FINANCIAL THOUGHTS
Lifetime Expenses Of Owning A Car
After getting your car license it is perfectly normal that the next thing you will aim for is getting a car. It is indeed exciting to own your own car but at the same time it is indeed expensive.
The thing is, you would not stop after buying a car. After the Certificate Of Entitlement (COE) ends, you would most probably buy another one. You are just used to it.
Therefore, this article will discuss on how much you will spend on cars in your lifetime.
The First 10 years
Imagine you are a 25 year old and eagerly want to own a car. Eventually you bought a car and below are the expenses for the next 10 years.
Choice of car
There is no right answer for this, everyone do have his or her own preference when it come to type of car.
Will not name any brands and not choose any certain type.
But lets just come to an agreement that the car (1,500 cc) cost $100,000 (including COE).
Financing it
You would take a loan to buy the car.
As with the value of the car, you can only borrow 60% of the car. That means your downpayment will be 40% of the car.
In total, just to own a car, you spent $112, 558
Car Insurance
It is mandatory to have car insurance. That is something you cannot control.
The price of car insurance depends on the
- Type of coverage
- Type of car
- Current age
- Driving history
To simplify things, we undetake an assumptions that your annual car insurance is $3,000.
For the tenure of 10 years, it would total up to $30,000
Road Tax
This is normally calculated on a 6-month or 12-month basis. We will just take the 12-month basis.
For this car with a 1,500 cc it will be $686.
Hence it will be $6860 for 10 years.
Parking
When you buy a car, you would automatically need to “rent” land as well. You simply cannot put your car in your flat.
We will divide it into several categories
- Residential Parking
Lets take it you live in a HDB flat and the carpark provided is a multi-storey carpark. For a season parking is $110 per month.
Cost over 10 years: $13,200
- Office Parking
For someone who works at the CBD area, the monthly season parking is around $400.
Cost over 10 years: $48,000
- Shopping Mall Parking
This part varies but lets just make an average assumption
You park at shopping mall roughly 8 hours a week (weekday lunch, weekend family outing). In a month it will be 32 hours.
Hourly parking rate: $2.50
One month: $80
Cost over 10 years: $9,600
- Parking coupon (just in case you need it)
With most carparks already setting up gantries, the existence of a coupon is almost redundant. Especially there is already an app that can you use to replace the use of coupons.
But then again this is just in case basis. Lets say you buy at least one coupon booklet per month, which cost $12.
Cost over 10 years: $1,440
ERP Charges
Lets say your spend $2 a day on ERP. That will total up to $10 per week and $40 per month.
Cost over 10 years: $4,800
Petrol
- What if 1 litre of petrol is at $2.20
- You travel approximately 60km a day. In a month you travel a total of 1,800km
- Car fuels consumption is at 18km/L
This is how much you spend in a month: $220
Cost over 10 years: $16,400
Servicing
This would consist of engine oil change, air condition and etc. We will round it off to $1,500 annually.
Cost over 10 years: $10,500
Total expenses after the first 10 years.
Over a period of 10 years, you would been spending a fair amount of your money just to keep the car legally moving. The cost of owning a car goes far beyond the number you see in the brochures or roadshows.
As displayed above, in 10 years, you have spent a total of $257,858.
You can perhaps buy a 2-room flexi HDB flat, in cash.
One car for every decade
So after the first 10 years, you decide to buy another car. And after that another one. Hence from the age of 25 till 64, that will be a total of 4 cars.
With the calculations of Time Value of Money, we shall calculate how much you will spend on cars in your lifetime. We will assume that the average price of the car and expenses will be the same throughout the years. But we have to input in the inflation rate.
We will have an assumption that the inflation rate is at positive 3% p.a.
First Car: $257,858
Second Car: $465,720
Third Car: $625,889
Fourth Car:$841,143
As time goes on, you would realize that the expense of owning a car is increasing every 10 years. Even if you buy the same car every time, the amount of money will increase all due to inflation.
Lets sum it up and look at what you would spend on owning a car for 40 years.
Total: $2,190.610
Yes, that is the amount. You would have actually been a millionaire if you did not buy a car.
Or maybe you would already have your retirement settled by not getting a car four times in your lifetime.
Would you still buy a car?
After seeing the numbers unfold, it might change your mind on whether you should buy a car. Or maybe you would even sell off the car you have now.
Above the financial aspect, you know that the overall reason of having a car is for convenience sake. It is easier to transport your children. Or maybe it is easier to travel during the festive season.
Nonetheless, it all comes back to you and your choices. Whatever you choose, that will be the lifestyle that you have chosen.
Whatever you choose now, will definitely affect what will happen in the future.
Well, that’s the end of this article. Do share it if you think this is beneficial to your friends and family.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
