The cost of car ownership is more than just the monthly repayment. There are several other factors you need to consider like the petrol cost, car insurance premium, road tax and more. Read this article to estimate and calculate how much it costs to own a car in Malaysia.
If you are looking to upgrade your car to a newer model or buy your first car, bear in mind that the total cost of car ownership is more than just the sticker price. From the finance charges and insurance, to maintenance and petrol, a lot of factors influence the total upfront and ongoing costs of a car.
Either way, it is an established fact that cars are expensive, regardless if it’s used or new, and understanding the different costs associated with owning a car can really help you figure out what you can or can’t afford when car hunting, as well as to make sure you spend below your auto budget.
What factors affect the total price of a car?
There’s a very simple formula that you can use as a guide: an affordable car is one with a price that’s equivalent to or less than your monthly gross salary x12 months.
For example, let’s use the average starting salary of a fresh graduate, RM2500 (in most industries); their annual gross income is RM30,000.
Using the annual gross income as a guide, a viable car for fresh grads would be any cars below RM30,00 – anything above that is way beyond their means.
Besides that, you should also take into consideration other factors beyond the sticker price and the finance cost.
We crunch the numbers below to help you estimate the different costs needed for a car. We break it down for you:
1. Finance charges aka your monthly payment
Though buying a car with cash isn’t entirely impossible, most people choose to finance their car by taking out an auto loan.
You could, however, reduce the overall payment due, by pumping in more for your down payment because then you’ll need to borrow less money, and pay less interest.
Besides that, your loan amount will also vary depending on the length of your loan. The longer your loan period, the lower your monthly payment, but it also means you’ll pay more in total interest.
Let’s use this as an estimate to calculate your total loan amount:
|Vehicle cost (with taxes and fees)||RM50,000|
|Your down payment||RM5,000|
|Total car loan amount||RM45,000|
Your car loan’s interest rate will also depend on your credit standing and employment status as well as pre-established stipulations that are car-related such as car make and age of the car.
Beyond just car-related factors, banks and dealers may influence interest rates via special arrangements or promotions to market a certain car make or model. These bank-dealer related features include the loan amount, down payments and specific dealer-bank arrangements.
If you want to get a loan with good interest, remember to maintain your credit, because the better your credit standing, the better rate lenders are usually willing to give. By the way, if you are on the hunt for a credit card or personal loan to improve your credit score, check out our website as we have some cool deals going on right now. If you need to check your credit score, you can do that here for free as CTOS is currently giving out free reports until December 31!
Let’s use this example to illustrate how your loan interest and loan term will affect your total car loan amount.
|Total car loan amount||RM45,000|
|Loan term||5 years|
|Total monthly payment (installment)||RM900|
|Total paid via loan over five years||RM 54,000|
You can also refer to this hire purchase loan calculator we found on CIMB Bank to get an estimate for your car loan.
2. The cost of petrol
Cited as the second highest cost of car ownership, it is advisable to consider the rate of fuel consumption of a vehicle before buying it.
If you drive a lot for work or in general, it would be beneficial to calculate the litre-per-kilometres rate of the car you want to buy.
Let’s use an example:
The fuel economy of X car is rated at 5.5-litres per 100km. Assuming a person drives a total of 1000km per month, the distance travelled over 5 years would be 60,000km. Using the current petrol price of RM1.70 per litre for Ron95, the total estimated cost for a year would be RM1,122.
|Litres per kilometre||5.5litres /100km|
|Over five years||60,000km|
|Petrol cost in one year||RM1,122|
|Total petrol cost over five years:||RM 5,610|
Total petrol cost over five years:
(RM1.70 * 5.5-litres / 100km) * 60,000 =RM5,610
Find out the latest petrol price here.
3. Cost of depreciation
It’s no surprise that cars aren’t the best types of investments - a car’s value declines as much as 10% the moment it drives off the lot, and can further depreciate by more than 20% after just one year. But either way, we still need them to get around and commute to where we need to be.
But even if depreciation is bound to cut through the value of your car, there are some things you can do to maintain the resale of a car. For instance, you can make sure you buy a car with traditional colours like white and black, and invest in maintaining the interior and exterior. For a full list of factors that affect the resale value of a car, click here.
Let’s assume that the depreciation rate is 20%, then this would be the value after five years:
|Car’s sticker price||RM50,000|
|Depreciation 50% in five years||RM25,000|
We found this super cool car value calculator by Takaful Malaysia if you need to calculate the value of your car.
4. Car insurance and road tax
The cost of road tax is pretty affordable as we found out that 1500cc or 1.5-litre cars only cost RM90 per year in Peninsular Malaysia. If you’re in East Malaysia, it’s even cheaper at only RM56.
Cars with good or better fuel economy will obviously help you save on cost. For example, cars with 3000cc could cost up to RM2,130 in road tax.
Check out this road tax calculator we found on Oto.my to help you calculate how much your vehicle’s road will cost.
Let’s assume our car is 1500cc:
|Car engine capacity||1,500|
|Cost of road tax||RM90|
|Total five year cost||RM450|
The cost of car insurance depends on various factors like the type of insurance, the car’s market value, your No-Claim Discount (NCD), the type of vehicle and engine capacity and your risk profile. If you need to calculate how much your insurance could potentially cost, we recommend you trying this calculator out.
Here’s a rough estimate of the cost of car insurance:
|Market price of car||RM50,000|
|Engine capacity||1401-1650 cc|
|No Claims Discount||None - 0%|
|Total car insurance in one year||RM280|
|Total cost in five years||RM1400|
In total, car insurance would cost RM280 per year and RM1,400 in five years. This is just an estimation.
5. Car maintenance and repair
All cars need maintenance, but it will also depend on how many times the car has been driven, the distance it has covered, and the wear and tear.
Though there is no fixed cost, as it depends on the car age, model and make as well as mileage, but a car that has driven 50,000km to 80,000km, could cost at least RM1,500 from our rough estimate based on personal experience and research.
This does not include batteries, the tyres, timing belt and brake pads, all parts that will need to be replaced over time as well. Check with your service centre if you need a more detailed breakdown.
Let’s assume this is the maintenance cost:
|Average maintenance cost in a year||RM1,500|
|Total cost of maintaining a car over five years, assuming the figure stays the same||RM7,500|
6. Parking and tolls
We don’t enjoy paying it, but parking and tolls are payments that you’ll need to factor in when estimating the total cost of your car.
Assuming your daily spend on parking and tolls is RM10 and RM6, respectively, you will spend about RM352 per month on tolls and parking alone.
Of course, both parking and tolls rates also depend on where you work and live because it will likely be cheaper in the suburbs and in rural areas than in the city.
|Parking rate (daily)||RM10|
|Toll rate (daily)||RM6|
|Total monthly rate||RM352|
|Total rate in five years assuming the price stays the same||RM1,760|
Here is the total cost of car ownership over five years (duration of the loan)
|Parking and tolls||RM1,760|
|Total cost||RM95,720 give or take|
Are you ready to commit that amount of money for a car (by the way, there may be additional payments)?
The total cost of owning a car is more than just the monthly repayments for your loan, it also depends on all the other factors we’ve stated above. If buying a car is way above your budget for now, you could always consider taking public transportation until you have enough money to buy one.
Bottom line - buying a car is expensive so make sure to do your homework before committing to a car loan
As always, the advertised price of a car is just one of the many factors that affect the total cost of a car. Other expenses like car insurance, petrol, parking and tolls, and maintenance can drive up your monthly costs as well.
With anything in life, make sure to do a little extra research so you can get a more comprehensive sense and view of the potential costs - upfront and ongoing - of a car. But more importantly, do so to ensure you stick to your budget!
Whether you are a first-time or seasoned buyer, the process of buying a car can be complicated if you don’t know the industry that well. The #BreakingItDown series is all about addressing this problem. Stay tuned for more content.