remember the first $20,000 you spent on the car? Time to take the money back! After you use the car for around 7 years, the value of the car would have deteriorated to approximately $28,000 from the Original price of $64,988. A "Loss" of almost $37,000

Well simply put, sell off the car at this point and take back your money. Assuming you are only able to get back $25,000.....this will MORE than cover your original $20,000 outlay of money which was your down payment for the car.

What is your true COST at the end of this whole Journey? Well, you will still be holding your shares in First REIT. Shares are yours as long as you DO NOT sell it. It can be left to your children when you are dead. The dividends from the shares would have enabled you to own the car for just $63.83 a month. After 7 long years the total you have paid for the car from your working income is a mere $63.83 X 7 x 12 = $5,361.

The total you have spent on the on the car was $20,000 + $5,361 = $25,361
The Sum you received for the sale of your car is $25,000 and so the true cost of your car is $361.

TIP - Use $20,000 from the Cash sum you received to use as downpayment for your new car. The remaining $5000 can be used to buy more "Dividend" Generating shares.

Assuming at the end of the Journey, the shares of First REIT have loss 20% of its value. What have you really loss? Nothing. You are still going to be in much better shape than spending the money buying a car and NOT investing. The car would have depreciated with you having NOTHING to show for it.

Dividend stocks are always our preferred form of Investment as they like all other stocks will rise and fall but you the investor will ALWAYS be rewarded with a stream of income.

Click here to see many more Articles on Investing that we love to share with you.

Side Note : For those who found this article useful i applaud you in your new knowledge in this investing journey. For those who disagree, do feel free to pay the car in cash or use your money in anyway you see fit. The suggestion above is merely an idea on how to use assets to pay off assets as was inspired by the Rich Dad series of books. Property itself can be a great investing idea but REITs are our favorite as they tend to have well diversified portfolios. REITs trading in Singapore are also subject to MAS scrutiny and constant checks thus gives the retail investor the clean knowledge that proper rules and regulations are in place to ensure low risk of fraud.

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​Features:
Type: Chain Connected Handcuffs
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Accessories: 2 keys

This is a steel chained double lock handcuffs.  It is made with stainless steel and mirror polished.  Two cuffs are joined with steel chains, and each cuff is secured with the pawl-and ratchet system.  This handcuff comes with 2 keys, and can fit most adult wrists.

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