The Real Cost of Car Ownership

It's funny how people mind works where they will tell you in order for you to get rich, you musn't spend too much on a car. Never buy anything more than a Vios / City, best if you stick to Proton. People look at the expenses equivalent to a car value or misconception that certain brand car will have a huge lost of depreciation, but most of the time, they will have no idea on the actual cost involved in a car ownership. I'm in support in savings money for the better future but also at the same time I'm huge supporter in getting best enjoyment with the smallest amount of money spent. As said, money paper is useless until you exchange it for something you want.

Living on penny doesn't make you rich, living smart is more important. Which is smarter? Buying a brand new RM89,000 Honday City, or buying a used Alfa Romeo at RM70,000? The answer lies on how much is the real cost of car ownership, as most people will tell you that Alfa Romeo is expensive to maintain and depreciate a lot. I'm sure none of them drove an Alfa Romeo before, I don't talk nonsense but only facts & figures. Let's look at the number.

I'm going to do a calculation comparison for both brand new Honda City and an used 2006 Alfa Romeo 147 2.0SS. In these calculations, I will consider a yearly mileage of 20,000km, current petrol price of RM1.92, 7 years in loan repayment at 2.8% interest and I have downpayment cash of RM15,000 on hand.

Honda City 2011 valued at RM89,000
Depreciation = RM5,800 per year (a search in newspaper will show you)
Maintenance = RM1,000 per year (based on maintenance booklet from Honda, will cost more later)
Petrol = RM3,000 per year (consider 13km/liter)
Road Tax = RM90 per year
Insurance = RM1152 (1st year based on RM89,000 insurance coverage with 55% NCP)
Tolls & Parking = RM600 per year
Loan Interest = RM1,480 per year (equally divided for loan interest over 7 years)

Total expenses per year = RM13,048 for a brand new Honda City.Not exactly cheap isn't it?

Now, let's move to a year 2006 Alfa Romeo 2.0SS worth RM70,000 at current time. I'm sure you can find something cheaper than the price I indicated.

Depreciation = RM6,000 per year (so low?? do a search, you will find out)
Maintenance = RM2,400 per year (a real figure that I spent, it's more than enough if you bought a good bella, not hard though)
Petrol = RM3,500 per year (consider 11km/liter, standard for a 2.0CC car)
Road Tax = RM379 per year
Insurance = RM932 per year (1st year based on RM70,000 insurance coverage with 55% NCP)
Tolls & Parking = RM600 per year
Loan Interest = RM1,091 per year

Total expenses per year = RM14,902 for a used 2006 Alfa Romeo 147.
Surprise? It's real, I owned one, and this is the cost I'm spending.

It's still RM1,900 per year more expensive that a spanky brand new Honda City, but it's a different class of car! I'm talking about 2.0CC Twinspark, 6 airbags, sunroof, 8 Bose speakers + amplified subwoofer, italian superior handling car. It's not a fair comparison, why don't we bring in a comparable class this time, the Honda Civic? Not too comparable, but you get the idea.

Depreciation = RM8,000 per year (again, go check on newspaper)
Maintenance = RM1,200 per year (based on Honda booklet, will get more expensive later)
Petrol = RM3,500 per year (consider 11km/liter)
Road Tax = RM379 per year
Insurance = RM1,634 per year
Tolls & Parking = RM600 per year
Loan Interest = RM2,300 per year

Total expenses per year = RM17,613 for a brand new Honda Civic.
It's RM2,711 per year more expensive than the Alfa Romeo and the only advantage of the new Civic is the room space and of course, spanky brand new model. Forget about the additional stuff Alfa Romeo is giving, but Civic still has nothing comparable in driving enjoyment and handling with Alfa Romeo.

This is what I call minimum money with maximum enjoyment. The rules changed as the number change, it's all numbers in the datasheet, work it out. Another example is that if you want to drive a BMW, never buy an used unit. Car like BMW has constant depreciation over years, and there is no different in depreciation value either new or used. The real cost of BMW is the maintenance cost. Take up a new unit and make sure the 3 years free maintenance is included, I'm sure the interest & insurance cost will be covered up easily.

And if you are really interested in Civic, again this car got constant depreciation, no different in new or used. Take up a short loan, change it every 2 or 4 years for a brand new spanky headache-less Civic. You do the math, then tell me.

Work hard, play smart. That's how I live mine. It's just a simple plan =)