Is owning car cheaper compared to other countries over 5-year period?

October 18th, 2012 by poobalan | View blog reactions Leave a reply »
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Is it true that using our car for 5 years will be cheaper if compared to using same car overseas, due to fuel subsidy?

Let’s say car cost is RM80,000 while in overseas it costs an equivalent of RM60,000 (25% cheaper). Assume petrol price is RM3.40.  After subsidy the petrol is RM1.90 in Malaysia. Assuming your mileage per year is 25,000 km and fuel consumption is 17km/litre.

5 year subsidised = (25,000/17 x RM1.90) x 5 years = RM15,833.37

5 year unsubsidised = (25,000/17 x RM3.40) x 5 years = RM28,333.39

Cheaper car price + subsidised petrol price 5 years = 80k + 15.6k = RM95.6k

Expensive car price + unsubsidised petrol price 5 years = 60k + 28.3k = RM88.3k.

So, with unsubsidised fuel price, the cost is cheaper by RM7k.

The above depends on car price difference, fuel consumption, petrol price subsidy amount. For example, in Thailand, car prices are lower between 30 and 40% while its about the similar in Indonesia and Philippines. Fuel is not subsidised in Thailand.

The actual cost of owning a vehicle also need to consider insurance, road tax, maintenance cost,  and loan rates in addition to car price and fuel price.

The above is just a simple example I created after I heard the following mentioned by PM:

Najib also insisted that middle class Malaysians do reap indirect benefits from government policies, through subsidies such as for RON95 petrol.

“Although we pay slightly more (for car purchases) initially, but because of the large amount of subsidies, you end up paying much less than your counterpart after five years of use,” he said.



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