General Advise
When I was buying the first car of my own, my seniors at the company gave me two main pieces of advice. 1. Buy a used car. This is because I'm still inexperienced in driving, so I could often scratch or ruin my car related to minor accidents. 2. The budget should be less than half of my annual income.
No. 1 is pretty reasonable advice, but about No. 2 I don't know what the basis is. Recently, I was watching YouTube and I was looking at a financial expert (?) recommended a reasonable vehicle price for each income. If you are mortgage free, it is suggested to use up to half of your total annual income, and if you are renting a house, you can get up to 3~4 months of your total annual income, and especially if you have a monthly income of less than $3,000, you should not buy a car. Use public transportation instead.
Again, I don't know what the rationale is, but considering that Car-poor have become a social problem and encourage people to buy unreasonably expensive German cars, it seems to be a good thing that there is such advice.
Total Cost of ownership
So, I did a simple calculation of how owning-a-car affects my personal finances on top of the price of the car.
[Total cost of ownership for a $50,000 vehicle]
|
petrol |
Diesel |
PHEV |
EV |
| Vehicle price |
$50,000 |
$53,000 |
$60,000 |
$70,000 |
| Depreciation / year |
$3,333 |
$3,533 |
$4,000 |
$4,667 |
| Fuel Costs / year |
$1,500 |
$1,305 |
$525 |
$300 |
| Registration fee / year |
$900 |
$900 |
$900 |
$900 |
| insurance / year |
$600 |
$600 |
$600 |
$600 |
| Maintenance / year |
$350 |
$350 |
$350 |
$350 |
| Mortgage Interest / year |
$2,500 |
$2,650 |
$3,000 |
$3,500 |
|
|
|
|
|
| Running cost per year |
$9,183 |
$9,338 |
$9,375 |
$10,317 |
| Running cost per month |
$765 |
$778 |
$781 |
$860 |
| Monthly net expense (excluding depreciation) |
$488 |
$484 |
$448 |
$471 |
| 10-Year Total Cost |
$91,833 |
$93,383 |
$93,750 |
$103,167 |
After making the table, some things come to light that I didn't realize before.
- Having a car costs a lot more than just the price of the car. I thought I bought a $50,000 car, but 10 years later, the total cost of ownership is more than $90,000.
- If you have mortgage to pay interest, the cost of interest on your loan is as high as the price of your vehicle. I bought a $50,000 car, and after 10 years, the interest on the loan alone is close to $30,000. I don't think you should buy a house with a loan until you pay off the loan.
- Diesel or plug-in hybrids (PHEVs) are more expensive than gasoline vehicles, but the 10-year total cost of ownership doesn't make much of a difference due to the low cost of fuel.
- EVs have a lower total cost of ownership advantage than PHEVs due to the high price tag.
It's a quick look at how financially expensive it is to own a car, and I think you should avoid big expenses like buying a car, especially if you still have a mortgage.
By the way, Australia has almost no subsidies for EVs, but only EVs and PHEVs are exempt from Fringe Benefit Tax if purchased through a company lease. The bottom line is that you can be exempt from income tax, so you can save nearly 20% of the price of your car in taxes.