Should I take loan to buy Isuzu FRR aka ‘Slay Queen’ on Sukuma-Deni terms?

Should I take loan to buy Isuzu FRR aka ‘Slay Queen’ on Sukuma-Deni terms?

What you need to know:

  • My name is James. I earn a net salary of Sh70,000
  • I would like to take a Sh1 million loan to pay off the owner. I plan to pay off the 3.9 million Sukuma-Deni from the proceeds of the lorry

My name is James. I earn a net salary of Sh70,000. My budget is as follows: Rent, Sh17,000, Mobile internet/airtime Sh2,500, Electricity Sh1,000, Shopping Sh7,000, Groceries Sh7,000, Transport Sh7,000, Parents Sh8,000, Savings Sh15,000, balance: Miscellaneous. I would like to venture into the transportation business and have a deal that has been proposed to me and I wonder if it is ideal. The deal is a Sukuma-Deni type of deal for an Isuzu FRR lorry known popularly as Slay Queen. I am to pay the owner Sh1 million cash, then take over the debt and the vehicle. I will be paying Sh116,000 monthly and the loan balance is Sh3.9 million. I have saved Sh435,000 in Sacco. I would like to take a Sh1 million loan to pay off the owner. I plan to pay off the Sukuma-Deni from the proceeds of the lorry and project to make around Sh150,000 per month. I would like to also pay the Sh1 million Sacco loan from my budget but don’t know how to realign my budget. Is this a deal I should take? Please advise.


Benjamin Cheruiyot – the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm.

The secret to financial security and wealth accumulation is risk and debt management, which entails being adequately insured, paying off short-term loans and living within your means by establishing a budget and adhering to it.

From your budget, you have miscellaneous expenses amounting to Sh5,500 and your rent is 24 percent of your net pay. Your savings of Sh15,000 represent 21 percent of your net income. As the average savings rate hardly beats 10 percent of net incomes, a modest lifestyle and budget are necessary for sustainable wealth building through increased savings and investments.

The rest of your expenses are in line with everyday expenses for a small family. It is also important to take care of other basics that form part of personal finance eg. education, medical insurance, and home ownership. Before dipping your feet in a capital-intensive venture like lorry transport have an insurance plan, adequate medical cover and a plan towards owning the roof above your head.

Your transport budget seems to be on the higher side. Daily fares exceeding Sh300 are way too high. Your job could involve a lot of local travel, or you frequently use “boda boda” short distances, or live far away from the workplace. You could consider moving closer to your workstation in order to reduce that expense.

Your intention to venture into the lorry business should be well thought out. What do you know about the business? Do you have reliable insider information to navigate the intricacies of the transport sector? Are the income estimates you’ve mentioned net of expenses? Consider the costs of maintaining the lorry, fuel, driver wages, brokers/cartels, roadblocks, inspection and insurance, lengthy wait times, etc.

It is advisable to find more information from an experienced owner and driver to understand the risks and opportunities of the business. People give enticing information while concealing stubborn facts especially when they seek to exit a venture. Remember you are getting into a lot of debt – Sh1 million loan that will cost you an additional Sh400,000 interest, and monthly repayments of Sh23,000 if servicing in 60 months – and over a million shillings in interests for the loan balance of Sh3.9 million.

Should you wish to pay for 60 months, the balance of Sh13,000 can only be met by cutting your living costs and your parents’ support money. For example, reducing parents’ support by Sh3,000 and groceries, shopping, transport, and miscellaneous expenses by Sh10,000. You will feel the pinch of the new adjustments. As such, you must do your homework. Do not only focus on the rosy side.

What would happen, for example, if the lorry broke down and needed urgent repairs? You ought to have an emergency fund. This means you should save part of the lorry income in an account to meet the lorry’s maintenance costs. With a monthly repayment of Sh116,000, you will be left with Sh34,000. Keeping part of this in a money market fund where it is not only safe but also earns interests that are credited monthly will help you take care of unforeseen expenses.

Finally, think through this proposition as it is capital-intensive and can easily put your finances in disarray. Apart from your Sh435,000 Sacco savings, you do not have other assets or cash to come to your rescue should the venture fail to go according to plan.

Build both fixed and liquid assets without exposing yourself to too much debt, especially by venturing into a dynamic sector like lorry transport. Learn the ropes of the trade while building adequate cash reserves as a fallback.

If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.