Things you need to know before buying a car?

When it comes to investing in a “First asset”, one of the most popular assets that many first incomers desire is a car. There is no denying that getting a car nowadays is as easy as getting a mobile phone. You can easily visit any car dealers and end up with driving a new car home. And one main reason that people want a car as a first asset is the convenience of owning a car. In Thailand, it is necessary to have a car to commute from place to place conveniently since public transports cannot take you to every destination you want to go. 

Before getting your new vehicle, it is always important to consider doing some researches before heading to a dealer. Most of the information you need to know are available online e.g. type of vehicles, price comparisons as well as auto financial loans availability. The best way to know how much you need to pay for monthly payment loan and whether you can afford or not is to set foot onto the car showroom. Subsequently a sale person will assist you with rate and terms of payment for your selection. Thus, you will know the required amount of monthly payment and interest rate for your dream car. After doing some calculation (Minus your monthly salary by monthly payment loan), it may seem like you can really afford it.

When you prefer not to pay the full amount upfront, you can make partial payment to the bank, also known as down payment and pay the remaining amount in equal installments for certain agreed periods.
For example, you can easily own an eco-car in Thailand by making a 20%-25% down payment and the minimum installment amount will be only THB5,500-6,000 per month. However, what you need to concern are hidden expenses that come with your new car.

Here are a few things you need to bear in mind before making a purchase
 
1. Fuel

Average cost per month if you use your car every day, fuel cost will be no less than THB1,500-2,000 a month. The fuel cost, which can be varied widely, depends on car usages, specific price of gas, and kilometers per liter that your car consumes. The more you use, the more you need to pay.

2. Insurance

Why is it important to have your car insured? You never know when there will be an accident, so it is highly suggested that you have an insurance to protect yourself from any unpredictable events.

Nowadays, some people even have an insurance for their smartphones so why not having an insurance for your car as well? An accident can happen anytime and anywhere, which can cause both car damages and physical injuries. Thinking of bills that you will be facing after the accident, having an appropriate car insurance coverage can help the car owner to protect all types of liabilities and property damages that can occur. The insurance coverage depends on the list of liability that the selected insurance is covered. For example, first class car insurance in Thailand can cost approximately THB10,000 per year for an eco-car while third class insurance may only cost THB3,000.

3. Other expenses

There are other miscellaneous expenses such as compulsory motor insurance approximately THB2,500, maintenance costs THB2,000, and tires THB5,000 per year. Normally, car tires must be changed every 2-3 years or every 50,000 kilometers. All the costs are varied depending on the age of your car and the amount of car usage. The older the car, the more expense you have to pay.

Combining all expenses, we are at approximately THB10,000 per month on the average for owning a car. Comparing this amount of money to THB15,000 which is a common salary for first incomers in Thailand, it is over 66% of the income. And there is a better chance that you will go out more often when you have a car, and more expenses occur accordingly.

Once again, it is always crucial to think carefully before making a purchase. And perhaps the most important question is “Are you in a financial position to be able to afford it?” You may come across some people who impulsively bought a car and later repossessed it due to their inability to manage their financial position. Unlike other assets, your car is depreciating over time, which will lose the value the moment you drive off the showroom. Thus, the answer whether to buy a car or not is different for everyone.

For those who decides that the car is necessary and affordably, we suggest that you should start saving up for your down payment. At least 25% down payment is recommended so you can lessen your interest rate and installments each month.

Tips for saving up for a down payment, we recommend you to “simulate a loan payment” by saving up fixed amount of money each month. The amount must be equal to your installment loan that you have to pay each month plus other related expenses. So, you can experience what your financial situation will be like if you purchase a car.

In addition, other than depositing money to your savings account, you can invest in the funds e.g. Principle Daily Income Fund and Principle Core Fixed Income Fund for better return. You can visit Principle Asset Management for more information https://www.principal.th/th/mutual-fundth.

Disclaimer: Investors should understand fund features, conditions of return, and risk before making an investment decision.