TCO: Owning a Car

A car is no small investment and has many different costs associated with it throughout the ownership cycle, from getting a licence to purchasing the car to selling the car. In order to know whether it is worth it to buy a car, we first need to consider the total cost of ownership (TCO) of a car.

In this article, I make a list of things that make up most, if not all, of the total cost of ownership of a car, and subsequently give an example of the estimated total cost of ownership, based on experiences clobbered from my own as well from others.

Getting Licensed to Drive

Most countries require a car owner to have a driving licence. For those without a recognised driving licence in the country where the car will be purchased, the costs of learning to drive may include the following:

Before you Start Learning

• Registration and administrative fees for driving school
• Trainee driver’s insurance
• Provisional driving licence, for learner drivers

Lessons and Tests

• Theory and practical lessons, the number of which depends on the type of lessons (conversion course, automatic transmission, manual transmission) and how good the trainee is
• Theory Test fees, multiplied by the number of tests, and number of attempts for each test
• Practical Test fees, multiplied by the number of attempts

After you Pass the Tests

• Licence Application Fee
• Licence Maintenance Fee, if it is required to renew the licence after its expiry

Others

• Transportation costs from place to place to attend to all the above, because you don’t own a car and can’t rent one… yet

Buying the Car

There are several costs involved in the purchase of a car, which may include several of the following initial payments:

• Making the downpayment on the car (if not paying for the car in full upfront)
• Purchasing the right to own a car, e.g., Singapore’s Certificate Of Entitlement (COE)
• Vehicle Registration Fees to register your vehicle with your local Transportation Authority
• Any other import taxes or excise duties, if you intend to import the car on your own
• Fees for transfer of ownership, for pre-owned cars

Be sure to consider any rebates offered for certain types of vehicles, such as electric vehicles, hybrid vehicles, or limited-use vehicles (e.g., off-peak cars).

Servicing a Car Loan

It would be ideal if we could pay for the full cost of a car up-front, as loan rates are usually higher than risk-free rates and a car is a depreciating asset. This may not be within your means, and you may need a loan in order to own a car. If you are taking up a loan, the rate is usually fixed at the start, so the monthly payments will be predictable for the entire period of the loan. Factors that affect how much you have to fork out each month are:

• How much you are borrowing; there may be a cap to how much you can borrow, e.g., 70% of the market value of the car, maximum monthly loan payments of 30% of your monthly base salary.
• The interest rate of your loan that the bank or the credit company is willing to give you, based on your credit rating or credit history, and the market rate for such loans.
• Tenure of your loan; there may be a maximum allowable tenure, e.g., 7 years.

You should consider that a car is a depreciating asset and that a larger portion of the initial payments on a loan will go towards interest payments. Ensure that you spend within your means and can afford the monthly payments.

Note that if you sell your car too early, you may end up having to fork out more money on top of your sales proceeds to redeem your loan. The amount that you have to pay the provider of the loan differs from provider to provider. Remember to read and understand the terms and conditions when you take up the loan and always do the math!

Buying / Renewing Insurance

In most countries, it is a must to have insurance associated with a car (whether it is the driver that is insured or the car that is insured, it depends on your perspective and the type of insurance). The cost of insurance varies and depends on the car, and what is covered. More comprehensive coverage would come at a higher cost for the same insurer, so it is important to shop around for ample coverage at the right cost for you. Factors that affect cost insurance include:

Characteristics of the Car

• Make and model of the car
• Age of the car
• Number of passengers that the car can seat
• Whether it is an electric car, hybrid car, or runs on gas propellant
• The engine capacity or power rating

Owner and Named Drivers

• Age and gender of the owner
• Whether there is a fixed list of drivers and if so, their ages and genders (and possibly proof of driving licence)
• Whether the owner or any of the named drivers has had any driving offences or were involved in any accidents in the past 12, 24, or 36 months

Intended Usage

• Whether the car will be for personal use, commercial use, or a mix of both
• Whether the car will be used to ferry paying passengers (including paid hitching)
• Whether the car will be rented out to others when not used by the owner or named drivers

Choices, choices…

• The extent of coverage, e.g., theft of the car, theft of contents, windshield replacement, floods, limits for third party liability
• The excess amount that you need to fork out for each claim before the insurer pays the first dollar
• Compensation types and limits for temporary/permanent loss of use
• Included or optional add-ons such as accident and hospitalisation coverage
• NCD protector in the event that there is a claim against your insurance plan during the period of insurance
• Whether a driving camera is installed, and whether it is only for the front view or has one for the rear-view (and side views) as well

Others

• Whether it comes with “complimentary” road-side assistance services
• Promotional discounts or vouchers from the insurer and / or the insurance agglomerator
• Size of the Insurer / Underwriter
• No-claim Discount (NCD) carried over from a previous car insurance plan (this might be transferable from person to person, usually among immediate family members)

Insurance is renewed annually. Getting quotes from individual insurers every year can be a rather daunting task. There are so many insurers and each may require different details from you and have differentiating factors that make them more challenging to compare. To make this task easier, I believe in using insurance agglomerators, who have done the research to determine the best value-for-money insurance plan for the consumer across multiple insurers. They give good advice and have promotions to sweeten the deal and effectively lower your total cost of ownership.

If you do your research or are blessed with sufficient luck, you can avail yourself of benefits from BOTH the agglomerator and the insurer. I once benefited from cashback from the agglomerator, and a vehicle inspection voucher from the insurer, which, together, were worth more than 15% of the price I paid for the insurance (which was already the lowest-priced one for my needs, and with a reputable insurer).

If you are buying a car for family use, do some research on insurance premiums and find out whether it would cost less for yourself or your partner, after considering any additional costs for named drivers.

Driving the Car

The car occupies space and needs energy to operate; neither of these is free and the costs can be high. Some drivers may want to have additional tools to make driving easier, to handle emergencies, or to protect themselves from false insurance claims. There may also be charges for the usage of roads or when entering another country. Here are some examples of costs incurred when driving a car:

Energy

• Purchasing petrol/diesel, actual cost depends on the grade
• Use of charging stations
• Use of home power sockets to charge the battery for electric cars

Space

• Season parking at work, at home, or other frequently visited places (look for parking passes that may enable you to park at multiple locations for a fixed monthly fee)
• Other parking
• Rental/purchase of parking space
• Paying interest on a short term loan in which you leave the car with the bank as collateral

Road Usage

• Tolls and zone fees
• Paying people to sit in the car as a passenger to allow you to use the carpool lane

Peace of Mind

• In-car camera(s)
• GPS unit and subscription (if that is still a thing these days)
• Subscription to a roadside assistance service

For roadside assistance, you may be able to register with them when you first require the service. Do take note that this is usually tagged to the person, and not the vehicle, so you will be able to call for assistance regardless of whose car you are driving.

Car Servicing and Maintenance

Cars need to be maintained regularly, for the safety and comfort of the driver and passengers, for better fuel economy, to prolong the useful lifespan of the car, and for aesthetic reasons. The costs vary from workshop to workshop, and depend on how comprehensive you want the maintenance to be and the parts and materials used. Here is a list of some costs involved:

Battery

• Battery and spark plug checks and replacement for petrol/diesel cars
• Battery checks and replacement for electric and hybrid cars

Engine / Motor and Cooling

• Inspection of radiator hoses and connections and top-up of radiator coolant
• Engine Oil and Transmission Fluid flushing and replacement, and oil filter replacement
• Inspection of the fuel tank, fuel injector, and fuel lines
• Checks on electric motor and electrical connections for electric cars
• Checks and top-up of coolant for cooling systems of electric cars

For a Safer Drive

• Tyre replacement, the frequency of which depends on the tyres and how you drive
• Wheel rotation and balancing, to prolong the useful lifespan of the tyres and for better fuel/power economy
• Brake inspection, brake pads replacement, and top-up of brake fluid
• Checks on and replacement of bulbs for headlights, taillights, license plate lights, brake lights, signal indicators, hazard lights
• Top-up of clutch fluid, suspension fluid, power steering fluid
• Inspection of exhaust pipes and catalytic converters
• Checks on wiper blades, wiper washer tank, replacement of wiper blades, and top-up of wiper washer fluid

Driver and Passenger Safety

• Checks on protective equipment such as seat belts and airbags
• Air-conditioning cleaning and filter replacement
• Inspection of all hinges, latches, and locks

Others

• Anti-rust protection
• Car grooming for car exterior or interior
• Maintenance of protective coat for car exterior
• Car wash of car exterior and vacuuming of the interior
• Replacement of solar film
• Replacement of fabric or leather upholstery
• Parts and labour costs for preventive checks and diagnostics and for other work done
• Transportation costs while your vehicle is being serviced/maintained

Regular checks, servicing and maintenance helps to prolong the useful life of your car, and prevent inconveniences such as sudden vehicle breakdowns on the road or accidents. It might be worth paying a little more to pay less later on.

Inconveniences

Not everything is entirely within our control. In driving, these would include at least accidents and breakdowns. These would have an element of bad luck (or good luck) involved. We can’t really put a dollar value on luck, but we can for these following items related to such inconveniences:

• Towing of your car to the workshop if it is not operable, or if it is safer not to drive it
• The excess that you have to pay to the insurer if you are deemed partially or fully liable for an accident
• If you are not claiming against your own or the other party’s insurer (as the excess is too high, or you want to maintain your No-Claim Discount with the insurer), the portion of agreed costs of repairs and other compensation (e.g., transportation while the vehicle is unavailable for use)
• If any public property is damaged, the cost of repair or replacement of that property, if not covered by insurance
• Any transportation costs while your car is unavailable to you for use, if such costs are not covered by insurance
• Processing, administrative, and logistical costs for scrapping the car, if it is not worth it to repair the car, whether partially or completely.

Many of the costs related to accidents and breakdowns can be defrayed by the insurer or by subscribing to roadside assistance services. More information on these can be found in the Buying / Renewing Insurance and Driving the Car sections above.

Obeying the Law & Following the Signs

From things that are not entirely within our control, we move on to things that are entirely within our control. Specifically and especially, obeying the law on public roads, and following the signs on private property. These include actions that you must do, which may involve paying for some services, and things you must not do (or must not get caught doing). Here are some of the costs involved in obeying the law / following the signs (and in not doing so):

Regular Regulatory Requirements

• Paying for regular inspection of your car by an authorised service provider
• Paying the road tax, the amount of which depends on the vehicle type, engine capacity/power rating, distance driven, age of the car

Not Obeying the Law

• Parking fines and further fines for not paying parking fines
• Fines for illegal accessories or modifications to your car, such as unapproved spoilers, exhaust pipes, accelerants, lights, etc.
• Fines and demerit points for traffic offences such as speeding (going too fast), road-hogging (going too slow), beating the red light, going against the flow of traffic, not following lane markings, drink-driving, etc.
• Engaging a lawyer to defend you for more serious offences that require you to attend court, such as for drink-driving, excessive speeding above a certain threshold, causing hurt or death, and continuous non-payment of fines

Not Following the Signs

• Unclamping fees
• Towing fees and vehicle recovery fees if your vehicle is towed away
• Legal fees and repair costs for damage to private property

The penalties for not following the signs when on private property are usually less severe than for not obeying the law. Sometimes, though, not following the signs could lead to you breaking the law, such as when you cause damage to property, hurt to individuals, or death of individuals, by a rash act or through negligence.

The penalties for not obeying the law include financial penalties as stated above, loss of use of your vehicle, revocation of your driving licence, being banned from driving temporarily or permanently, imprisonment, or (I have to put it out there) your own or someone else’s injury or worse, demise.

Obey the law and follow the signs, please.

Selling or Disposing of the Car

When the time comes for you to sell your car, whether it is because you no longer need it, you want to replace it, your licence was revoked, or you’re just fed up with traffic jams, other drivers, and finding parking spaces, be sure to know the costs involved to avoid unnecessary losses or unwanted shocks. These costs may include:

Advertising and Commissions

• Advertising or listing fees on e-commerce portals; the price varies according to the reach of the platform, and the level of service they provide
• Commissions or costs to the car dealership, e.g., for allowing you to leave your car there for a day for viewing by potential buyers, for successfully selling the car on your behalf

Administrative Costs

• Costs for the redemption of the loan (separate from and in addition to the principal remaining), e.g., percentage of interest rebate, percentage of the total amount financed, clawback fees
• Fees for transfer of ownership
• De-registration fees if you intend to dispose of the car
• Fees related to the export of the car for resale overseas

What you will receive for disposal or sale of your car will be determined by market forces. There are various platforms and services out there that can help put you car up for sourcing of quotes, which would charge a fee but take care of the end-to-end process fo you, which I find to be worth it as it saves a lot of time and prevents many potential mistakes.

Time

Your time is precious. It should come at a cost. Whatever your per-minute rate is, here is where you might spend your time on your journey to car ownership:

• Obtaining a licence: Studying for theory tests, filling in forms for insurance and registration, finding the right instructor, switching instructors, travelling to lessons, the lessons themselves, practical tests, arguing with the examiners and instructors, taking the right picture for your licence, applying for and obtaining your licence, and collecting your licence.
• Buying a car: Doing research online, deciding whether to get a petrol, diesel, hybrid, or electric car, using the tips provided in this article to do up a budget, deciding whether to get a new or pre-owned car, deciding how many cars to buy, travelling to/from car showrooms, viewing and test driving cars, discussions with your loved ones on which car to get, doing up all the necessary paperwork for car ownership and car loan, rearranging your finances to make the purchase, making the downpayment, spending unnecessary time worrying about cash flow, and travelling to collect your new / pre-loved car.
• Driving the car: Delays due to traffic jams, time spent finding a parking space, time spent giving a lift to others, topping up of stored value cards, finding people to carpool with you, finding a petrol station, filling up petrol, finding a charging station (!), charging the battery.
• Servicing and maintaining the car: Cleaning and decluttering the car on your own, bringing the car to the car wash or groomer, bringing the car to the workshop, buying spare parts and materials online on in a physical shop, maintaining the car on your own.
• Renewing the insurance: Researching online for the best deal and best fit (time spent on this is non-trivial; use an agglomerator), speaking to brokers or advisors, purchasing the actual insurance.
• Obeying the law (or getting caught for not doing so): Sending the car for mandatory inspection, paying road taxes, slowing down to adhere to the speed limit (if this applies to you), dealing with the authorities if you get caught for road offences, spending time paying parking or speeding fines, or attending court for more serious offences.
• Dealing with accidents: Reporting the accident, bringing the car for repair, dealing with the other parties, dealing with the workshop, dealing with the insurer.
• Selling the car: Taking photographs of the car to use in the listing, bringing the car to a dealer, replying to potential buyers, bringing the car to potential buyers, handing over the car to the new owner, spending time paying off the loan, transferring ownership of the car.

Sample TCO Calculation

Here, I choose to use an example from my own experience and estimate what the costs might be over 10 years for buying a brand new car without taking a car loan, owning and using it for 10 years, then disposing (de-registering) the car thereafter. As learning to drive and getting a driving licence does not always lead to buying a car, I will leave those costs out in my calculations.

To factor in inflation, I use a 2.5% inflation rate, compounded over 10 years. Using the concept of sum of Geometric Progression, the total cost over 10 years for regular payments can be estimated by multiplying the first year costs by 11.203. For costs that are done irregularly over 10 years (inspection, tyre replacements), I have done the necessary calculations but will not include the math here. For simplicity, I used the fees and costs that are charged today as the base cost per year. There is a balance across the different component costs as some have increased over the past few years, while others have increased.

For my example, I will simulate the purchase and ownership of a brand new Honda Jazz Hybrid 1.5 ECVT Luxe e-HEV (A), because the infrastructure in Singapore is not quite ready for fully-electric vehicles yet, and I want a car that is fuel-efficient and big enough for a family of 4 including 2 young children. Also, I am a fan of the Honda Jazz, having owned two versions of it for a total of more than 12 years so far, as you will see below.

First, some background on my experience in car ownership:

• I live in Singapore, where the cost of car ownership is high, and where a Certificate Of Entitlement is required for car ownership.
• I obtained my driving licence in 1999, which would give you an idea of my age and my driving experience.
• I bought my first car, a Honda Jazz 1.4A, in 2005, at around the time I was courting my then-girlfriend, who is now my wife. I took an 85% loan for this car. I sold it in 2012, after moving to my marital home, which was centrally located.
• I purchased a brand new Honda Jazz 1.5A in June 2016, when my wife was pregnant with our first child. The car was paid for in full; it was a conscious decision not to take a bank loan, to have a better credit situation when purchasing property in future. Some of the proceeds came from scrapping a 10-year old car belonging to my in-laws. This also enabled us to benefit from a No-Claim Discount (NCD) of 50% on the insurance premium that was transferred from my in-laws.
• I had two minor accidents (no one was injured in either), one in 2010 and another in 2018, both of which I was at fault, and I chose to pay out-of-pocket instead of claiming from my insurer, to maintain the 50% NCD that I had and to avoid higher insurance premiums in subsequent years.
• For both cars that I purchsed, I chose to get them serviced and maintained by the company linked to the authorised distributor instead of a private workshop, so the costs related to these may be higher in my example.
• I generally obey the law, and in 22 years of driving, have paid not more than $600 in fines, all of which are parking fines for which appeals were unsuccessful. However, since the rollout of the Parking.SG app by GovTech in Singapore, I have not paid a single parking fine due to the convenience and ease of paying for parking.

With that, I will begin the TCO simulation.

Purchase costs

• SGD 106,000 for the car. This includes the Certificate Of Entitlement (COE), which today is at about SGD 45,000, and includes the Enhanced Vehicular Emissions Scheme (VES) rebate of SGD 15,000. I would safely assume that distributor/reseller, Kah Motor, have included any registration fees, excise duties, and import taxes they would have to pay at their end, as these costs are not made known to me.
• For the sake of discussion, I may choose to take the maximum allowable loan for this purchase, which is 70% of the purchase price for a car with Original Market Value (OMV) of under SGD 20,0000, for a tenure of 7 years. For an advertised rate for the loan is 2.5%, this works out to be an effective interest rate (EIR) of 4.69% per annum. In such a case, the downpayment would be SGD 31,800 and the monthly payments would be SGD 106,000 × 0.70 × (1 + 0.025 × 7) ÷ (12 × 7) = SGD 1,037.92 per month for 84 months. The total amount paid for purchasing the car would then be SGD 118,985.28, which is SGD 12,985.28 more over 7 years. That is SGD 154.59 more per month for 84 months, or one plate of chicken rice with pickled vegetables (or premium nasi lemak) per day for 2,557 days.

Petrol, Parking, and Road Usage

• My car has been driven about 16,000 km per year on average for the past 5 years. The average fuel consumption for the Honda Jazz Hybrid 1.5 is advertised as 26.3 km per litre. I will shave 25% off that and use a consumption rate of 19.72 km per litre of petrol. After a 14% discount that I have been getting for more than 10 years, the current price of 95-grade petrol today is SGD 2.12 per litre of petrol. Assuming consistent usage over 10 years, this amounts to about SGD 19,270.07 over 10 years.
• Based on my tracked expenditure, I spend about SGD 180 per month on non-season parking and road usage for the past 3 years. Assuming consistency over 10 years, that’s SGD 24,198.48 over 10 years.
• For season parking at work, that is SGD 65 per month or SGD 8,738.34 over 10 years.
• I stay in a condominium, and parking space is not charged separately and I assume, reasonably, that it would be part of the maintenance fees. I will put a dollar value of SGD 120 per month on this today, which makes this SGD 16,132.32 over 10 years.

Regulatory Requirements

• SGD 684 per year for road tax. Late payments incur additional charges. Assuming two late payments, each incurring SGD 30 in additional charges (spread out as SGD 6 per year), that makes SGD 7,730.07 over 10 years.
• SGD 75 for each inspection today, and required in years 3, 5, 7, and 9 as required by the Land Transport Authority (LTA) in Singapore. Non-compliance would result in an additional inspection at about half the cost. Assuming one additional inspection is required in each of years 5 and 9, this results in SGD 427.02 over 10 years.

Insurance

• After considering the vouchers and cashback from my latest insurance purchase, the price I paid was about SGD 580 for the most recent premium paid this year. Although my insurance premiums have decreased from SGD 850 five years ago to SGD 580 today, I don’t think this is sustainable. Thus, I would estimate my insurance costs to be about SGD 680 per year. This makes it SGD 7,618.04 over 10 years.
• The insurance plan comes with roadside assistance service, so I don’t fork out any additional funds for this service.

Servicing and Maintenance

• The price of servicing and maintenance differs according to certain milestones for the car, e.g., 30,000 km, 70,000 km, 3 years, etc. I will take the average that I have spent per year in the past 5 years as the cost for the first year, and I will make the oversimplified assumption that the cost of maintaining a hybrid car is not much different from that for a fully-petroleum-propelled car. Thus, I will use SGD 801 per year. Over 10 years, with inflation, that would be SGD 8973.60.
• I choose to change my tyres separately, as the timing for this does not match with the servicing timings. This costs about SGD 560 for all 4 tyres if done today and would be done in years 2, 5, and 8. That would equate to SGD 1857.80 over 10 years.
• I am lazy when it comes to cleaning the car, and other than waiting for the servicing staff to clean it, or some simple vacuuming of the interior, I spend about SGD 30 per year on car wash. That is 336.09 over 10 years.

Inconveniences

• Assuming a total of 3 accidents occurring in years 2, 5, and 8, and having to fork out about SGD 1,200 in today’s dollars for each occurrence, that would cost about SGD 3,981 over 10 years.

Not Obeying the Law

• (Estimated) SGD 35 per year in parking fines, which is consistent with the less-than-$600 I have paid in total over 22-plus years of driving. That is SGD 392.11 over 10 years.
• For other offences, assuming a 0.5% chance of getting caught for committing any of a pool of less serious offences (speeding of less than 30 km/h over the speed limit, not following lane and road markings for prohibition of driving, parking, overtaking, stopping, etc.) with an weighted average fine of SGD 200, and 100 instances of such breaches a year, I would estimate the cost of this at SGD 100 per year or SGD 1,120.30 over 10 years.

Disposing of the Car

• As the car would still be less than 10 years old at the time of de-registration and is still using its original COE, I will get back a Preferential Additional Registration Fee (PARF) rebate of 50% of the Additional Registration Fee (ARF) paid. For this example, the actual ARF paid is the Original Market Value (OMV), estimated to be about SGD 18,000, less the Enhanced Vehicle Emissions Scheme (VES) rebates, which is SGD 15,000. Thus, the PARF rebate would be about SGD 3,000 ÷ 2 = SGD 1,500.
• What I will get for the disposal of the car would depend on its market body value at that point in time. I could put it up for auction at one of many reputable platforms, ask an authorised car dealer to take it off my hands, or find a buyer on my own. I estimate the body value to be low, so I would get back about SGD 1,500 after payment of any commissions and fees.

With the above, the total cost of owning, using, and maintaining a brand new car for 10 years adds up to SGD 203,775.24, after considering inflation and the proceeds of disposal. I would end up spending more than 90% of the purchase price of the car in operating and maintaining the car. If I had taken the maximum allowable loan at the maximum allowable tenure, this would have been SGD 12,985.28 more over the first 7 years.

Is it worth it to own a car?

The answers to this question vary widely and are all subjective. To address this, we need to consider our own situation and the alternatives.

Affordability

I always advocate living within one’s means, i.e., don’t spend more than you can afford, and avoid locking yourself into financial commitments, as much as possible. If you have to take a loan to own a car, make sure that you can afford to make the payments over time. Take a loan on a lower amount if possible. Read the fine print and consider all the terms and conditions of the loan before committing to it. Remember that redeeming a loan incurs additional costs that are directly proportional to the amount loaned, and that there may be clawback fees for early redemption.

Also, remember to consider the regular costs of using a car. A car with a more fuel-efficient engine or a more efficient battery, or one that requires less frequent maintenance or is easier to maintain, is highly likely to cost less to use over time. This requires a lot of research on your part. Find out about the technical details of the car you intend to buy, and be inquisitive.

Company Reimbursement

If you are required to visit different locations frequently for work, e.g., visiting client or supplier locations, travelling between different offices, there is a chance that your company would either reimburse you for expenses incurred for using your personal vehicle (based on kilometres driven) or a lump sum, paid annually or monthly. Find out what your company policy is on the usage of personal vehicles for your role, and consider how much you will be using the car for work (and the benefits or inconveniences it might bring… parking expenses, for example) and the reimbursement provided by your company when deciding whether to purchase a car.

Level of Usage

You would also need to consider whether you will be utilising the car enough to warrant owning one. One gauge that I would use is whether you would have to send the car for servicing before the date cap recommended by the workshop. For example, if the manufacturer or a reputable workshop recommends servicing to be done every 6 months or after 10,000 km of driving, and you think you would reach 10,000 km after 5 months (less than the 6 months recommended), it is an indication that you will be utilising the car enough to justify owning it.

Convenience and Intangibles

What you intend to use the car for would affect whether you buy one or not. These could result in intangible benefits such as peace of mind, or upkeep of reputation.

One such case is when you are expecting a child or have young children aged 10 or below. There is much ferrying of people around to and from medical checkups, schools, play-dates, relatives’ homes, classes, places of interest, and home. I think it would be worth it to get at least a second-hand car if you can afford it, as the level of convenience it brings is very high.

Another scenario is when you want to make a good impression. This does not necessarily mean buying the flashiest car out there to be the envy of your friends. It could also be because it is more convenient during a courtship, especially if your significant other lives a distance away, and having access to your own vehicle cuts down your travel time, and often travel costs, by more than half.

Alternatives to Owning a Car

All of the above points raised should be considered together with the alternatives to owning a car. There are many of these, facilitated by technology and entrepreneurship. Car-sharing arrangements, car-pooling, private hire car, and taxi services are much more accessible now than 10 years ago. There are also many car rental companies that charge by the minute or hour, which make these more affordable and convenient.

One factor that I find affects this greatly is the locations of the places that you frequent. If your place of work and your home is situated near one of the rental hubs or locations, this is clearly convenient. On the other hand, if you stay in, or frequent, a remote location, it can be a lot harder to find a taxi or private hire car to bring you to, or fetch you from, such locations.

As a quick example, let’s assume that those who would benefit from the ownership of a car spend would otherwise spend an average of SGD 50 per day on any combination of alternative modes of transportation, or on the long-term rental of a car and its associated costs. That is SGD 18,262.50 per year, or a total of SGD 204,594.79 over 10 years considering inflation (by multiplying the first year value by 11.203 as derived above). In my Sample TCO Calculation above, the TCO of owning that particular car is less than this. Add the intangible benefits (convenience and time), which is net positive, this makes it worth it to own a car. On the other hand, if the average spending on alternative modes of transportation is SGD 30 per day, or SGD 122,756.87 over 10 years, it is unlikely that the intangible benefits are worth the difference, and it would be better to stick to alternative modes of transportation, or consider buying a cheaper car, whether pre-owned or new.

Conclusion

Whether it is worth it to own a car depends on what you will generally be using it for, how far you travel regularly, how careful you are, the overall benefit it brings to yourself and to others, how much you are paying to purchase and maintain it, and the cost of the alternatives to owning a car. As it is no small purchase, I would advise treating it as an investment, wherein it is important to consider all the various costs over time, and do a comprehensive cost-benefit analysis before deciding whether to purchase one. I hope this article has helped you in that regard.