Buying a Toyota Corolla instead of a BMW X3 can make you R1.2 million richer
Drikus Greyling • 31 January 2025
An analysis by Daily Investor showed buying an affordable car, like a Toyota Corolla Quest, instead of a luxury BMW X3, can make you R1.2 million richer.
In South Africa, a car is seen as an important status symbol, and many people cannot wait to buy their first luxury car.
Showing off your new BMW or Mercedes-Benz portraits that you are financially secure and have achieved career success.
However, buying an expensive luxury vehicle comes at a tremendous cost. It is a poor investment which destroys wealth.
Daily Investor compared the difference between buying a luxury vehicle and opting for a cheaper alternative and investing the savings in the S&P 500.
For this comparison, we selected two of the most popular vehicles in their respective categories and considered their financial impact over six years.
- BMW X3 xDrive 20d
- Toyota Corolla Quest Plus
We assumed that the two buyers had the same budget. The first one spent his full budget on a car, and the second selected a cheaper car and invested the rest of the money.
Both vehicles were purchased in 2019 with loans covering 100% of the purchase price at an interest rate of 13%, repayable over a 6-year term.
Both cars were insured using a constant insurance profile to make the insurance premiums comparable.
It should be noted that insurance is subjectively applied to individuals and will differ from person to person.
In this case, the insurance profile was kept the same for both vehicles, which means the insurance premiums can be compared.
Insurance quotes were obtained from Naked Insurance for brand-new models of the same vehicle and proportionally applied to their 2019 prices.
We assumed the insurer’s risk profile remained constant over the 6 years, and the premium was adjusted for inflation to cover the vehicle’s replacement value.
For the sake of simplicity, it was assumed that both vehicles were sold with a complete service plan covering all maintenance expenses over their 6-year financing period.
Only the fixed costs of the vehicles were compared. This means that costs such as fuel and tyre wear were not included.
In 2019, a new BMW X3 xDrive 20d cost R789,000 and could be comprehensively insured for R2,001 per month.
To own this car, the monthly repayment would be R15,668, paid from January 2019 to December 2024.
This brought the total fixed costs of the BMW to R17,669 per month, which gradually increased to R18,161 over the repayment period due to rising insurance.
In 2019, a new Toyota Corolla Quest Plus cost R277,000 and could be comprehensively insured for R1,109 monthly.
The monthly repayment on the vehicle for six years was R5,501 over the same period as the BMW.
This brought the total fixed costs of the Toyota Corolla to R6,610 per month, which gradually increased to R6,883 per month due to rising insurance costs.
This means that the owner of the Corolla saved R11,059 per month from the first month by not buying a BMW.
Every month, the Toyota Corolla owner invested his savings in the S&P 500, which helped him accumulate wealth while driving a cheaper car.
After six years, when both cars were paid off, the BMW X3 xDrive 20d owner can sell his car for R468,900. The car was his entire investment over the period.
The owner of the Toyota Corolla can sell his car for R209,900. However, his S&P 500 investment with the excess cash grew to R1,423,942.
This means the Toyota Corolla Quest Plus had assets of R1,633,842 after six years, much more than the BMW owner’s R468,900.
It shows that buying a more affordable car and investing the rest created an additional nest egg of R1.164 million over six years.
The table below summarises the difference between buying a luxury and a more affordable car over six years.
| Measure | BMW X3 xDrive 20d | Corolla Quest Plus |
| Car Value after 6 years | R468,900 | R209,900 |
| S&P500 | Zero | R1,423,942 |
| Total Wealth | R468,900 | R1,633,842 |
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