June 3, 2016

Personal Finance Tip: Buying a Car

Buying your first car can be an exhilarating and daunting experience for many. After months of saving, weeks of checking out different car showrooms and online reviews, doing test driving for the finalists, you are now ready to take the plunge and sign on the dotted line. Before you do, here are some "costs" that you may have overlooked:

Maintenance and Servicing

Many car buyers fail to factor in the cost of regular car maintenance and servicing. Cars normally are brought in for check-up either every 6 months or every 5,000 km whichever comes first. Aside from the labor service fee that many car shops charge, you will also be charged for the oil and parts that need to be replaced. Costs vary across the different cars brands and even across different car models. As a general rule, I noticed that the more expensive the car brand and car model is, the more you need to shell out for preventive maintenance.


If you are financing the purchase of your new car, you will normally be required to get insurance. I think getting comprehensive car insurance is good idea regardless given how chaotic (and unpredictable) driving in Manila can get. You will normally have to pay for your insurance on an annual basis so keep this in mind.


If you work in Makati or any of the CBDs, expect to pay (a lot) for the privilege of parking your car while you work. A daily rate of P150 is probably now on the low side. You will likely end up paying more as landlords know that space is limited in CBDs. Keep this in mind as many office workers buy cars thinking they can avoid the hassle of commuting to and from work, only to realize that looking for parking in the CBDs during office hours can be just as frustrating.


Most cars depreciate in value very quickly. Even though this is technically not an actual cost as you no longer need to shell out any additional cash, you still need to factor this into your decision especially if you are rationalizing your decision to buy the car by saying it is an "investment". Buying a car is not an investment unless you plan to monetize the use of the car by converting it into some form of public transportation. 


Another intangible cost. No particular outlay of cash here but every new car on the road adds a certain amount of pollution to our environment. We may not feel the impact of this immediately, but in the long run I'm pretty sure we will. We already currently feel the negative impact traffic and underdeveloped and deteriorating infrastructure has on our quality of life.

The bottom line is that having a car is a luxury. If you think you will have difficulty meeting the additional obligations above, you may need to rethink your decision to buy a car. If you are okay with the above and think a purchase of a car will improve your quality of life (despite the cost), then go ahead and make the jump.

Buying a car is a big decision and great care needs to be taken to list and think of the pros and cons of owning your own car. Car ownership has its perks but there is no shame in walking away and saying this is not for me.