Utility and value
 

In life we cannot escape buying and acquiring things that will eventually spoil and become worthless. Household appliances and furnitures are immediate examples. These things helped make our lives better and free us from doing mundane things so that we can pursue other meaningful things in life. A car is one such item. It provides comfort, safety, privacy and convenience to the whole family. More so, if you have infants, and/or infirmed elderly to ferry around.

It is just that in Singapore, because of the high cost of owning a car and the artificial 10 year life span, the value of the car is called into question. In reality, the utility of the car is still the same. Car owners know this, and will continue to want one until they are priced out of the market by richer buyers.

Since the day I bought my first car, 27 years ago, I have never looked back. I have seen how the public transportation system improved by leaps and bounds, from many private bus operators to just 2 big bus operators and the MRT. Public transportation is now first world standard, I have to admit, but I still want my car! My wife also has a car, that makes 2 cars in our family. It has been this way since the day we married, because she had a car before we got married, and I had mine. Our current 2 cars are our number 8th and 9th car.

Yes, the cars eventually will become scrap metals, but they have given us much in return. As we are staying in a condo with underground car parking, having a car means not having to carry umbrellas to go grocery shopping, as we could simply go from underground car park to underground car park and get our groceries! And the many years, I sent my children to their schools, take examinations, to the vasrsity and whatever activities they had, all in time, in comfort and safety. The list just goes on.

Let's do a simple reality check.
You have had a car for 27 years. Let's assume that your wife have had a car for half that time I.e 13 years. The yearly car ownership cost is typically quoted to be around 15k-20k. Let's take the mid point I.e. 15k. So 17.5kx 40 years = 700k.
If your wife had her car for the same duration as you did I.e. 27 years, your family has just thrown a total of 1 MILLION a dollars into the drain...

Sure, being able to use a set of wheels is convenient but just because you like to drink milk doesn't mean that you need to buy 2 cows. There is this thing called a taxi.

And that 700k - 1 million is many times the minimum sum that the govt requires people to keep in cpf to be returned in installment (plus interest) to people. And yet, we have people surrendering 700k/1million without a fight .......

I am not against cars. I am only against ownership of cars in singapore.

There are 3 ways to fight the expensive cost of cars.

1) wait for random fluctuations of COE and buy the COE ... Similar to timing stocks.
2) vote agst PAP and influence others to do the same. Perhaps a different govt can use a simple balloting solution. If HDB flats can be allocated by pure dumb luck (Last time), why can't a COE be allocated the same way?
3) abstain from cars while waiting for 2) to happen.

My family and I are practical. We have decided to abstain, perhaps until the day we die or leave singapore, whichever is earlier, to not transfer a vast amount of money to the govt aka buying a car. LOL

49, full time trader and investor, makes about $80k pa on average over the past 5 years so far from tradings gains, interests and dividends. i enjoy trading the markets.

wife, 40, makes $70k pa.

total family expenses $90k pa.

total family savings $60k pa.

we have been living in our 5 room HDB flat for over 18 years. now fully paid. worth $750k.

our car is a 4 year old 1.6L car. fully paid.

Let me ask you a question, do you think cars or hdb flats are more expensive in singapore?

Now keep that answer in your head while I walk through with you the numbers...

Let's say you were that unintelligent guy who bought the pinnacle at duxton flat for 950k. It is 5 years old with approximately 91 years of lease left...

Is it wiser to pay 950k to own a flat for 91 years OR to pay 950k to own and use a car for 54 years (assuming a yearly cost of 17.5k?

If one accepts the cost of car ownership than one must say that to buy a 4 room flat at pinnacle is the best deal cos it is so much "cheaper"! And last I checked, there are 2 toilets in a 4 room flat. How many toilets does a Corolla have? LOLOL

The guy who bought the $950k duxton flat is in fact very smart. Why? because a similar sized condo in the vicinity would cost at least $2m. He gets to enjoy the place until he dies assuming he dies before the lease ends, which is likely the case. Most likely the place will go for SERS after 50 years and he will get back his money or even get more than $950k.

What about spending on cars? Well, this has always been an expense and only those who can afford and willing to buy will buy. If you have money, why need to save so much? Why do you need to bequeath your wealth to your children at the expense of your suffering? If you have the money to spare, just buy a car and enjoy. But don't be stupid to buy an expensive car model. You can get a good, reliable new car for $100k.

You do this analysis only if you have to choose between owning a car against spending on other necessities, including saving for retirement. In Singapore, as I said before, the public transportation is of first world standard. This makes car ownership less compelling, more so if one does not earn much. So yes, if spending on a car is going to set you very far back in terms of savings or worse, taking on debts, then you should seriously consider doing without a car. You should ask yourself then whether all the creature comfort that you can derive from owning a car is worth all that money.

I see you came up with a very rough estimate of the money we have supposedly "thrown" away from owning 8 to 9 cars over the course of 27 years. You are very far off the mark, as it is really not that much. You have also forgotten that there was a time where there was no such thing as COE. And we we started with 2nd hand cars. Could you believe we bought 5 year old cars for $25,000? Well we did.

We started buying new cars much later in our lives as we got established in our careers, and always only took minimum 1 year loans to qualify for discount on the car prices.

Undoubtedly we could definitely save more if we just relied on public transportation to move around, but then it begs the question what are you saving all that money for? There comes a point where you decide you have enough money saved for the important things in life and you want to reward yourself as you go along.

Let me ask you in return, would you buy a car if your savings each year allow you to buy 3 new cars? As the COE lasts 10 years, in between buying new cars, we have also bought our second property.

To cut the long discussion short, we feel that the benefits of owning a car far outweigh the cost. If we are earning less, yes, the decision would have been different.

Here is the formula to own new cars:

1. Buy your first BTO flat for $200k.
2. Wait for 5 years (MOP) of your flat, then apply for second BTO flat costing $200k.
3. After you get key to your 2nd BTO flat, sell your first BTO flat in the resale market for $500k and make profit of $300k.
4. Use your big fat profit to buy a brand new car.

Our cheap BTO flats make us all rich and able to buy new cars. As long as we have cheap BTO flats, COE prices will continue to rise higher and higher.

Indeed, many families become rich from flipping their property. We bought a landed house in 2006 at the bottom of the property cycle and sold at the peak in 2013. We then downgraded to a 3 bedroom condo in the Bukit Timah area and paid it in full. On top of that we still have cash in hand. With this cash, we renovated our new home nicely and also bought a new car, also paid in cash. We do not have to take any loan at all and we don't need to use any of our cash savings. We are also DEBT FREE at the age of 43. All this is made possible courtesy of the property market. However, this flipping is now no longer possible. The property bull market is OVER.

Since we have fully paid our condo, we now don't care what will happen to property prices. However those who bought their condo with only 20% downpayment will need to worry as they may face negative equity if prices crash more than 20%. The banks may ask them to top up and if they can't they have to sell at a big loss. That is why I always advice people around me to buy a property (even for their first property) with a 60% downpayment. Better still, is to buy with full cash.

Dont anyhow advise lah.

For people with the money to fully pay for the home, there is no need to pay up in full. With a housing loan interest of below 1.5%, it is idiotic to pay up in full.

Even keeping your money in CPF earns you 2.5%! Supposed you just pay 30% of a $1m property, the $700k left in the CPF will earn you a net gain of 1% every year or $7K pa.

And if put in blue chips stocks, you can derive 5% returns (counting only dividends, and not including capital gains)

But never mind, thats why we will always have people who asked why people are so rich, or how people get so rich?