Back in my mid-20s, I remembered starting my two-hour commute to work one day and thinking, “Why the [email protected]#$ am I doing this?” This was almost immediately followed by:
If you’ve ever had that conversation with yourself as you’re being “chauffeured” to work in your Mercedes-Benz or Volvo stretch limo (read: public buses). I feel you… So let’s find out how much you theoretically need to earn before you even think about buying an air freshener for your brand new car.
Disclaimer: the numbers and figures here are all based on assumptions and estimations, so feel free to adjust them accordingly to better reflect your situation.
TL;DR: Can I Even Afford To Buy A Car?
- The cheapest new car on the market right now is the Perodua Bezza 1.3 Premium X (Auto) which goes for S$57,800
- You need to cough up S$1,604.49 per month, on top of the S$17,340 downpayment which you’ll need to make in cash
- It’s not possible to responsibly afford a car on a monthly income of S$3,000…
- You need a gross monthly income of S$7,511.23 to comfortably afford the cheapest car on the market
What Car Are We Looking At?
Singapore is notorious for being one of the most expensive cities in the world. And it’s no surprise that the cost of owning a car is astronomical. So for this exercise, we’re going to be really budget about this and pick the cheapest new car we can find on the market.
After all, we’re all about personal finance and fiscal responsibility, so buying an Aston Martin is antithetical to what Seedly is all about. Besides, we just need something with four wheels that’ll bring us from point A to point B – without having to experience what it’s like being a sardine in a tin.
Here’s how we chose our car:
- It has to be a brand new, passenger vehicle with an automatic transmission (Like the wife said, “I am NOT getting into a lorry in this dress.”)
- A car loan will be taken (If you’re going, “Need car loan meh?” Stop. Just stop reading this article now you high-SES… Ahem. We digress.)
So what’s the cheapest new car we can find?
It’s the… Don’t hold your breath… Perodua Bezza 1.3 Premium X (Automatic Transmission)!
And she’s all yours for a mere S$57,800 inclusive of Certificate Of Entitlement (price from sgcarmart and is correct as of 11 Feb 19).
As the Open Market Value (OMV) for the Perodua Bezza is $12,349 (less than $20,000) that means that the maximum car loan you can get is 70% of the car price and you’ll only need to put down a 30% down payment.
FYI: Cars with OMV exceeding $20,000 will be entitled to a maximum loan value of 60% of the car price and a minimum 40% down payment. The key takeaway here? If you’re unsure whether you can afford that car, look at how much cash you can put down for the downpayment and work up from there.
Assuming you take the maximum loan tenure of 7 years (at 2.78% interest):
- Loan Amount (70%) = S$40,460
- Downpayment in Cash (30%) = S$17,340
Using sgcarmart’s Road Tax Calculator, the annual road tax for a Perodua Bezza is S$584.
Your monthly road tax = S$48.67
Car Insurance Premium
Car insurance is pretty much a given for anyone who owns a car.
Read more: Which Is The Best Car Insurance For Me?
For the sake of this theoretical calculation, we’re going to assume that this is your first car and that you are relatively young and inexperienced (younger than 27 years old, and with less than 2 years of driving experience). Yeah… Insurance companies have high standards.
For your reference, this is the driver profile we submitted for a car insurance quote:
- 25-year old, single male
- Working indoors
- 0% No-Claim Discount
- 2 years of driving experience
Without going into details like why women get quoted cheaper prices (yes, insurance companies generally consider the fairer sex as safer drivers), the excess, personal accident coverage, and etc. The cheapest annual car insurance premium we can get is S$2,450.
Your monthly car insurance premium = S$204.17
FYI: It’ll definitely get cheaper as you get older, get married, and manage to maintain an accident and claim-free record.
- Actual fuel consumption is probably closer to 17km/L given the start-stop traffic of driving in the city
- You live in the East but work in the West, so an average of 60km each day, for a grand total of 1,800km a month
- You keep your petrol costs low by referring to this Comparison of Petrol Prices religiously and manage to pay about S$2.15/L
Contrary to what a lot of people think, this is where it can get surprisingly expensive.
Here are some assumptions regarding your monthly parking arrangements:
- HDB season parking at S$110 per month
- Office season parking at S$100 per month (highly dependent on location)
- Shopping centre parking at S$75 ($2.50/hour for an average of 8 hours a week, or 34 hours a month)
- Parking coupon-type parking at S$24 (2 booklets at S$12 each)
Your monthly parking cost = S$309
If you plan your routes carefully, you might be able to avoid ERP charges altogether.
But if you need to enter the CBD or get into town on a Saturday, it’ll probably cost you something like S$2 each time you cross a gantry. Assuming a conservative charge of S$10 a week.
Your monthly ERP cost = S$40
Car Servicing And Repair
Considering that you’re starting with a new car, we’ll assume that the first couple of years will only require regular servicing. We called up a few workshops in Singapore and got an average cost of S$250 for every 10,000km interval. Assuming that we’re doing 1,800km a month, that’s one servicing to be scheduled every 5 months or so.
A major servicing which entails tyre replacement and the works will cost about S$400. And that happens probably once every 2 years. Let’s also assume that because of your regular servicing and the fact that you’re not driving your Perodua Bezza like you’re in the Fast and Furious franchise, that you’re not going to be hit with any major repair work.
We’re going to hazard a guess here and say that your monthly car servicing and repair cost = S$100 (to be safe)
How Much Do I Need To Spend Per Month On A Car?
Of course, the figures here are all based on assumptions and agar-ations, so you’ll need to adjust your individual monthly costs accordingly.
Oh yeah, and don’t forget. This is on top of the S$17,340 downpayment which you’ll finance in cold-hard cash.
How Much Do I Need To Earn Per Month Before I Can Afford A Car?
You might have seen your peers or know of people around you who earn a gross monthly income to the tune of S$3,000 but are cruising around in their rides. And deep down, you’re wondering, “Can meh? How they afford sia…”
Erm… They can’t.
And honestly, we don’t know how they’re doing it either.
Remember the 50% expenses, 30% wealth building, 20% savings rule where we pay ourselves first before spending anything? Let’s break it down:
- Gross monthly: S$3,000
- After CPF contribution (20%): S$3,000 – S$600 = S$2,400
- After 30% wealth building: $2,400 – S$720 = S$1,680
- After 20% savings: S$1,680 – S$480 = S$1,200
Even if we assume that you pour everything you have left of your “Expenditure” fund into your car (meaning you’re effectively surviving on air). You’re still short of S$304.49 in order to own that Perodua Bezza. Yeah… Your friends are over-leveraged. Meaning they’re not saving enough or they’re not investing for their future.
So let’s be realistic about this and work backwards.
We’ll keep the “Expenditure” fund at 50%, and give you at least S$1,500 for food, insurance, parents’ allowance etc. so you can live like a well-adjusted human being. We’ll also need to add the S$1,504.49 monthly car payment, which brings our total “Expenditure” fund to S$3,004.49.
This means that your total monthly income, before CPF deduction, should ideally be S$6,008.98. Or a gross monthly income of S$7,511.23.
And if you’re looking to get your own place in the future, you’ll need to make sure that you do not commit your entire income to your car because you won’t have enough debt allowance to take up a mortgage loan… #justsaying
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