Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

Owning a modest car in Nigeria is increasingly becoming a luxury rather than a necessity, according to a new report by Cowrywise.

The report highlights the financial burden and tough choices a Nigerian worker must make to achieve the dream of owning a car, even if it is used.

The new report titled “The Economics of Owning a Car” revealed that the total cost of owning a locally used 2005 Toyota Corolla in Lagos has climbed to N22.7 million over five years.

This figure includes purchase price, fuel, maintenance, regulatory fees, repairs, and depreciation. Even after factoring in the vehicle’s resale value, the overall cost remains at N18.9 million.

The report explains:

"If Sola purchases a clean Nigerian-used Toyota Corolla for N4.9 million (the estimated average cost of a Nigerian used car), the true cost of ownership goes far beyond the sticker price. She will have to spend about N234,000 monthly, or N2.8 million annually, on maintenance and related expenses.

"Over five years, her total cost climbs to N22.7 million, but factoring in resale value brings it down to N18.9 million."

To avoid financial strain, Cowrywise recommends that individuals allocate no more than 10 to 15% of their net monthly income to transportation, in line with the widely cited 50/30/20 budgeting rule.

Cowrywise noted that a car owner would need to earn between N1.2 million and N1.5 million per month to afford the vehicle comfortably, an income range typically associated with assistant managers in commercial banks or senior associates in investment firms.

It said:

"Owning a car is a major financial commitment."

What this means is that young professionals in Lagos, owning a car has become more of a financial strain than a symbol of progress.

The report added:

"For young professionals like Sola, the journey to car ownership typically follows one of two routes: saving to buy or borrowing to buy. Each path comes with distinct financial implications and lifestyle tradeoffs.

"Sola could save N415,000 per month for one year (with an estimated 20% return), or N217,000 per month over two years (yielding approximately 16.5%).

"Alternatively, she could fund the purchase through a combination of a staff loan (N3 million at 15% per annum) and a digital loan (N1.9 million at 84% per annum), resulting in monthly repayments of N575,000."

While borrowing enables quicker access to car ownership, the high cost of credit, especially from digital lenders, can create significant financial strain.

In contrast, saving, though slower, offers a more secure and sustainable path to ownership, BusinessDay reports.

The report also revealed that choosing to commute using ride-hailing services is very expensive.

The report noted that a salary earner could spend up to an average of N461,000 monthly, translating to N5.5 million annually on transportation, which surpasses the long-term cost of owning a vehicle.

It added:

"Public transport remains the most affordable at about N1.4 million a year, but it comes with trade-offs, including delays, safety concerns, and unpredictability."

Earlier, Legit.ng reported that a Nigerian man who deals in cars said someone came to his shop and paid N45 million for a car but did not take it

According to Uchenna Odu, the car paid for by the customer has been with his dealership for two years.

He said his company has tried calling the man and also reached out to his bank, but they have not seen him since then.

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Source: Legit.ng