What’s The True Cost Of Vehicle Ownership?

Malaysians often complain of high car prices in the country, due to the excise duty. It was reported that we have the world’s second most expensive car prices.

However, for car owners, we are off to a good start this year, with price of RON95 dropping to RM1.91 per litre.

The cost of car ownership is not as simple as what you’re paying for your car loan, but it also involves the cost of day-to-day running of your car.

The total cost goes beyond its purchase price when you consider out-of-pocket expenses like petrol and insurance, plus the car’s loss in value over time (depreciation).

For the sake of this article, let’s examine the true cost of owning a Proton Preve 1.6 CVT Executive at RM62,540.00 for five years.

1. Financing

Unless you started saving the day you were born just to buy a brand new Proton Preve, chances are you will have to get a hire purchase loan to afford a car in Malaysia.

If you go the usual route, you will have to fork out 10% of the car price, and the rest of the 90% will be financed. Here is how much you will have to pay in interest over a five-year tenure:

With the maximum hire purchase loan tenure at nine years, car buyers who choose the longer loan tenure will have to fork out more on financing over time. Find out how much your will be paying in interest on a longer loan tenure.

2. Depreciation

Depreciation is one of the highest costs in owning a car. It is how well the vehicle holds its value over time. This is particularly important if you keep the car for less than five years as the depreciation rate is always higher in the initial years of ownership.

The moment you receive the keys from the car dealer, you’ve already lost thousands of Ringgit, and this crazy phenomenon is known as depreciation.

To illustrate how much depreciation will cost you for a 5-year-old Proton Preve, let’s assume the same depreciation rate of a Proton Gen-2 2010.

For the simplicity of the calculation, we are assuming that the depreciation rate of a Proton Preve is the same as a Proton Gen-2.

There may be other factors that can accelerate the depreciation rate of a car, such as the mileage, brand, and history of reliability, degree of wear and tear, modifications and who you sell your car to (selling your car to a car dealer will lower your selling price further).

3. Petrol consumption

Surprisingly, petrol is the second highest cost of vehicle ownership. However, as the price of petrol fluctuates, this year, drivers may see a reduction in this part of the cost.

Choosing a car with good rated economy may be able to help you lower this cost. A Preve boasted a 5.8 litre per 100 km at 90km/h. Assuming an average of 1,000 km a month, here is how much you are estimated to pay for petrol over five years.

4. Maintenance and repair

The key to keeping vehicles running well, and repair cost low down the road of car ownership is to do routine maintenance.

Though many new cars today comes with a 5-year warranty, the manufacturer warranty usually does not cover service cost.

The general recommended car maintenance schedule is as follows:

As the Proton Preve comes with a 5-year warranty, you can save some money on repairs, assuming that the warranty covers the repairs you require. However, to be on the safe side, the general rule of thumb is to allocate 1% of your car value every year for maintenance purpose, and to have an emergency fund of 10% of your car value for unexpected servicing cost.

5. Road Tax

Depending where the car was bought (Peninsular or East Malaysia), type of vehicle ownership (private or company) and engine capacity, road tax is one mandatory cost that you are unable to escape from.

For a Preve of 1.6cc in Peninsular Malaysia, the road tax rate is RM90.00 a year. That amounts to RM450 over five years.

6. Insurance

Another annual cost of owning a car is motor insurance premium. This can be significantly higher than your road tax cost as it depends on the value of your car. You can use our car insurance calculator to find out how much is your car insurance premium.

Here we estimate the annual motor insurance premium for a Preve:

* The above calculation is based on comprehensive motor insurance coverage, not inclusive of windshield cover or no claim discount (NCD).

For those who stay or commute in flood-prone areas, it will save you a lot of money if you opt for flood coverage for your motor insurance.

7. Parking and toll

Unfortunately, the cost of vehicle ownership does not end here. There are still other miscellaneous costs, that may look insignificant, but can add up to quite a sum. Here are some hidden costs that you may not take into consideration.

If you are unfortunately enough to work in the city centre, be prepared to fork out at least RM200 a month for a parking bay. This does not include the various parking fees we pay when we go for meetings and shoppings.

Let’s assume a city driver spend about RM230 a month on parking alone.

There are still toll payments to consider. Nowadays, almost every major highway in the Klang Valley has a toll booth. You can easily pay at least RM20 a month in toll, if you happen to drive pass a tolled road to work every day.

In five years? That will come up to RM13,800 in parking fees and RM1,200 in toll! That’s a cool RM15,000 out of your pocket in five years.

Do bear in mind that the parking and toll cost can vary greatly depending where you are located and your driving habits. Someone who don’t commute to the city centre, and luckily enough gets free parking at work, may see a very low cost in this category.

This makes an individual having to pay RM70,948.40 to own a local car for five years!

Though it’s easy to be a car owner in Malaysia, it is one of the main reasons why our disposable income is as pathetic as it is right now. Owning a car may still be an essential to us, but it sure does not come easy.

With the MRT and more LRT lines coming up, let’s hope having a car becomes less of a necessity for Malaysians.