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CREDIT IS HERE ...Cont'd
Since the car you drive away with does not depend on cash at hand, you can jolly well afford to point out your dream car. The dealer is willing to let you have it. You work for a bank or oil company for crying out loud.
The moment you pull that car out of the parking lot, that car has lost 25% value instantly, before you log one kilometer. If you change your mind before the gateman opens the gate for you to leave, and decide you are not buying again, you have a high grade tokunbo in your hands (have you noticed that most tokunbo car dealers now have latest model automobiles in their car lots?)
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You have lost 25% instantly, and in the world of accounting, you lose 25% every year thereafter. After four years, the car has a zero book value. It will still be on the road, no doubt, but you will become quite close to your mechanic, and he will know you to your house, and sometimes your village.
So you have a situation where you are paying for something that is losing value before your very eyes (or "very before")
Imagine you used that N4M loan to buy Dangote Sugar Refinery Stock? I am sure you get the picture. It will be worth more that N12M now, you sell one third of your stock to raise N4M to buy your dream machine, another one third or so to pay off your loan and you still have some cool millions sweating it out for you in the market, giving birth (adding value, not depreciating) through bonuses and dividends.
A tale of two colleagues, wont you say?
Both cruised on credit boulevard. One got richer, the other poorer.
This does not mean that every stock in the stock market will pull the same stunt Dangote Sugar did. In each case, especially when other peoples money aka credit is involved, you have to do due diligence before you jump.
Credit is like a two-edged sword. It can make a way for you, and it can inflict deep cuts on you, depending on how you wield it.
You can hardly go wrong when you vote for assets, when credit is involved. Shine your eye well well.
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