Sen wise, Ringgit foolish

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Property is an Asset, most of the time. A car is a liability, all the time. A friend bought a new Japanese car recently, a segment B car. 🙂   When asked why is he choosing that model. He said, ‘the agent said this one saves fuel a lot. Even more fuel savings than the previous model. The agent also said the second hand value very good. If sell after 3 years, you only lose 20% or less.’  This friend is an engineer in a MNC in Penang. Let’s look at what the agent said on both comments. One is fuel saving. How awesome. Let’s assume that at current prices, the price per km for this model is only 10 cent. Quite impossible to reach but does not matter. We assume it to be 10 cent. My current Persona gave me around 15.6 cent per km. Does not matter, let’s assume it to be 17 cents just to make the difference much greater.  So, we come to 7 cent per km. If you drive only 10,000km per year, you have a savings of RM700. If you drive 20,000km, you have savings of RM1,400. After ten years, you save between RM7,000 – RM14,000. Reminder, you have to drive 10 YEARS to save this. And the numbers are already exaggerated. The price paid for the model versus the current Persona with 2 Air Bags, 4 Disc Brakes, ABS, EBD is only about RM40,000 difference. Oh yeah, if you really do want fuel savings, I recommend VIVA.

Second comment is the ‘second hand value very good’. In Malaysia, if I remember correctly, the typical car ownership years are over 10 years. Thus, the question of selling after 3 years is really not likely. Let’s assume this friend is very rich and really changes car every 3 years. So, his car price of RM85,000 x 20%, he would only lose about RM17,000. Is he going to take MRT after selling his car? Of course not, but he can’t be buying same model right? Assuming he buys another Segment B model, he would have to start repaying RM85,000 or more all over again just to SAVE 20% losss after another 3 years. Makes a simply great Sense.

calculatorIf we look at the monthly payment, the total savings per month is close to RM700. With RM700, you can already nearly pay for a RM200,000 property and get good rental for it. Do not get me wrong, if this engineer friend of mine is a Director of Engineering, I would not say all these. However, as a young engineer, I think his planning is currently too  emotional based instead of planning for future. He wanted to tell all his peers that hey, I am driving a better car than you. Most of the time, we spend too much time trying to do things we do not need to show off to people we should not care about in the first place. Nevertheless, I did not argue with him. I just smiled and left the conversation. After all, I am considered a different class. I drive just a national marque. Oh yeah, last but not least, for me, if you want to show you have achieved a minimum standard I consider as successful, nothing less than a Segment D car (Teana / Camry / Accord / 508) is needed. Not even Segment C. (Civic / Altis / 408 / Preve)  In English, there’s a term called ‘Penny wise, Pound Foolish.’ I think in Malaysia, we need ‘sen wise, ringgit foolish’ too.

written on 3 Jan 2014

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