Have you ever calculate the True Cost of owning a car? Nobody does it we guess? If you don’t then this is the right article for you to plan for a better cashflow management.
Cashflow management is very crucial to your Personal Finance. You need to keep it as healthy as possible to live stress free life. While at the same time allowing your payslip some room to maneuver for other loan application from a bank. I mead a good debt ya.
Criteria to consider for True Cost
There are 10 criterias for you to consider prior to buy a car. We believe this criteria is exhaustive enough to determine the true cost of owning a car in Malaysia. In order for you to choose the instalment that suit your paycheck this is a good rule of thumb to stick to.
- Advisable to finance your car within 5 years period and lesser interest rate advisable (nominal).
- Look for lesser maintenance or longer period to service.
- Low fuel consumption car is very much desired. Mileage for our study was set at 100,000 kilometer.
- The bigger the size of tires the expensive its going to be.
- Engine capacity directly proportional to the insurance coverage.
- Road Tax
- Road tax is depending on your engine capacity as well.
- Depending on where you are working. In city centre parking fees can be expensive.
- Our calculation was based on RM 0.11 per kilometer. This is align with PLUS toll fees applied throughout the expressway.
- This is optional to you. However coating your car with additional coat (paint) it will make your car appearance last longer and less washing needed.
- If you are applying coating (additional coat) you may save considerable amount of washing needed per month.
In this article we choose the car from C and D segment. This is to cater for a very large group of buyer and variety of car to choose from. Among the car that caught our attention are as follows:
Before you choose the right car for you, you should observe your financial strength beforehand. This is compulsory exercise to lessen the burden the car instalment may have on your paycheck.
Generic rule of thumb to car ownership
Have you ever heard about generic rule of thumb for a car ownership? Typically generic rule of thumb for car ownership, you should survey a car price that is equivalent to your 1 year salary.
Therefore your monthly commitment for this rule of thumb will be 20% from your paycheck on monthly basis. This is considering 2.5% interest rates for 5 year period.
On a second thought, is this the correct rule of thumb? You may see it once you have finish up the whole article. Bare with us!
Case Study: Honda Civic 1.5 TCP
In this study, we have found that Honda Civic 1.5 TCP is the best car to choose from that meet our budget, performance, maintenance and estatic looks. Let us break it down into cost calculation part for Honda Civic 1.5 TCP.
Based on this cost, the True Cost for us to pay on monthly basis is RM 3,260 for a 90% loan with 5 year period. Ownership cost for this car is not merely RM 2,200 per month as we used to calculate to own a car. It way beyond that. We should key in other factor as well like we did on top there. For a Civic, the cost easily balloned to 48% more on top of your monthly instalment.
Lets have a look on the other car.
Mazda 3 is among the best in class for C-segment. It has won many plaudits. Among that is 2020 World Car Design of the Year award. On top of that this car also received 5 Star EURO NCAP Rating. The highest scores for crash rating protection ever!
After Mazda 3, Mercedes Benz A200 offered the best service as well in terms of design and safety. This is the closest rival to Mazda 3 on the market. Its very stiff competition from our point of view.
Well, Volkswagen Passat is not in C-segment. It resides in D-segment. Compared to its previous model, this new version looks dull to us. The interior looks as well below our expectation for a German made car.
Based on these comparison you can make several observation. Depending on which factor you are considering. In terms of:
- German car is the most expensive to Japanese made. However Mazda 3 is within touching distance to A200 for its 2.0 model.
- Mazda 3 offering the best maintenance service among all. They are offering 6 years warranty and free maintenance or 120,000 kilometre whichever comes first. So, in term of maintenance Mazda 3 is the champion then followed by Civic 1.5 TCP.
- For this factor, A200 is the clear winner. Powered by 1.3 engine with a Turbocharged. Therefore its fuel consumption is the most lowest consumption among comparison. Civic 1.5 TCP came in second place.
- In terms of space, VW Passat comes to close stand off with Civic 1.5 TCP. Both offering generous space. If you are considering for a small family, this car is definitely will be on top of your bucket list.
In our opinion, you should be looking for car that most suitable to your paycheck. This is the most important part. Otherwise you are exposing yourself to a bad finance and unnecessary stress.
Therefore, to buy a car you should consider your net paycheck for a year instead of gross paycheck. If you can afford a A200 for instance for your gross salary, you should just consider Honda 1.5 TCP instead if you are considering its True Cost.
If you still insist to own a A200, you just need to work harder. Piling lots of overtime week in week out. Or start to add up multiple stream of revenue. Your choice. Make a good one!