You’ve always wanted a car to call your own. Fed up with public transport, you decide to pull the trigger and start shopping for your very first car.
Whilst buying a car isn’t the most complex thing that you can do as a young adult, it does have a tangible impact on your financial health. Do note that if you’re looking to settle down, owning a car will affect your Total Debt Servicing Ratio (TDSR), which may lead to lower loan amounts from your financial institutions.
If you’ve already done your due diligence, and still have the same conclusions (that you need a car!), just what are the steps can you take to afford one?
How To Afford Your Very Own Car
Car ownership isn’t just about purchasing the car. There are other ‘hidden’ costs associated with having your own vehicle too. Running costs, which include things like maintenance, insurance, fuel costs, parking as well as ERP charges, can cost as much as a typical COE car’s monthly instalment itself.
There’s also a theoretical opportunity cost that you’ll be missing out on by locking your funds into your car. You may not be able to invest in potentially lucrative ventures with the funds inaccessible.
To comfortably own a vehicle, and still have enough set aside for other expenditures and savings, financial experts believe one should only spend up to 30% of your monthly salary on your car.
According to Labour Force, your average millennial should have a monthly post-CPF salary of around $3,200. 30% of this sum is $960.
Bear in mind, this $960 is inclusive of the running costs of the car – realistically, you’re looking at a monthly instalment payment of around $400-500.
What Can I Get For This?
It is unlikely that you’ll be able to afford a new car’s payment on that budget. Expect to fork out north of $1,000 monthly for a new car.
As such, your only option is a COE car. But there are potential pitfalls you’ll have to take into account before buying one.
The condition of the vehicle should be your primary concern. Where possible, get the car properly inspected by a qualified mechanic to ensure it hasn’t been involved in a major shunt. He can also ensure that the oily gubbins (mechanical parts) are up to the task of another decade of motoring.
You may want to avoid modified examples at the lower end of the market – typically, these cars may have had sub-par aftermarket componentry installed, which may affect the long-term reliability of these vehicles. In this part of the marketplace, try and find cars that are as original as possible.
For more information on what you should look out for when you’re looking to purchase a used car, refer to this article!
Financing Options
By law, you’ll have to fork out up to 40% down payment upfront for your car. Unless you still have savings left for other potential life emergencies after factoring in this payment, you may want to hold off on a car purchase.
If you’re good on that front, you’ll then have to decide what financing option you’d like to entertain. Used car dealers often have their own financing packages. Whilst they do have a higher interest rate, there’s less restriction on the amount of, as well as the duration, of the loan. In fact, some dealers even offer you a full 100% loan for your purchase.
Dealers usually also have bank partners, which offers them a small kickback if they can get their clients to take up a loan with the bank. Typically, you may experience the lowest interest rates going down this route, as banks often have promotional rates with their dealer partners.
Alternatively, you can take up a personal loan to pay for the car. It probably isn’t the wisest decision here, but purchasing a car with a personal loan theoretically means you own the car outright, unlike the other two finance options, where the car is taken as collateral if you can’t repay the loan.
Motorist can also help you in your car ownership journey. We have car loan and paperwork support, as well as assistance for insurance. For a fuss-free and hands-off approach to car acquisition, consider using our services!
Reducing Car Expenditure
The loan has been approved, and you’re now the proud owner of your first car. So what’s next? Just how do you reduce car expenditure?
For starters, offering hitching services can be a good way to recoup some cash without necessarily going out of your way to do so. Ensure that your insurance clears you to do as such though – you do not want to be involved in an accident and have to pay out-of-pocket for your passenger’s medical fees.
You’re making the commute to and from work anyways – why not incentivise that journey? Legally though, you’re only allowed to provide up to four carpool trips a day. This is a law put in place to prevent drivers from abusing the system.
If you’re uncomfortable with sharing your car with a stranger, another approach to reduce car costs is to maximise your fuel economy.
Keep excess weight to a minimum. The less mass you have to lug around, the less fuel you use. Invest in quality window tint to keep the cabin at a manageable temperature without putting excess strain on your air conditioning unit.
The biggest factors that will reduce your fuel use though, would have to be the proper maintenance of your oily bits and changing your driving style. Ensure your service is carried out by a reputable workshop, with the correct grades of oil.
As for changing your driving style, consider adopting a ‘lift-and-coast’ approach. When approaching a set of traffic light, for example, opt to lift off the throttle earlier, letting the car gradually coast to a stop. Only reaccelerate when you are sure that you do not have to stomp on the anchors again to scrub the speed that you’ve just gained.
Also, opt to gradually gain speed, instead of stomping on the throttle and egging the car to operate in the higher rev ranges.
Other Ways To Recoup Car Expenditure
Some insurers will actually offer you a discount if you fit a dash cam to your vehicle. This is on top of any NCD that you may have accrued, and the Certificate Of Merit that you may be entitled to.
You can also get some extra funds back by taking part in our Motorist 4D Draw! To take part, simply register a vehicle in the Motorist App, and the licence plate number of your registered vehicle will count as an entry into our weekly draw.
If your licence plate number matches the winning 4D number, you will instantly win up to *$2,000 in cash!
What’s more, your winnings will also be doubled if you have successfully referred one friend to the Motorist App! The prize will be evenly split if there are multiple winners. The draw of our Motorist 4D Win will take place every Sunday after 6.30pm.
*T&Cs apply.
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Keyword: Car Ownership Guide for Millennials: How to Afford a Car, Ways to Save on Costs