The real cost of buying a new car

Correspondent | Monday May 9, 2016 15:14

Financial Rule # 3 -

Vehicle:

“Always pay cash for the car you drive, never on buy on credit, and never drive a vehicle that costs more than six months net income.”

This week let’s take a look at the real costs of buying a car. Below is a table that you can use to help you work out how much a new car really costs. Put the purchase price at the top of the page where the space is provided.

Then follow the instructions on each line to calculate the devaluation each year in the value of your vehicle.

New Vehicle Purchase Calculation:

Cost of Vehicle:

Purchase Price (incl VAT) …………………………………………………………

Cost of Extras (incl VAT) …………………………………………………………

Total Purchase Price ………………………………………… e.g. P100,000

Value of Vehicle:

Value at End of Day 1

Remove VAT (divide by 1.12) ………………………………………… e.g. P89,285

Value at End of Week 1

10% Depreciation (multiply by 90%) ……………………………… e.g. P80,357

Value at End of Year 1:

10% Depreciation (multiply by 90%) ……………………………… e.g. P72,321

Value at End of Year 2:

10% Depreciation (multiply by 90%) ……………………………… e.g. P65,089

Value at End of Year 3:

10% Depreciation (multiply by 90%) ……………………………… e.g. P58,580

Value at End of Year 4:

10% Depreciation (multiply by 90%) ……………………………… e.g. P52,722

Value at End of Year 5:

10% Depreciation (multiply by 90%) ……………………………… e.g. P47,450

Value at End of Year 6:

10% Depreciation (multiply by 90%) ……………………………… e.g. P42,705

Loss in Vehicle Value over 6 years:

Subtract from Original Price ……………………………… e.g. P57,295

Additional Costs to be considered:

Interest on Borrowed Amount (eg 11% p.a)

Insurance (eg 5% of value per year)

Fuel (eg P1,00 per km)

Consumables

(e.g. tyres etc not covered by motor-plan)

Licenses

* Names in this article have been changed