Lets say we want to buy/upgrade a medium ticket item like a car. Now there are three options.
- Go for company lease
- Go for bank loan
- Fully fund from savings and portfolio.
Now i don’t want to start a debate on which is better. there are a lot of calculators available. I think 1.) is the best option considering tax saving on emi/fuel/service etc. But the problem is that huge regular monthly outgo will create some psychological discomfort. and consider this. on a day when your portfolio is down by 2% or so, you will feel,i should have sold 2% of my portfolio and fully funded the purchase. So why not sell a fraction of portfolio ( say 2%) and fully fund the purchase?. for selling we can employ some strategy like equally sell 2% of all stocks in the portfolio. this way, you will not feel any difference. ( in any case, 2% fluctuation is common). I would love to hear from other experts views.
(Note: I am not sure if i am posting it in the right section. sorry if i am not supposed to create a general topic like this).
Overcome the psychological discomfort… I interact with few people and lot of time they give same reason. I don’t know why they don’t want to overcome something which is wrong.
Second, if you can payback the money from your salary then you should not be worried about the taking 1 or 2 options.
Third, Car loan will be available at around 10-12% and if you are not sure if equity is going to give this much return then i think you should be out of equity market :)…
so overcome the psychological discomfort… and go in for 1 or 2.
Look for details into the company lease…at least in our case
- There is a buyback cost ( 10% of vehicle ) which we have to pay
- There is a higher road tax component in mahrastra on the company registration
- in our case its kind of least arrangement with the loan company… so anyway intrest components gets added to your cost of acquisition
- Perquiste gets added into your salary…
So please check what is really benefical between 1 and 2
Just a bit on non-investment advice:
In case if you go with a car lease, please insist on getting a full depreciation insurance. The car lease companies contracts are drawn such that they are not liable to pay damages if the car is not usable after an accident but not a total loss ( usually the case). I lost a couple of lakhs because of this. Else pick one where they are liable to give you a replacement car.
A little digression for fun. If, with 2% of your portfolio you can fully fund your car & assuming your looking at a decent car in 8-10L raise, how big is your portfolio upwards of 5 cr