The true cost of owning a car

Malaysians and Singaporeans love cars! The very first thing a working adult in Malaysia wishes to buy is a car. There are various reasons you think you need a car,

• making your commute between home and workplace more convenience,
• driving a car is safer than riding a motorcycle in Malaysia ( which is certainly very true),
• need to impress others because it is difficult to find a girlfriend if you do not drive a decent car in Malaysia or Singapore

Before buying your first car, you need to think again about the true cost of owning a car in Malaysia and Singapore.

Malaysians love their cars

Malaysians love to drive and we get car loans to buy a car. We like to park in front of anywhere we go! We even park in front of a hawker stall while waiting for our Char Kuey Teow in Penang Island.

In Malaysia, there are 443 cars per 1000 people. 82% of Malaysian households own at least a car!

Calculating the true cost of owning a car might delay your intention to buy your first car! I prefer you to save your first 3 years’ income first before even thinking of buying a bicycle!

Can you survive in Malaysia without a car?

It sounds crazy not to own a car in Malaysia! Public transportation punctuality is pain over the ass and the experience of waiting for a bus can be your worst nightmare!

I still remember my secondary school days of waiting for the bus to go home from Simpang Ampat to Bukit Tambun. After my Malay Language tuition in Bukit Mertajam, I had to take Bus 98 from Bukit Mertajam to Simpang Ampat and the second Bus from Simpang Ampat to Bukit Tambun.

It took me more than 3 hours to travel from my secondary school back home. Even though the distance is only 22km, the last part of the journey from Simpang Ampat to Bukit Tambun which is only 3 km apart took me 1 and a half hours because of the erratic bus schedule!

It took me only 35 minutes to walk from Simpang Ampat to Bukit Tambun. Eventually, I gave up waiting for the bus I nicknamed ‘stupid red bus’ and decided to walk!

The idea of staying near my school finally came to my mind. Why wasting 12 hours of my life every month on a commute where I could rent a small room for MYR50 near my school and walk to school every day??

Do you need a car? Can you move to a place near your workplace and take public transport instead? The cost of owning a car can delay your financial independence!

The true cost of owning a car

Never buy a depreciating asset with a loan, you end up being robbed by the banks!

Let say you want to buy a Perodua MyVi 1.5L which costs MYR52197 and take up a 90% loan.

Financiang

Average Malaysians put a 10% deposit for their first car, to finish paying up your very first car by taking up a 5-year loan with a 3% interest rate, your monthly loan payment would be MYR 900.

Initial Deposit	MYR5220
Total loan over 5 years	MYR54000
Total payment	MYR59220

Depreciation

After paying up your loan in 5 years, your Perodua Myvi has depreciated at least 50-60% in value. Let say you are lucky some stupid dudes want to buy at MYR28000, you had spent MYR31200 over 5 years!

Petrol/Gas Consumption

The Perodua MyVi 1.5L is a small car and fuel-efficient. 1 liter of petrol can take you to go as far as 20km ( which is MYR0.0825/km based on MYR1.65 per liter of petrol). 71% of people live in Kuala Lumpur, Malaysia drive to work with an average distance of 21km. On average Malaysian drivers travel around 800-1000km monthly.

Current petrol price ( RON 95) =MYR 1.65

One year mileage 1000km x 12 month= 12000km

Maintenance /Repair/Road Tax

Maintaining a Myvi car is about MYR 1000 per year. This translates to 12000km for MYR 1000 which is MYR0.09/km.

Road tax for 1500cc car is MYR90 per year which is negligible in our calculation.

Changing four tires ( about MYR 1000) every 90000km which is MYR0.011/km.

Let say insurance premium is about MYR 1000 per year ( initially it is higher but cheaper later due to Non-Claim Discount ( NCD) for 12000 km. About MYR 0.09/km.

To put that into perspective, to drive the ultimate fuel-efficient car Perodua MyVi plus the petrol, you need MYR0.09+MYR0.011+MYR0.09+MYR0.0825 ( petrol)= MYR0.2735 for every km!

To drive a fully paid MyVi every km, you need to spend MYR0.2735. But you are buying that MyVi on loan. You have to add the monthly installment into your monthly cost of owning the car.

As for Singaporeans, your COE ( Certificate of Entitlement) adds further costs to owning a car. Your cost of every km would be 3-4x higher than Malaysian drivers!

You have to add up the cost

Travelling 1000km per month, you would be spending MYR273.5. Adding up MYR900 monthly installment, you are actually spends MYR 1173.5. If one family has two similar Perodua, the couple would be spending MYR2347 every month.

The decision of owning two cars using car loans at 3% in one family would cost you MYR28164 per year and MYR140820 after 5 years! That is 1.71 working years worth of time! ( Average Malaysian yearly salary is MYR82299)

What is the alternative?

You can either choose to stay near your workplace or get a job near your home!  The idea of living close to work seems to be completely alien to most people.

Why spending that MYR1173.5 every month to get a car when you can rent a small room near your workplace at MYR500-600 per month? Be creative and share a house or room with others. Spending MYR1173.5 every month, plus struggling on the road around 40.71 min every day to go to work is no joke.

40.71 minutes for one way and 81.42 minutes every day translate to 3.39 hours per week. You would be wasting besides MYR14082, but also 176.41 of life hours every year if you decide to commute between home and workplace!

MYR1173.5 saved can used for a MYR250-280k home installment interested at 4% per year for 30 years.

or I would rather save that money and invest in my USD ETFs and see the money grows at least 40-50% after 5 years!