Money Confessions: I Took a Loan to Buy a Luxury Car

January 3rd, 2022, was a good year for me. It was the day I reported for my first real job. 18 months after I had graduated with a degree in Computer Science. I had a few odd jobs which were mainly IT gigs with no consistent flow of income. My new job was at a local bank where I was hired as an IT technician. 

It was a dream job, my gross salary was Ksh109,000 gross. As I tell you this story, it's two years since I got this job and things are not as rosy as I had expected. Last Christmas, I missed a family function in Oyugis because I could not raise the fare. In fact, at some point last year, I had to borrow some cash to place food on my table. 

This is my money confession. 

I have always loved technology. Getting a well-paying job in the IT sector was a dream come true. When I started in January 2022, I did not feel like I was working. It was pure bliss. 

Later that month, I received my first salary, over Ksh80,000 in net. 

I had not seen that kind of money so I had a wild weekend. I took my friends out, settled a few old debts, sent some money home for shopping, and even managed to buy a new sofa in my Ksh10,000 bedsitter which I had lived since campus. I repeated the same routine in February, this time, buying a new TV. 

Taking the First Loan

As I settled into my third month, I had an induction session with HR who informed me that once my probation ended, I qualified for a special employee loan facility. We did the calculations and I was informed that I could borrow up to Ksh1.2 million and repay up to 60 months. 

Although I did not have a concrete plan for the windfall, I decided to apply for the loan and come up with a plan. After all the struggle I had in my tarmacking days, I felt that I needed to grab every opportunity and ask the questions later. 

On the same day that I took the loan, I encountered a heavy downpour as I was leaving work at around 7 pm. I was stuck on the matatu stage for 10 minutes, I was soaking wet, my work laptop barely survived. It was there that I got the idea of buying a car. 

Tech bros love cars and I am no exception. Buying a car had always been my dream although I had not prioritised it in my broke days. Now that I had what I considered a fat salary, I felt it was the right time. 

My colleagues in the IT department drove fancy cars and I soon started looking for a model that would be part of the pack. After two weeks of continuous searching and a few yard visits, I found a German sports car that was within my budget. 

The owner was selling it at Ksh1.1 million - almost Ksh200,000 below its market rate. He explained that it was a distress sale as he was relocating abroad. We did the due diligence and after another two weeks, I was the proud car owner, with only my name in the logbook.

I had avoided telling my parents because they are more old school and I knew they would push me to buy a piece of land first. However, when I showed up with the German machine at my parent’s home in Nakuru - they were exhilarated. We even prayed for it. 

Taking the Second Loan

It wasn’t long before I realised that this new life would be no walk in the park. To begin with, I was still living in a flat of bedsitters in Roysambu. No reserved parking. This means that my sports car would be standing out, a major security threat. I had also failed to factor in the fact that a change in ownership also meant that the insurance cover would need a replacement. Being a premium car, the annual cover cost is Ksh71,000 - just short of my entire monthly salary. 

As I was pondering over how to get around the insurance sorted, I woke up one morning to find a boda boda had hit my side mirror while it was parked on a back street near my bedsitter. It was baptism by fire as I witnessed the high cost of maintaining my beautiful baby as I nicknamed it. The side mirror and one-panel painting cost me over Ksh50,000. 

I was running low on cash. So broke that I had a few incidents where my car ran out of fuel as I was heading to work. One stall cost me Ksh6,000 after a breakdown was called in to tow me off the highway. 

The situation was untenable. I needed to figure out a permanent way out. In hindsight, I realise that I was reacting instead of understanding the deeper problem. My thinking at the time was that I needed to use my vehicle to get more money - after all, it was costing me so much money. 

I was already locked out of a formal loan from my bank, which was also my employer. I resorted to a different financial institution that offered loans with the logbook as collateral. They told me that I would qualify for up to Ksh800,000 and since I did not want to keep going back for more, I opted to take the maximum and if things worked, I would repay it lumpsum. 

I spent about Ksh250,000 upgrading my car. Comprehensive insurance, new lights, an entertainment system, replacing some worn-out bushes, and other elements in the suspension system. 

Then it was time to move out to a better neighborhood and house. I got a one-bedroom apartment in Ngong Road going for Ksh30,000. It is a nice place with a big parking and a pool. I was also in the company of other tech bros who always had exciting plans over the weekend. 

Also Read: Money Confessions: I am Tired of Pretending to be a Rich Man

Wrong Turn

Now, I was paying Ksh25,000 for my check-off loan, Ksh30,000 for the house, and Ksh25,000 for the logbook loan. Technically my salary was depleted. But since I had a Ksh600,000 balance from the logbook loan, I never noticed I was swimming in murky waters. Sometimes, I would spend up to Ksh20,000 on a single weekend  - trips, friendly loans to friends who never paid, random car repairs, etc. 

I knew I was stretching it, but I hoped that soon I would start letting out the car and get some money back. However, in July last year, I got the shock of my life when I went to check the balance in my account - only to find Ksh58,000! This was the same account that had Ksh600,000 only a few months earlier. From there things went downhill. 

As soon as this cash was depleted, I could no longer afford to pay both the car loan and the rent. I defaulted. The fines were quite high and before long, my interest alone for the loan was Ksh39,000. Paying Ksh25,000 was barely enough to cover the interest - let alone the principal. 

Correcting My Mistakes

It was an extremely stressful situation that started to seriously impact my work. However, in October last year, I took the bold decision to surrender my car to the company that had extended me the logbook loan. I asked them to see it to recover their money and concentrate on getting my life back. 

Six months later, I am slowly rebuilding my life. Back to the bedsitter with another four years to clear my first loan. Luckily, my work has been superb and I got a Ksh30,000 raise in January. I am directing all the new income to clear the outstanding loan. As I look back, I feel hopeful about the future. I do not blame anyone for my setback, but I now know better than to take a loan without a plan. Of course, I will take up loans in the future, but the lesson I have learned is to always have a solid plan and a proper budget when taking credit!