Blog post by sgbluechip:
I drive a humble Japanese car which I bought brand new 3 years ago. I paid the full amount in cash and hence no expense on loan interest was incurred. I would like to see if it is worth keeping my car or change to taking taxis on a daily basis.
Cost of car: $46,000
Road tax and radio: $769
Insurance: $700 (50% NCD+5% police white card for good driving record)
Petrol: $1200 ($100 per month. My workplace is near my home but extremely inaccessible, though parking is free)
ERP: $20 (I rarely go to town area)
Yearly servicing: $150 (I do it only once a year, since I drive an average of 10,000 km per year)
Other wear and tear: $200
Parking at home: $765 (No way to avoid this unless you are living in private property)
Parking outside home and office: $120
Car wash: $144 (twice a month@ $6 each time)
Depreciation: $4,000 (minimum)
If I were to drive my car for the full 10 years, it will cost me $40,000. As the scrap value at the end of 10th year is $6,000.
Hence the total cost of my car ownership is $8168 per year. If I were to take a taxi everyday to work, it will cost me about $20 daily. That alone will cost me $4,800 a year. Though there are days I am on MC and leave, let’s just leave the figure for simplicity sake.
I need to take a taxi to school for my masters course, which adds up to another $1,000 per year. This is because I will incur transport costs for going to classes, meeting project mates, going for coffee, drinks and other associated traveling costs.
On weekends, I will need to meet friends on a regular basis for movies and drinks. That will cost me roughly another $1,000 per annum.
Hence, taking a taxi will cost me about $6,800 cash outflow per year. As depreciation is a non cash item, it means I will have to spend more money per year as compared to keeping my car now!
That said, after factoring depreciation, taking taxi instead of a car will save me about $1,300 per year. This amount can buy me a new laptop, LCD TV, high end PDA or an overseas tour.
Although on the average I do not spend more than 1 hour in my car daily, having a car is a lot more convenient and fun that will yield me more satisfaction as compared to the paltry $1,300 saved.
I do not want to save $1,300 and be subjected to the weather conditions, peak hour surcharge, dirty cabins of some taxis and waste time waiting for them.
$1,300 is money well spent if time is saved and quality of life vastly improved.
So perhaps taking a taxi can definitely save money, but qualitative factors are important as well. For example, picking up a girl in your own car is much nicer than picking her up in a taxi. Even if it is an old car!
Economists would argue that the upfront $46,000 when invested properly can yield more than 6% per annum. Hence my actual cost of car ownership is more than the above projection.
Well my take for them is, if that is the case, there is no need for any other material expenditure if all we do these days is to calculate to the last cent if it is worth owning any assets or not!
Then economists will be unemployed as well. How about that?
This entry is provided by the owner of http://sgbluechip.blogspot.com