Tuesday, November 10, 2009

How much should we buy that car ?

Most personal car purchases are sentimental and relate to quality of life ... however if purchasing a car is mainly a transport and finance matters then it could be iron out this way ...

First lets start with some facts of transport life around me;
  • Taxi is as good as my own car if not better ( its my own car + a driver ) but its costly
  • Bus stations are near by and can go almost anywhere but it takes too much of my precious time
  • Intra city trains are fast and efficient but only after you are IN the city
  • Car rental gives the highest flexibility but it could be expensive if park aside too long
So I will need a hybrid solution if I don't have my own car. For me, I will use Taxi - Train - Light Rail during normal days and Bus and Car Rental during weekend and holidays.

First I take a taxi to the near by train station (KTM), once in town I use light rails ( PUTRA, STAR, MONORAIL etc.) to travel almost anywhere within the city. Typically I would need to exchange once within the light rail systems to reach my destination. Return trip same path.
$8 : Taxi to station
$1.40 : Train to Town
$1.80 x 2 : Light rails within city

One way = $13
Return or one day = $26
5 days week = $130
50 weeks a year = $6,500
By weekend, I would rent a car and run away for 2 days ...
$180 / day x 2 days = $360
4 weeks or 1 month = $1,440
12 months or 1 year = $17,280
Adding both up is $23,780 a year.

If $2,000 a month of transportation fee seems ridiculously high, you probably do not need to rent a car every weekend, perhaps every bi-weekly or even every month if at all needed. Run your own numbers for your own scenarios. This example is trying to mimic the same lifestyle with a car.

Now if I do all that with my own car, I would need to pay for
  • petrol : $400 a month
  • parking : $10 / day x 5 days x 4 weeks = $200 a month
  • maintainence : $100 a month
That is a total of $700 a month burn. That leaves $1,300 a month for the car itself. So if I can find a car that I have to pay monthly less than $1,300, it may just be a good deal.

So if I take 3 years car loan at 3% interest I probably should buy a car less than $43,000
if I take 5 years car loan instead, I could spend up to $67,826 for a car.

Consider the resell value as a bonus or final fund consolidation just in case maintainence shoots up or you ended up not using that car that much after all.