While most of us decide to purchase a car based on how much we can afford to pay the monthly installment, this sometimes lead to a disaster in future where some of us might feel the servicing or the fuel consumption is a burden. Let’s look into the major component to be considered before we decided to purchase a car.
This article is purposely refer to the cost of ownership in Malaysia, hence below is the list of component for TCO calculation:
- Initial cost of the car
- Interest in financing
- Insurance premium
- Fuel consumption
- Maintenance & repair
For ease of calculation, consider the depreciation is flat 10% per year.
Interest in financing depend on the car you purchase and bank’s rate.
Insurance premium for Malaysia, please refer various car insurance calculator available online.
Fuel consumption, we refer to the official fuel consumption published by manufacturer even though it is not really accurate. Maintenance & repair we take consideration the schedule maintenance and tires change. This very much depended on how far your drive (kilometer) per year. The more you drive, the schedule maintenance will be frequent and the faster you need to change your tires.
For this article purposes, let’s take an average of 40,000km per year and tires change every 80,000km.
For an example in this article, we take Perodua Myvi 1.3 (A) EZI vs Proton Saga 1.3 FLX (A) Executive for a comparison (later you do your own calculation for any car you choose).
1. Initial Cost: Myvi 1.3 RM 50,413.00. Saga FLX 1.3 RM 45,211.00 Assume down payment of 10%. Myvi 1.3 RM 5,000.00 and Saga 1.3 RM 4,500.00
2. Depreciation formula is as follow: V = C * (1 – D) ^ Y, Where: V – current value C – initial cost D – % depreciation per year Y – number of years owned.
Hence, we take the ownership for 9 years (majority of Malaysian take 9 years loan)
Myvi 1.3, V = 50,413.00*(1-0.1)^9 = value after 9 years RM 19,531.00
Saga 1.3, V = 45,211.00*(1-0.1)^9 = value after 9 years RM 17, 515.00
3. Interest in Financing: Current Myvi Interest 2.88% vs Current Saga Interest 2.88%
Myvi 1.3, RM 45,413*0.0288*9 = RM 11,771.00
Saga 1.3 RM 40,211*0.0288*9 = RM 10,422.00
4. Insurance Premium:
Myvi 1.3, RM 237.35+[(RM49,413*RM26)/RM1000] = RM 1,522.10 for 1st Year
Saga 1.3, RM 237.35+[(RM46,211*RM26)/RM1000] = RM 1,438.85 for 1st Year
To calculate for 9 years ownership, we put aside the NCD and just take the full premium amount to be paid. We take 10% reduction for each year (inline with the depreciation of 10% per year). The first year insurance already built in in your loan.
Myvi 1.3 = 1,369.90 + 1,232.91 + 1,109.62 + 998.66 + 898.80 + 808.90 + 728.00 + 655.20 = RM6,903.10
Saga 1.3 = 1,295.00 + 1,165.50 + 1,048.90 + 944.00 + 849.60 + 764.70 + 688.20 = RM6,755.90
5. Fuel Consumption 1 year 40,000km, 9 year 40,000 x 9 = 360,000km
Myvi 1.3: 6.4 L/100km, 6.4*360,000(100) = 23,040L
Saga 1.3: 6.3L/100km, 6.3*360,000(100) = 22,680L
If we take current price of RON95,
Myvi 1.3, 23,040*1.90 = RM 43,776.00
Saga 1.3, 22,680*1.90 = RM 43,092.00
6. Maintenance & Repair
Myvi 1.3 and Saga 1.3 have more or less about the same servicing cost where normal/minor service cost about RM200 and major service cost about RM450.
The service interval is every 10,000km and Major Service only occurs every 40,000km.
The calculation will be by year, 1 year service schedule = 3 normal service + 1 major service = (RM 200 * 3) + RM 450 = RM1,050.00.
For 9 years, the service cost will be RM 1,050*9 = RM 9,450.00.
Tires change every 80,00km means once in two years. For 9 years, a total of 4 times you need to change tires. Take the average tire price which is RM 160 per piece. For 9 years, RM160*4*4 = RM 2,560.00.
Now, let’s calculate the total ownership cost for 9 years = Initial cost + Interest in Financing + Insurance Premium + Fuel Consumption + Maintenance & Repair.
Myvi 1.3 = 50,413.00 + 11,771.00 + 6,903.10 + 43,776.00 + (9,450.00 + 2,560.00) = RM124,873.10. Divided by 9 years RM 13,874.80. Divided by 12 months RM 1,156.00.
Saga 1.3 = 45,211.00 + 10,422.00 + 6,755.90 + 43,092.00 + (9,450.00 + 2,560.00) = RM117,490.90. Divided by 9 years RM 13,054.60. Divided by 12 months RM 1,087.90.
This comparison is made with the intention to tell us how much actually we spent for our car monthly. So next time, don’t just judge you affordability looking at the monthly installment, instead take into consideration other factor as stated above. The depreciation factor is just a measurement how much your car cost if you wanted to sell it after your loan completed.
Note: this calculation not taking into consideration of rise in fuel price, insurance premium and other economics factor. If you feel there is something wrong with the above article, feel free to comment. Sharing is caring