How to buy a Porsche in Jamaica

One night drinking some white rum and ginger ale with a couple of 30 year old friends, the question was asked “How do you buy a Porsche that costs JMD$20,000,000?”

Well, there are a couple of different ways, you can either beg it, borrow it or buy it cash.

Beg it… you can always start a GoFundMe account, with the title “Help me buy a Porsche.” It’s a long shot but heck I have seen worst, like the guy who started a GoFundMe to buy a pizza.

Borrow it… this is the conventional way a vehicle can be purchased, in fact this is probably how you own your current vehicle. So, let’s see how this works out.

In Jamaica Bank policies for new cars are typically:

Cost of Porsche: JMD $20,000,000

Financing: 95%

Interest Rate: 9.75%

Time: 10 years

Deposit: 5% or JMD $1,000,000

Loan Amount: JMD $19,000,000

Monthly Payment: JMD $238,000

These terms may vary from bank to bank but not by much so this would be a good starting point.

Bank policies usually state that total loan payments cannot exceed 40% of gross income, therefore a salary of JMD $600,000 is required to qualify for a Porsche loan if there are no other monthly commitments to consider.

The other option is to purchase your Porsche cash. To buy it cash you would need to embrace the same discipline you would require to make the monthly payment for the loan we spoke of earlier. Assuming the same salary of JMD $600,000 per month and the deposit of JMD $1,000,000, you would need to save 30% or $180,000 per month for 9 years to have $20,000,000 to buy the Porsche. Unfortunately by that time 10 year inflation would have move the goal post ultimately resulting in the vehicle costing more.

So clearly we need to minimize the effect inflation will have in saving to our goal by reducing the time it will take to reach the amount. We reduce the time to achieve a goal by investing in good assets that give a return on our money. By investing consistently we can grow our money quickly.

Given the same scenario of gross salary $600,000 and initial deposit of $1,000,000, saving 30% or $180,000 per month, with an annual return on investment of a conservative 6% it will take 7 years to accumulate JMD $20,200,000.

Porsche is used as a tool to define success in this article, however everyone defines success differently for some people it is a home, family education or financial freedom. What ever your financial goals are investing is the tool to get you there faster.