How to finance your first car – A Millennial’s Guide

I Was asked by a friend, “Why Can’t I Afford A Car?” So I have decided to answer him here and also address “What Options do you have to finance your first car?” This is a Millennial’s Guide to Car financing. The methods here will help you finance your first car.

Who is A Millennial?

Car Financing in Uganda - How to Finance your first car
Car Financing in Uganda – How to Finance your first car

A millennial is anyone born between 1981 and 1996. These are young adults aged between 23 to 39 years of age (as of  2020).

Millennials form the biggest portion of the world’s Young Corporate Professionals.  These are the people that want to acquire cars but since they have just started working, the majority can not afford the car.

Contrally to what the name seems to suggest, millennials are NOT people born at the turn of the Millenium in 2000. Those actually belong to the new generation

Why Can’t I Afford A Car?

There several reasons why you may not be able to afford a car but over 80% of millennials do not afford a car simply because they do not work, If they work they do not save and if they save they don’t save enough!



Majority of Millennials (and especially in Africa) are jobless. Cars, on the other hand, are fairly expensive. If you are not gainfully employed, it will prove a daunting task to save enough to finance your first car.

Related to the above, millennials have a very poor saving culture. Many young people feel they have a lot of time ahead of them and there is, therefore, no reason to rush into saving when you can start saving later!

This is made even worse by the fact that Africans even among the adult community save very little. Majority of car owners in Africa depend on a financial windfall (deal) to finance their car purchase.

Regardless of what you earn, learn to set aside some little money and respect it not to spend it when the finances are a bit tight.

Another big challenge for millennials is that they are not banked. This means that they can not walk into a bank and ask to be helped with a car loan. The majority either live hand to mouth with little to bank or they are paid by cash and they do not bother to take their money to the bank. If you are not baked your credit score will remain at almost zero!

There is a good chance that you can’t afford a car because you actually do not need it! Life is in such a way that we make priorities the things we truly need. You might want a car but if you do not really need it, you will never sacrifice enough to buy it. Most of your earnings will be spent on the things you need.

How Do I Finance My First Car?

There are many ways you can finance your first car as a millennial. I explore some of the legal ways you can use to pay for your car.

1. Save For your Car.

The most preferred way to finance your car purchase is to save. If you set aside some money over a period of time, you will soon have a big amount before you even realize.

One good trick is to save all sudden and irregular incomes. Bonuses and money got from deals will not be as painful to save as it might be with the regular income.

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Pros: You are at liberty to save any amount. The advantage of buying your car on savings instead of a loan is you will have very little stress as no one is calling you when you are broke demanding for their money.

Cons: The method requires a great financial discipline to stay focused and not stop the saving. Its also long term. You will not be able to raise enough to buy a car in a short time.

2. Start A Side Business

One way you can increase your savings is to improve your income. You can do this by starting some side hustle that supports your primary source of income.

If you can, consider offering the skills you have to clients who may want a freelance provider. You could also start a small business that you can supervise after your daily routine with your regular job. Agriculture is another option if you want to boost your income.

Pro: You will be able to do this with the support of your main job. You can start small and keep injecting more and more as you make savings from your main job.

Cons: Your job might be really demanding and you will end up with less time to grow your side hustle. You may also not have the capital to start with. Investments like these are high risk and you could end up losing all your savings if you do not manage them very well.

3. Open A Target Account

Many banks have a target savings account. This type of account allows you to save for a specific amount of time and you will be paid interest. If you are in Uganda, you may need to visit United Bank of Africa (UBA Bank) to know more about this type of bank account.

Pros: You can save any amount of money you want and access your money in as short as just three months.

Cons: This option requires a high level of financial discipline otherwise you may withdraw the money and divert it to some other expenditure.

The other downside of this method is that you may not have saved enough to buy a car in just 3 months. While it’s possible to extend the tenure, it will be more like any other savings account!

4. Take Out a Life Insurance Policy

You can takeout a Life insurance policy at your preferred insurance company. You will then be able to save up a certain amount of your regular income for a period of not less than 5 years. At maturity, they will pay back all your savings and the accrued bonuses. You can then buy yourself a car.

Some Life Insurance plans allow you to borrow a part of your savings after some time so you can buy your car. Others do allow you to use the policy as security to get a loan.

Pros: The advantage of this method is that you will choose how much you want to save at your convenience. You will also not get into debts as you save before you actually buy the car.

Cons: This is a long term plan. You will have to wait a very long time before you can either qualify to borrow or before your policy matures to buy your car.

5. Take a Bank Loan

If you are banked, your bank will most likely have several loan product. Talk to your bank and see if you qualify for a car financing loan. There are loan products like Car loans, Logbook loans and many more on the market. Talk to your bank to advise you.

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Pro: Majority of bank loans like this help you acquire a brand new car! The car is also comprehensively insured for the period you will be paying back the bank loan.

Cons: Most of these will require that you have saved up a percentage of your car worth before they top up for you. Generally, the bank wants to be sure that you have a saving culture and you will be able to save and pay back their money.

6. Buy a Car on Hire Purchase.

If you want to buy a car and you have a part of the money to buy the car but not the full amount, consider talking to your car vendor. Many car dealers will accept instalment payment where you pay a part of the money and pay the balance in agreed instalments. We recommend you talk to Vuganda for your Car Hire Purchase

Pros: You will be able to pay the balance while you drive your car. This is more like a Lease to own car purchasing arrangement.

Cons: Most car dealers will demand that you pay at least 60% of the car value for you to qualify for hire purchase instalment payments.

The payment period is normally very short. Majority of car dealers give you only 3 months to pay up the remaining instalments. In case of failure to pay in time, dealers ask for a huge interest rate of over 15% per month. You risk losing the car completely if you fail to pay up in time.

Ok, now that I have told you ways you can finance your first car let me deal with the ways you shouldn’t try.

Ways You Shouldn’t Think About To Finance A Car.

You might want to buy a car real bad but these are some methods you shouldn’t consider to finance your car purchase.

1. Do Not Use Illegal Means

Illegal means seem like a quick way to finance your car. I mean you could just steal the money to buy the car or even steal the car itself. Sound easy not so? After all, you watched the guys in Money Heist steal a lot of money in the movie.

Yes, that’s a movie. It looks very easy in the movies. Welcome to reality. You are gonna get killed in the process. If you survive, most likely with a bullet in your leg, the cops will be by your hospital bed with cuffs to take you to jail for a very long time. There is also the mob. They catch you stealing someone’s car and you could be roasted like a pig in broad daylight. You might really want a car but you don’t want it this bad. What is the use of a car you will not enjoy riding as you look over your shoulders all the time?

2. Don’t Sale Land or Solid Investment to buy a Car.

There is nothing wrong with selling land or any other of your valuable to buy a car. In fact, I know someone that sold Land, to buy a motorbike to ride as a Boda Boda so that he gets money, save enough to buy Land.

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If you notice the irony of selling a solid asset to gamble it on the car helping you make more money to buy the land in future, and you still want to go through with the plan then I am not in a position to stop you. Its risky but you are an adult take your chances even though this is a very bad idea.

3. Don’t Borrow From A Money Lender

Borrowing money from a moneylender other than a bank is the last thing you should ever consider. Whether you are buying a car, Land or whatever else, it is a bad idea to borrow from money lenders.

The idea of getting money from Moneylenders seems enticing. You will not have lines, not a lot of paperwork and the money will be in your hands in just hours but its the worst idea.

For a start, they are going to ask for security. If you have it they will make you write a sales agreement since they are not authorized, lenders. The interest is also broad day robbery. Think of 20% per month. If you borrow 10 million in 5 months you will pay back 20 million.

Do you still want to borrow from a moneylender all the same? We recommend you check out Oguntu. They have some really nice terms but they are also money lenders.

4. Do Not Borrow From A Friend

I do not know who needs to hear this, but its a very bad move to borrow money especially huge amounts of money from a friend.

I have seen friendships that were solid as a stone go down the drain because of MONEY, MONEY, MONEY! There is something about the money you get from a friend, whenever you are about to pay something comes up and since he is a friend, you postpone. This goes on and on until the friend gets the guts to face you only he won’t be smiling. He will be ending your friendship effectively and probably throwing your As* behind a police cell.

If you are shameless and don’t care if you spoil your friendship, Know that no one will lend you the huge amount to buy a car and start saving up some money of your own or borrow from many of your friends and lose all your friends and turn to your car as the only source of joy.

4. Desist From Diverting Money Meant for something with a Fixt Timeframe

The minute I wrote that heading, I thought of school fees money. I know a “brother” who used tuition money hoping to replace it and he failed and while we wore our graduation gowns he was on Nasar road forging a University transcript.

The number one law of money, do not spend it before you have it. Even if you have a promise that you will be paid on a particular date, don’t start spending just yet.

You will be better off buying your car a few weeks or months later than the stress that you get when money meant for something else is trapped and you have no other source of money.

I recommend you take time and read: Things To Consider When Buying A Car.

By the way, We would love to hear your thoughts on this matter so how about you leave us a comment in the comment section below?

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  2. Now this is a very good article. Thank you so much for reminding me what I always take for granted.

    1. Hahahaha Well I have bought very many cars using many of these methods. However, to answer your question, My first car was acquired with a salary advance and my personal savings.

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