Saving for an EV

It seems wildfires, floods, and signs of extreme whether are everywhere caused by climate change. We naturally want to do something to feel that we can exert some control over the situation rather than just sitting on the sideline feeling hopeless.

One option is to switch to an EV – electronic vehicle.  Given such high gas price, the incentive is even stronger.  How about buying a second-hand one? Here are the pros and cons.

If we consider buying a new one, many of us need to save for it. I would not suggest to take out a car loan especially when the interest rate is so high now. If you have to use a car now, buy a second-hand one. Find a family member or friend who knows car very well to help you buy one. Or hire a mechanic if you have to. The common sense is that a new car’s value depreciates right away. It is not worth the borrowing cost. House values usually appreciate, and the mortgage rate is usually lower than other types of loans so it makes sense to get a mortgage if you can afford it.

Now you need to save for an EV.  Usually, for short-term big-ticket item purchase, it is suggested to use a high interest saving account rather than invest in the stock market because short-term trade is risky. It is impossible to predict the short -term market ups and downs. On TV, many industry experts debate whether there is or will be a recession and when that will happen.  My humble opinion is that we only know the answer for sure when it happens.

If you are a bit more flexible with the purchase timing, you might consider this. If the market is down, then use the cash to buy the dip. A well-diversified low-cost ETF might be a choice. If later the market is up, you can sell the securities. If the market is still depressed, just continue to buy more. You might need to wait a bit longer. If you want to be safer, do 50/50. Put half in the saving account and invest the other half. If your old car breaks down and the market is not yet recovered, you might have to buy a second hand one now that costs much less.  And you already have some money saved in the high interest saving account if you do 50/50.

This only works if you can be a bit flexible with your purchase timing.

Make sure to check out government incentives for EV.

Published by Worthfy

Financial literacy and counselling

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