Lessons Learnt #1

I wish to add another label for my posts that is 'Lessons Learnt'. As life goes on, there are lots of decisions I had to made. Posts under this label is aimed to share my experience and the lessons learnt from those experience where money matters. I do hope the posts will benefit somebody along the way and I do hope people will not repeat the same mistakes that I did. To the first lesson.

Buying my first car

I started working back in 2004 with a mere salary of RM1,800 in KL. Back then, I only owned a scooter. After 6 months, I received a salary adjustment of RM400. Guess what, the first thing I thought of buying was a car. I guess a car goes side by side with a man's ego. Reflecting back, I didn't really need a car at that point of time since I had a bike. If I need to travel back to my hometown, I can always car pool with my brother. I go to the office with my bike, even after I bought the car.

Some might think that owning RM2000++ is a license to own a car. But please do your math carefully before deciding to buy a car. Please read my post on "Who can afford a Myvi" to get a better idea of what are the costs involved after you own a car.

My first car was a second hand Perodua Kelisa. I bought it for approximately RM28,000. I paid the down payment from my ASB savings. What a waste! If there's any positive to be taken from this experience is that I insisted the loan repayment tenure to be 5 years instead of 7 years (which a normal person would do). The installment comes up to about RM555 per month which is approximately 25% of my gross salary.

The most important element that I missed out when I decided to buy that car was I didn't pay myself first. The first thing on my mind when I received the salary adjustment was to spend it instead of investing it. When I finally owned the car, I was struggling to maintain it since I also own a bike at the same time. At the end of the day, I didn't have much left to pay myself. Just imagine instead of paying RM555 per month as installment for that car, I could invest it further to grow the money. It could have become approximately RM31,000 in 4 years time with rate of return of 8% per year compounded monthly.

After 2 years, I decided to change to a Perodua MyVi. Lucky enough, since I took a loan repayment period of 5 years, when I traded in my old car, I managed to get some money as a down payment for my new car. If I were to take a loan repayment of 7 years instead, I certainly would have to fork out extra cash just to settle the outstanding amount owed to the bank. Reason for change was I wanted a bigger car since my old car is beginning to tire me when I drive especially long distances (the car size is not proportionate with my body size).

If I were to plan properly, I should have bought only one car and use it until now. That would have saved me lots of money and time. A big chunk of the loan repayment would also have been paid by now. When the car is fully paid, perhaps the extra cash could go to more investments until I really need a new or bigger car.

Owning a car will certainly eat up a big chunk of your expenses. Besides installments, you would have to pay for petrol, tolls, maintenance and parking fees to name a few. Before deciding to buy a car, please.. please.. please plan carefully and analyze your financial situation properly. Only buy when you think you can afford all the associated expenses that come with owning a car. If you are buying for convenience, please ask yourself: Can I live without a car? As long as the answer is yes, it's better not to own a car.