Despite my stingy reputation, I actually like spending money. On the right things of course.<\/p>\n
What I really hate<\/strong> is losing money.<\/p>\n Which is my number one issue with buying a new car: Depreciation sucks.<\/p>\n In layman\u2019s terms, depreciation means that your car starts losing value from day one. Even if you bought a depreciation-resistant car (like a Civic, Vios or Myvi), after seven years your car is only worth half<\/strong> of its original value. This\u00a0is even\u00a0worse with other car models.<\/p>\n If I bought a brand new Vios for RM76,000 (US$18,000) today, it would be only worth RM38,000 in seven years\u2019 time, making me lose RM38,000.\u00a0And that\u2019s before even considering interest (if I took a loan<\/a> and car insurance<\/a>), and opportunity cost (investing the money elsewhere). Not cool.<\/p>\n If I could, I would go totally car-less. But since I still need a car, I decided to buy one that had already<\/strong>\u00a0experienced the most significant years of depreciation: a nine-year-old Myvi for RM 20,000.<\/p>\n Yes, it will still depreciate. But in ten years\u2019 time I would probably have lost only RM15,000 on it.<\/p>\n What is affordability? It depends on who you ask.<\/p>\n If I walk into a car dealership, they\u2019ll tell me I can afford a loan<\/a> for a brand-new BMW 3-series. But it would kill my finances.<\/p>\n If I\u00a0ask my hero, Mr. Money Mustache<\/a>, he\u2019ll tell me to buy a used car within the 5 to 15-year-old range. But I need to pay cash. If I need to take a loan, that means I can\u2019t<\/strong> afford it.<\/p>\n Sample calculation showing almost RM8K of interest over 5 years! For a brand new RM 62,540 Proton Preve, with 90% loan.<\/p><\/div>\n If I\u00a0ask Financial Samurai<\/a> or Money Under 30<\/a>, they\u2019ll tell me I can afford a car worth 10% of my gross annual salary.<\/p>\n Now, some people are going to object here \u2014 saying that the three financial writers above are based in the USA, where cars are much cheaper. And that in Malaysia, 10% of gross annual salary isn\u2019t enough to get a decent car. Here\u2019s what I think \u2014 it\u2019s enough, but only if you\u2019re a high earner, and can accept the frugal life. So how about we compromise? \u2014\u00a0Money Under 30 says 20% to 25% of gross annual salary for a car is acceptable too.<\/p>\n For someone earning RM3,000 per month, 25% of RM39,000 (annual salary including bonus) is RM 9,750. And\u00a0could get a:<\/p>\n Wonderful 2006 Proton Saga (via Carbase)<\/p><\/div>\n Nobody said being responsible with money was easy.<\/p>\n So how can all\u00a0these young people afford to drive around in new, imported cars?\u00a0Maybe because the bitter truth is this:\u00a0most people actually can\u2019t afford <\/strong>a new car.<\/p>\n Optimisation isn\u2019t about choosing the cheapest option. It\u2019s about making the best choice from a cost\/benefit perspective.<\/p>\n Some people need to drive a lot for work. Or to ferry their kids around.\u00a0 Maybe they\u2019d need a good car.<\/p>\n Me? I drive about 200 kilometres a week. At most. On weekdays, I take the Light Rail Transit (LRT) to work. So 97% of the time, my car is either vulnerably parked near the LRT station, or at home. It\u2019s horribly inefficient for me to spend too much money on a car.<\/p>\n A new Vios for RM76,000? Out of the question. I even thought long and hard about paying RM20,000 for the second-hand Myvi I bought. Could I go totally car-less and just depend on UberX<\/a> and MyTeksi? After calculating total cost of ownership<\/a>, I found it was still more efficient for me to get a cheap second-hand car. Of course maintaining an older car is more expensive. But the difference isn\u2019t that great \u2013 especially if it\u2019s a common car model (i.e. cheaper spare parts). There\u2019s a \u201csweet spot\u201d for buying a used car between the 5-15 year old range. Where it\u2019s already experienced the most serious depreciation, but isn\u2019t starting to break down yet. For the past few years, I\u2019ve driven the lousiest car within my social circle.<\/p>\n Some of the interesting comments I\u2019ve heard from colleagues, friends and family:<\/p>\n \u201cWhen are you gonna get an upgrade?\u201d<\/strong> It wasn\u2019t easy at first. I too lusted after luxurious cars. At one point, I thought I wanted to buy a Lexus. But over time, my ego got used to it. Instead of being ashamed of driving an old car, I learned to feel proud that I was in control of my finances. I find it amusing now when people ask me why I drive an old car \u2014 because I get to say:<\/p>\n \u201cBecause I\u2019m too stingy to buy a new one.\u201d<\/strong><\/p>\n Today, I\u2019m fully converted \u2014 a car is a means for getting from Point A to Point B. All it needs to be is safe, reliable and comfortable. It doesn\u2019t need to be shiny.<\/p>\n I understand that for many people \u2014 a car means more than that. Like buying a house, people get emotional about their cars. Maybe it\u2019s a symbol of achievement, or a source of pride. Maybe it\u2019s a reward for years and years of hard work.<\/p>\n I\u2019m not here to judge, but I\u2019ll throw the question:<\/p>\n The\u00a0traditional car ownership model is screwed. The one where one person owns one car, drives it alone, and adds to the crazy traffic jams.\u00a0The government could raise toll rates, widen the roads, and hire traffic police all you want \u2014 but traffic jams will never go away unless we change the way we\u00a0move.<\/p>\n We already\u00a0have evidence of how technology will help. Five years ago, the best we could do was pay for an expensive GPS system. But today, you use Waze for free<\/em> on your phone\u00a0to find the smartest way to drive somewhere. Google has already been testing self-driving cars for more than five years. And Tesla, Apple and Uber are in the game too.<\/p>\n A few months ago, my current twenty-year-old car broke down as I was heading to dinner with my girlfriend. We maneuvered it to a safe spot, locked the car and decided to leave it there. I\u00a0turned on Uber, and requested a ride. Then we watched in fascination as the small vehicle icon crept\u00a0towards us on the screen. Within fifteen minutes a new Honda City arrived\u00a0\u2014 a much nicer vehicle\u00a0than I can afford. 35km and 30 minutes\u00a0later\u00a0\u2014\u00a0as we arrived at dinner\u00a0\u2014\u00a0I checked how much it had cost: less than a taxi.<\/p>\n Not only was I reminded that I have an awesome girlfriend (she handled things very calmly), I marveled at how drastically technology will change our lives.<\/p>\n I can\u2019t predict the future,\u00a0but here\u2019s my bet:\u00a0In ten years\u2019 time, when my \u201cnew\u201d second-hand car is nineteen years old and starting to break down \u2014 I won\u2019t have to buy a new one.<\/p>\n People buy new, expensive cars for different reasons. My girlfriend loves luxury cars\u00a0too, so I\u2019m not trying to diss anyone by writing this.<\/p>\n But I wrote this because somewhere out there, there\u2019s a young man struggling with the cost of living. And he\u2019s getting bombarded with messages\u00a0of how he needs certain things to be cool: expensive smartphone, branded clothes and a luxurious car. Maybe he thinks he can\u2019t find a girlfriend without a nice car. All his friends are getting in debt doing it, and the peer pressure is getting to him: he\u00a0thinks he needs a\u00a0loan \u2014 and spend\u00a0half his take-home salary on a new car.<\/p>\n But\u00a0maybe what he really\u00a0needs is this: someone to tell him it\u2019s OK to go without these things. That he can make his money worth more by investing in better things. That a person\u2019s value is not measured in the things they own.<\/p>\n And that after careful consideration \u2014 if\u00a0he still really needs a car \u2014 maybe a cheaper, used one is enough.<\/p>\n *If you buy a used car, you\u2019ll need to know a good mechanic. If you need a recommendation, let me know.<\/em><\/p>\n **Exchange rate: USD 1 = RM 4<\/em><\/p>\n mr-stingy ditched his old car for another cheap used car. Find out why this may be one of his smartest financial decisions.<\/p>\n","protected":false},"author":41,"featured_media":17989,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[237,19,256,218],"tags":[],"class_list":["post-18730","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-autos","category-car-loan","category-lifestyle","category-money-management"],"acf":[],"yoast_head":"\n<\/span>2. I can\u2019t afford a new one<\/span><\/h2>\n
![\"car](\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/31.png\")
![\"buy](\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/2015\/09\/proton.jpg\")
<\/span>3. I don\u2019t really drive much<\/span><\/h2>\n
![\"uber\"](\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/2015\/09\/uber.jpg\")
If you\u2019re a follower of my blog, mr-stingy.com<\/a> you know that I\u2019m crazy about optimisation.<\/p>\n
\n
\n<\/div><\/div><\/p>\n<\/span>4. My ego can handle it<\/span><\/h2>\n
\n \u201cAiya\u2026 you can afford something better\u2026\u201d<\/strong>
\n \u201cDon\u2019t be so stingy la\u2026\u201d<\/strong><\/p>\n<\/span>5. Traditional car ownership is not the way of the future<\/span><\/h2>\n
\nThis article was first published on mr-stingy.<\/em><\/div><\/div>\n<\/span>Compare car loans <\/a>to make sure you get the best deal to help you afford your new set of wheels.<\/span><\/h3>\n","protected":false},"excerpt":{"rendered":"