So some would remember I have a cost of car ownership calculator some time back. You can access it over here. Here are the instructions how to use it.
I did a computation in 2010 (2.3 years ago) with my good friends 1.5 litres Toyota Vios. Then, you can pay for 10 years, the loan interest rate 2.2%. (See the result here)
It’s a whole different ball game now. We are constrain to only 60% of loan servicing and a higher interest rate and a shorter tenure.
One reader Lee Wen Loong actually mentioned this necessity to own a car to me.
So I did another computation this time with a
- Kia Cerato Forte 1.6L $93000 (including GST, March Prices)
- Loans from DBS Car Loan. (See here)
- 30 year old 0 NCD – Insurance $1800/year
- Season parking at $65 (home) + $70 (workplace)
- Road Tax – $744/year
- Cash card – 30/mth
- Miscellaneous – 20+++/mth
So the result is as follows:
Hmm it is higher than the last time but it will work out to be 41% of your disposable income if your disposable income is $4000. The good thing is that you expense this amount across 5 years instead of 10 years in the last one.
Of course disposable income is higher. The good thing is that your home can probably be paid by your CPF.
Give it a try. Tell me whether you are able to afford a car.
Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
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Lee Wen Loong
Wednesday 27th of March 2013
Hi Drizzit,
you missed out 2 important cost of owning a vehicle
1) Petrol cost range from $350-$500 dependant of distance travelled for KIa
2) Maintenance cost ranging from $400-$1000+ assuming servicing via the agent(since warranty covered for 5years/100,000km) per year. Generally twice a year(every 10,000km)
That will not add up to 41% but instead 60%+ of disposable income. General thumb of rule the cost of owning a vehicle should preferably not exceed 20%-30% of disposable income.
Base on past experience, income must be 5 times or more vs the instalment given.. i.e. if instalment adds up to be $1,081.13, income have to be at least $5405.65 or more for the bank loan to be approved.
Kyith
Wednesday 27th of March 2013
Hi wen leong,
Thanks for the input. But I have questions.
The maintenance cost is above that of servicing? Looks excessive. The 400 to 1000 is per year right
I thought it's much easier to get a loan? Why do banks need to check that since non of my friends faced that problems
The petrol cost looks high. I always thought people pump petrol twice per month which will work out ti be that amount