The Practicality of Owning A Car In Countries With Extensive Transport Network
While the cars present some form of convenience, during peak hours in those busy cities, the jam is such that often times taking a train is faster. Furthermore you save on expensive parking. This creates a situation where sometimes a car owner chooses to take the public transport to save time and cost.
I also have friends who told me that because of their children, a car is necessary to get around. The car is convenient and should there be anything urgent, they could quickly get to the hospital. While that is true to a certain extent, it is not critical in big cities with a developed transport network. Many of our parents managed to raise us without a car, in an era where trains and buses were far fewer. Urgent medical care can be settled by a private hire cab or Uber, or in the worst case scenario, an ambulance.
Of course, if you are in the sales line or often have to meet up with customers, owning a car will allow you to have the advantage of being able to ferry customers around. Or to showcase your status as a successful person. Afterall, in our superficial world, image is important when it comes to business and sales negotiation.
Or perhaps you are running your own small business where your car is needed for logistical purposes. Or that you travel extensively in a particular area in the course of your work.
The Never Ending Desire
I have a fellow colleague who told me once that his subordinate bought a BMW. This subordinate was earning a salary of about $3500 per month. Once he was calculating that after he got his year end bonus, he will be able to pay the outstanding loan instalment, leaving him with just a couple hundred dollars. He was then seriously thinking if he should change the rim of his BMW.
My colleague was understandably stunned at such financial decision making. His subordinate was a single person (no children) living in a city with an extensive public transport network. He was also not doing sales nor anything that adds value to him about owning a car. Yet, despite his low salary, he not only bought car, but an expensive one as well. He had already ‘spent’ his bonus before having received it, and was thinking if he should use up everything to ‘upgrade’ his car.
We are now past the topic of whether there is a need to own a car. So the focus for now will be the desire to own something more than necessary. We will assume from this point onwards, owning a car is necessary.
My job is a somewhat niche industry, such that the lower and higher ranking staff are paid a premium for our salaries. Compared to our peers in other private or public sector, we have a slightly higher salary and bonus. It is hence very common to see people buying fanciful cars, or even worse, owning more than one car in this expensive country (Singapore).
I have married colleagues who are both in the same job, hence working in the same place (obviously). But for some reason, both husband and wife own a car each. The example above also tells of a lower ranking staff spending money on a car which he can barely afford.
Should car is a necessary means of transportation, does not a common Nissan or Toyota serve its purpose? Why would there be a need to buy a BMW or a Mercedes? Would there even be a need to own more than a car?
But often times the desire to upgrade or even own more cars is appealing. After a Toyota, I want a Suzuki, then an Audi, a BMW, a Bentley. The desire never ends. It is always a constant upgrading once every few years despite the huge sunk cost in the big cities. But even for countries like New Zealand where cars are cheap, changing them once every few years or owning multiple cars is also a needless expense.
The Real Cost Of Owning A Car
The cost of a car goes far beyond the actual price you pay for the product itself. It also includes annual maintenance, road tax, parking, petrol etc. For higher end cars like BMW with a lot of added functions, each tiny function which went wrong would trigger irritating alarms, which would drive you to get it sorted out – an unnecessary expense.
Granted, people look at you differently when you own a Land Rover compared to actually driving a 1995 Mitsubishi Lancer. You feel great. People respect you. But privately, are you scrimping on your daily meals, skipping your social gatherings, sacrificing your much needed overseas holidays to relax and take a breather?
On top of the actual monetary cost, are you also paying for that social status in other ways? If you saving on meals and not eating properly, are you not paying for it with your health? If you are calculating the finances every other week to see how you can pay for the loan, are you not adding unnecessary stress to yourself?
What about your children and your wife? If using an older or cheaper car would mean a savings of $20000, would it not make your wife happy to have a fanciful dinner once a while, or your children excited if you could bring them to the theme park once every few months?
What about contingency planning? If one day you lose your job, will you be able to maintain your lifestyle? Will your family suffer because of your financial decisions?
The real cost of owning a car goes way beyond the monetary aspect. The peace of the mind, the daily little happiness which you sacrificed without knowing it, the extra happy memories you can have (holidays and stuff) are all burnt down because of that one or two Audi you bought.
Of course, if your financial capabilities are beyond that and you can fully pay for 3 BMWs without an issue, then this leads us back to the original topic of the whole blog. Have you reached financial freedom, or do you intend to reach it?
Whether you really need a car or not, only you know. Having one is not wrong, not having one is also a correct decision. Having an old and cheap Mitsubishi does not mean you are not doing well. Conversely, owning a Bentley does not mean you are doing fine either.
What matters most is, whether the car provides a real value to you and make your life better. A car is a depreciating asset. It should be a tool which should make your life better, not more miserable. If it drains you financially without providing actual value, then perhaps you should consider cutting it down.
Afterall, your wealth is like a snowball. You need to give it time and add to it constantly for it to grow. But like snowballs, it may take some time to grow to a decent size, but once it does, the speed at which it grows is something that will make you go: It is all worth it.