Posted by: fathersez | February 14, 2008

This should be a no brainer, shouldn’t it?

Petrol prices are terribly, terribly cheaper in Malaysia than in almost everywhere else in the world (except maybe the Middle East). The Gomen keeps telling us how much they are spending on subsidizing the cost of petrol to users, and how much a financial burden it is.  

Our general elections have just been announced and we are all gritting our teeth expecting a fuel rate hike soon after the new Gomen is safely ensconced for the next 5 years.  

Sometime ago, I wrote about having fitted out our car, a Toyota Camry with NGV capability This has reduced our costs of the Camry’s utilization significantly, and I should be able to recover the cost of the NGV fit-out costs in about 2 years. 

We also have another car, a Toyota Innova. This is larger and is more suitable when we travel as a family. This car is also used by my wife for her grocery shopping, kids to school and other activities, errands etc.

So generally, this car is used a lot less than the Camry. We keep a car log book, tracking daily travel, km when we start and when we return, cost of servicing, and fuel pumped etc. 

The average petrol cost per month for this car over the last 7 months is RM 213.90, or say RM214.  The estimated cost of NGV fit out is RM 6,800. In addition, I have to install overhead racks for baggage as there would be no more room at all in the car for stuff. This is another estimate of RM 1,500, making a total of RM 8,300. 

Assuming I can save 50% of my petrol bills per month (which is the savings rate I get for the Camry) or RM 107.00 per month , this investment will take 77.6 months to be recovered or 6.5 years. 

Or an investment rate of return of 15.38%. 

And, of course, if there is a petrol rate hike, the rate of return will be proportionately higher.  

I have been undecided on this for some time now.  I am now revisiting this issue a lot more analytically.  

One 

Should I go through all these trouble to save RM107 per month? (Ever since I started reading the pf blogs, I have decided to be a lot more careful with cars, basically maintain them well and run them to the ground. So this car is going to be with us for quite, quite some time.) 

Two 

Should I ask my wife to try better planning the usage of the car? For example, Lynnae is working on with 3 days a week of no driving at all.   

Three 

Would I be able to take the RM107 savings and chuck them into a savings / investment vehicle and watch it grow? Or would I just waste it away? 

FMF highlighted as one of his favourite money saving tips on cars, a comment from a Yahoo reader. 

In 2001, I bought a five-year-old Jeep Grand Cherokee with 40,000 miles. I paid cash for it and decided to invest what would have been a “new car payment” of $400 a month into a mutual fund. Five years later, I have nearly $40,000 in the fund. It was easy and a lot of fun watching my money grow. My Jeep is still running great, and I’m now trying to figure out what that to do with some of that money when I retire!”

Looking at the reasoning, the answer to my dilemma seems to be a resounding YES.  

a) I should pay for the NGV fit out. And if necessary take out part of present savings in Unit Trusts to pay for this. 

b) Set up standing instructions from my bank to pay in RM107 per month back into the Unit Trust. 

c) And quietly let my savings grow and reduce my carbon footprint at the same time. 

What do you think? Is there something else I can do to make the whole thing even better?

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Responses

  1. I don’t know very much about cars, but from what I can tell this sounds like a good idea. I think the savings translate to 30 USD, which sounds like quite enough to make the switch for (since it’s monthly). And then if prices go up, even more savings. Sounds good. :)


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