Hang That Car Around Your Neck- Take the Train
Especially if you don't even earn S$3000 (around US$2060) a month as take home pay.
Consider this:
1. Petrol - Top up 3 times a month around $70 each time = $210
2. Road tax - $ 800 for 6 months for a 1.5 litre car.
3. Radio licence - $27 per year
4. Car Insurance - around $700 per year on average
5. Car Servicing - around $100 a month
6. Parking at open air HDB - $65
7. Add a buffer of $80 for miscellaneous costs like repair, washing, increase in petrol prices (like what happened in 2008), parking fines.
What is the total amount? That is around $650 a month.
And we haven't even account for people who buy the car on installment, or you going out to town to park at that expensive city parking lot. Or even the dreaded and hated ERP(electronic road pricing- for those who are not living in Singapore, every time you drive a car to the city area, a toll is automatically deducted from a fixed gantry).
So if you pay via installment, go past the ERP a few times every day to and back home, wash your car every week at the petrol kiosk, your monthly costs of maintaining the car will easily go beyond $1000.
If you earn less than $3000 a month, that is more than 1/3 of your salary gone.
More importantly, when you place that $50,000 for your car (which in Singapore can probably only buy you the cheapest Japanese made car) it is valid for only 10 years, after which it will probably take around $10,000-$20,000 (or even higher depending on how many rich people are buying cars at the point in time) to get the privilege to drive it around for another 10 years.
Assuming you put this same $50,000 instead to work as investment and earn a return of 7% a year when you are 30 years old instead of buying the car. When you are 60 years old, guess what amount would you be left with?
S$380,612. That is almost four hundred thousand dollars.
If you put that $1000 you spend on the car each month to work for 30 years continously as investment, what would you have after 30 years with 7% as the target return each year?
A cool $1.2 million. That's the power of compounding interest.
Take the public transport instead.
It could mean the difference between whether you have the million in your pocket come retirement or just a car key in your pocket.
August 29, 2009 at 7:50 AM
Hi Lemizeraq,
Good article, and a very pertinent one about the cost of car ownership in Singapore.
I still cannot believe we can paying such high prices for cars, compared to countries like Australia and USA ! If you add in the COE it makes it even worse...
I've read many blogs/websites on the high cost of owning a car. Your blog post joins them as one of the very relevant and well-articulated ones.
Regards,
Musicwhiz
P.S. - I do not own a car. Haha.
August 29, 2009 at 8:24 AM
Hi Musicwhiz,
Yes, it is too expensive to own a car in Singapore.
I don't own a car too :)
Every time I think of how much I have to pay for ERP, petrol prices, maintenance etc I ask myself if I really need the car.
It'd be interesting for a car owner to list down all the costs associated with maintaining a car.
Your blog is interesting to read about and find more about the companies you cover in your search for stocks with that margin of safety :)
I've been reading your blog to find leads for future stock purchases too.
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