People buy cars for many reasons. For some, it’s about prestige – the car being an extension of their personality and a symbol of who they are. But for the majority, having a car means not being bound by the limitations of public transport wherever and whenever they need to travel.

To some, a car is a necessity, not a luxury. They need it to ferry an elderly parent to the doctor without trying their luck for a taxi, or to send young children to the babysitter and not fret about passengers who pretend to sleep on the train to avoid giving up their seats.

Got money?

For this last group of consumers, a car that targets the budget-conscious will probably meet their needs. The car could be a fairly basic model without too many frills, and the cost of ownership shouldn’t form the bulk of the household budgets or monthly expenditure.

If you are looking at such cars, don’t be taken in by offers like “low monthly instalment” or “$0 deposit”. Since the relaxing of car financing regulations, loans can be paid over a maximum of 10 years, instead of seven. Although extended loan repayments may mean lower monthly instalments, this works out to paying much more in compounded interest.

Cost of a car

In general, the cost of car ownership can be divided into two parts: the actual purchase price and the monthly maintenance cost. Those on a budget can opt for a car from a cheaper marque and of a lower engine capacity to save on road tax. The Certificate of Entitlement (COE) for smaller cars (1,600cc and below) is also relatively lower.

You cannot avoid other recurring fixed costs like the monthly instalments, annual road tax and insurance, radio licence and season parking (for HDB residents); you have to pay for those regardless of how often you use your car. Maintenance is another area you shouldn’t pinch pennies in because the safety of the car is at stake.

But you can control your spending on variable costs like petrol, parking and ERP charges. Again, with a smaller car, fuel consumption tends to be more economical.