When the pandemic broke out, businesses had to work from home, and it seems that will continue to do so in 2021.
With fewer drivers, private cars stopped in parking lots and driveways and decreased over time. If you look at that, the question arises as to whether cars are still a necessity and what factors are decisive for this decision.
If you are thinking of buying a car (or selling your current car because it is underused) there are a few questions you should ask yourself before making such a decision.
1. Can I afford to own a car?
Take the Perodua Myvi 1.5L H (2018) as a case study as it is a popular and affordable car in Malaysia that is suitable for both young graduates and small families.
Note: We chose an older variant of the Myvi because it has a known depreciation value.
Link to the purchase price of MYVI here.
The estimated operating costs are over 3 years RM17,381 (This calculation is based on the assumption that the mileage will not exceed 20,000 km per year.) This includes the depreciated vehicle value, insurance, road tax and service, but excludes gasoline costs.
Using four different travel scenarios, which differ according to the distance covered per week (in km), we have calculated the average costs per km for the trip. This does not take into account the amount of loan interest accrued over time.
You can calculate the estimated cost of ownership by adding the numbers on the last line.
Based on the table above, if you only drive about 100 km per week, you will pay a higher average cost per km than someone who drives more.
This is only a small glimpse, however, as the total cost of owning a car is highly dependent on the individual's circumstances.
You may think buying a car is a rite of passage and should be a standard on your life's journey, but the past year has challenged many people's financial stability and a car has been a serious commitment for at least several years.
Owning a car means making a commitment to one monthly minimum costsregardless of your personal financial circumstances. In the event of an emergency such as sudden illness or unexpected setbacks such as losing a job, the monthly installment must still be paid. This even includes the current situation where many cars are idling during the MCO.
After all, historically, around a quarter of Malaysia's bankruptcies can be traced back to vehicle loan defaults. The decision not to own a car enables more Liquidity and flexibility when it comes to your monthly expenses.
2. Am I willing to take on the responsibility that comes with owning a car?
The care and maintenance of a car is a necessary task to keep it safe and usable. However, in a 2018 survey, Bosch found that more than 50% of Malaysian drivers have no knowledge of basic car maintenance and how it affects the safety of passengers, cars, and roads.
Car maintenance is a fixed and regular needStarting with regular inspections, checking the oil and fluid levels (and topping up), as well as monitoring tire pressure and tread depth. This ignores the other components that make up a car and affects its performance.
3. Can I deal with the consequences of potential accidents?
In 2019, the number of road accidents in Malaysia was at an eight-year high.
When accidents happen, car owners have to deal with towing the car, filing a police report, insurance claims, car repairs, etc. In addition to the time and effort required, this can lead to a loss of No Claims Discount (NCD) and an increase in vehicle depreciation.
While car accidents are common, the main difference with car rental or email is that you don't have to personally take care of repairs, insurance, or maintenance.
4. How much time do I spend traveling?
Waze estimates that Malaysians spent an average of 1 hour and 12 minutes a day in 2019.
For some, long journeys are a norm as they live there and don't have access to public transport. But compared to a decade ago, we now have much more transportation options.
In an international study from 2020, the analysis found that when given the choice, consumers viewed public transport or email as an opportunity to handle business emails, important calls, or social media while someone else takes the wheel. This choice is determined by the preference for productivity.
Back in Malaysia, a 2019 study found that private cars are preferred over public transportation because they are considered more convenient. The study concluded that a comprehensive public transportation system is required before commuters can switch, and they expect the same level of comfort that they enjoyed with cars.
5. What do I prioritize when it comes to flexibility and comfort?
Different modes of transport will suit different people depending on your lifestyle and priorities.
In a Malaysian study from 2019, car owners attach importance to being able to visit places at any time that allow them to take spontaneous trips. Without real-time credible information about the daily availability of public transport and service routes, this level of convenience can only be achieved through email or renting a car.
Last question: should I own a car?
Several factors aside, one important question is, "Do I want to commit to a fixed cost to own a car, or do I prefer more financial flexibility in my life?"
With gross income of RM2,900 / month, what is the maximum monthly debt settlement you should have?
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For one, it can be handy to have a car available. On the flip side, there are regular payments that secure a portion of your income that could be used on other potential channels. This access to additional savings could be used for leisure or as an emergency for a rainy day.
To make a decision, it is helpful to first consider your other outstanding debts and payments such as PTPTN / student loans or personal, medical, and health insurances. As a rule of thumb, your debt shouldn't exceed 36% of your gross income.
While it might be difficult to imagine a world without a car, the frequent news of limited parking in Kuala Lumpur and improvements in the connectivity of our public transportation infrastructure point to a possible future.
