Losing money based on %? Are you serious?

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I read an article by a very prominent financial website on which are the cars that is worth buying based on the value of depreciation over a period of 5 years. It said that certain cars are worth buying because they lose less in terms of % over a period of 5 years. Sorry but I beg to differ. When it’s LOSS, it should be based on actual figure instead of %. Basic example, if a company loses 50% of its value after 10 years, would you still buy its shares? However, if you sell a property during a downturn, instead of earning RM100,000, you only get RM50,000. Do you see the real difference here? For losses, especially for cars, it should be in absolute numbers because in actual fact this is the actual money you lost! Imagine you buy a car for RM86,000.  After 10 years, somehow you can still sell it for RM43,000, so you only lost 50%. In actual fact you have lost RM43,000 which could have been downpayment for a RM430,000 property! And if this RM430,000 property ONLY increase by 1% in price every year, after ten years, your ROI is easily 5% or more per year, better than FD. I have not even began to count the rental from this property for ten years.

Of course, for those who are able to afford Mercedes, I do not think they care about the losses. However, I can safely tell you that the reason why people buy a RM86,000 car is definitely not because they are way too rich. It’s because that’s the car they believe gives them some ‘face’ amongst the peers. Please do not start to tell me that it saves fuel, I will just let you win if you want to argue about fuel savings. Please do a calculation before you even start to talk about this savings. 3 years ago, I bought my car for RM43,000 (year end discount) and if I drive it for ten years and I can only sell it for RM10,000 my actual loss is only RM33,000.  Assuming I could not sell and its value dropped to zero, it meant I lost the same amount as the one who paid much higher price for their car. However, every month for 10 years, I am able to save on car loan and perhaps can change handphone every 4 months? (If I just want to waste money).

If you sincerely want to save money, Perodua Viva’s fuel consumption is very low. If you want value, Segment B Persona has the most superior features you can ever have for less than RM46,000 over cars twice its price. Alternatively, lots of well maintained second hand cars. Oh yeah, a second hand Hyundai Sonata 2.0 with 4 airbags is only RM35,000. My friend survived a highway crash in one due to its rigid body and airbag. Her company cars are now full of these second hand Hyundai Sonatas. Think objectively, what is it that you want? Losing less money in real RM or losing less money in terms of %. Then, you decide.

Written on 14 Feb 2014

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