Can I Afford a Car?

This is a frequently asked question on many local motoring forums. I am surprised if any of the topic starter actually rely fully on the responses to make the buying decision. There are many tools to compute depreciation, paper distribution, motor loan repayment schedule, etc. but I could not find a good tool to analyze the Total Cost of Ownership including ongoing operating costs. Thus, I had embarked on a mini project back in October 2007 to study the Total Cost of Ownership (see the site on Wordpress) for motoring in Singapore. However, I did not get many responses and therefore, the idea was sitting on the backburner for quite some time.

Earlier this week, I got inspired and managed to put the tool together in a few hours. These are the components that I take into consideration:

1. Loan Instalment

2. Road Tax and Radio License - road tax can be computed from the formula at www.onemotoring.com.sg and radio license is $27 per annum as given at www.mda.gov.sg. Adhoc rebates from the government is not reflected.

3. Motor Insurance - annual insurance premium with No Claim Discount of up to 50% can be computed. The estimation is assuming that the annual premium stay constant and no accident occur so the NCD will increment each year up to 50%.

4. Fuel Cost - monthly cost is computed from the average mileage x fuel price x fuel consumption of the vehicle. You can estimate the monthly mileage from the regular destinations (eg. home to office to home on working days) and some buffer for weekend and adhoc trips.

5. Servicing - maintenance of the motor vehicle is necessary every 10,000km so estimated servicing cost is added every 10,000km driven. However, one standard cost is used for the estimation as different costs per 10K, 20K, 30K, etc. servicing cannot be easily captured.

6. Parking - monthly season parking charges, average coupon costs and adhoc parking costs can be estimated.

7. Electronic Road Pricing - monthly ERP charges can be estimated (www.onemotoring.com.sg) with some buffer.

8. Cleaning and Grooming - package cost or allowance for car washes can be estimated.

9. Inspections - required for vehicles at age 3, 5, 7 and 9 years. Inspection cost is taken from VICOM (www.vicom.com.sg).

10. Others - tyre change, in-car entertainment system upgrade and adding other accessories.

The tool can help the new motorist understand the Total Cost of Ownership and the schedule of cash flow needed to fund the operation of a motor vehicle. The tool is also useful to the seasoned motorist as a log to record the actual cost incurred for each component. Do note that once an actual cost is entered, it will overwrite the formula in the cell and you will need to download the tool and start from scratch again if you need to revert to the original numbers. Please feel free to provide me with your feedback of the tool.

Ready to test drive the tool? Click here to proceed.

Total Cost of Ownership

Current Version: 1.0 dated February 27, 2009

This worksheet helps you to estimate the Total Cost of Ownership for your motor vehicle over its lifespan. You should read the following post for more information:

• Can I afford a car? posted on February 28

You can download the file SMTotalCostOfOwnershipV10.xls (MS Excel format, 115 KB) from my Shared DropBox folder https://www.dropbox.com/sh/4kwkgarn1qw0bej/AAAd-NqSxLxoVw6g2u7WXL6Ta?dl=0

COE Prediction - March 2009 1st Bidding Exercise

I was surprised by the early LTA announcement about the cut in COE quota for 2009/2010 on February 12. But then again, this year's Budget was also delivered early with the Resilience Plan to tackle the current economic crisis. The timing of the announcement has indeed caused a rebound in the COE quota premium.

The most important impact of the rebound is to prop up the Prevailing Quota Premium (PQP) to discourage vehicles near their COE expiry from renewing the COE. Now the March PQP is $4,516 (Cat A) and $3,004 (Cat B). If the February 2nd bidding exercise had concluded in a similar 1st bidding exercise result (Cat A - $1,020, Cat B - $689), March PQP would have been $3,943 (Cat A) and $2,304 (Cat B). I believe that the March COE quota premium will average at $5,000. Thus, April PQP is estimated at $3,850 (Cat A) and $3,150 (Cat B). Advice for those considering COE renewal should do so immediately using the March PQP $3,004 for Category B vehicles and wait a month till the April PQP $3,850 (estimated) for Category A vehicles.

Prediction on February 24:
Category A: $4,000-5,000
Category B: $5,000-6,000

Verdict on March 4:
Category A: $4,890
Category B: $5,101

COE Prediction - February 2009 2nd Bidding Exercise

The COE Quota Premium is likely to see a technical rebound. Although the economic outlook seems grim, potential buyers are likely to nibble at the attractive offers of FREE COE. If you really need to change your ride, it is a good opportunity now.

Let's talk about the "need" to change ride - motorists are still trading in cars aged five years or even less. Wise decision? No. Deep pockets? I hope so. Many of the cars are still in good condition and can be more fully utilized but the foolish owners succumb to the temptation of a new ride. Renewing COE for vehicles near age of 10 at the Prevailing Quota Premium (PQP) is very attractive for cash-strapped motorists whose vehicles are in good condition and road worthiness. It costs about $2,700 and $2,200, in addition to the scrap value and higher road tax, to extend the use of Category A and B vehicles for 5 more years. The PQP will come down even more after the upcoming bidding exercise.

One good option now is to buy (at near scrap value) a used 8-10 year old Continental make in tip top condition and pay the PQP for another 5 or 10 years COE renewal. Do drop me a note (on the comments) if you have executed on the idea.

Prediction on February 10:
Category A: $2,000-3,000
Category B: $1,000-2,000

LTA has announced the cut in COE quota for 2009/2010 on February 12. The reduction is about 24% from the previous year's quota but Category B is reduced by 30%. Quota premium is expected to rebound strongly with dealers pressuring buyers to commit.

Revised prediction on February 13:
Category A: $3,000-4,000
Category B: $4,000-5,000

Verdict on February 18:
Category A: $4,460
Category B: $4,889

Bid for your own COE

The bidding exercises are conducted from Monday noon to Wednesday 4pm on the first and third Mondays each month. Bids can be submitted through the DBS/POSB ATMs, Citibank Internet Banking facility or via OCBC and Citibank phone banking services. Remember that you need to have $10,000 in your banking account for the deposit and will also incur a banking service charge.

During the bidding exercise, you can check on the status of the bids and revise the reserve price using these banks' services, the LTA Open Bidding website (http://ocoe.lta.gov.sg/), or by calling the LTA Open Bidding Phone System at telephone number: 6362 1465.

The rest of us can watch the bidding on the One.motoring website (http://www.onemotoring.com.sg) or on Teletext (pages 521-523).

Why bid for your own COE? You are in total control over how much to pay and do not get yourself into conflict over COE rebate with the dealer. However, you should visit the showrooms of those makes that you are interested in buying so as to know the selling price, COE rebate, etc. Upon a successful bid, you have up to six months to bargain and negotiate for the best deal with either the Authorized Distributors/Dealers or Parallel Importers on the car of your choice. You should take note of which COE category (A or B) does your preferred make and model belong to bid for the right certificate.

The best recommended option is to use either the Citibank Internet Banking or the Phone Banking since you can revise your reserve bid price from the comfort of your office or home. It is certainly a pain to miss getting the COE by just a small quantum - example is that you are willing to pay $500 and put in your reserve bid price accordingly. At 3:55pm, the quota premium is bidded up to $510 and with little time left, the winning bid will not be much higher. Thus, you can raise your bid to $600 and secure your COE in the current bidding exercise rather to wait till the next exercise.

Good luck and may you win your bid!

Related posts: Cheaper to Bid?, Lucky Bid Price