Having ‘the first car’ may be a common dream for most people. Car facilitates our traveling and is also an asset that can probably mark your status. Anyway, if you own a car beyond your financial status, you’ll be in trouble. Considering the following concerns before you make a decision to buy a car.

1. Savings accounts

You need to have a down payment at 10% average of the car price. You should plan to start saving your money. Before buying a car, make sure you have liquidity as much as 3-6 times of monthly expense. You need a good financial plan, check your income, expenses, savings, and potential for monthly installment payment.

For example, a salaryman who earns 20,000 baht monthly, and car installment payment with the minimum interest of about 8,000 baht. As 8,000 baht is a fixed expense and considered a monthly burden, only 12,000 baht is only left including other essential expenses. This salaryman may not have enough money or no savings. An effective financial plan is to have debt less than 35% of monthly income so it’s better to review your financial status.

2. Consider your goal and needs to buy a car

Before making a decision, we should know our goal and needs to buy a car as it’s an asset that will stay with us over a year following by a debt burden. If we really know our needs, we can choose the right car to make the most of it and our spending will be a good value for money.

Additionally, we should compare our current expenses such as traveling expenses, and whether we can save money if we have a car. If saving money is not possible, consider the economic value of owning a car. If we live far from the office and have a long journey to arrive there. It wastes our time and affects our mental health (long waiting for a bus or rarely find a bus during rush hours). Somehow, owning a car may not help saving traveling expenses but it saves time, and that’s worthwhile.

Be considerate of debts which may lead to a family problem if you change your car often in a short time or don’t use the car at its full capacity, or don’t really need a car.

3. Beware of other expenses after buying a car

Apart from car installment, there’re other related expenses or ‘hidden expenses’ after buying a car such as gas, insurance, car tax, maintenance, parking fee, Toll fee, altogether is an average of 5,000 - 6,000 baht per month plus car installment above mentioned that will make the whole car expenses at 13,000 – 14,000 baht per month. If the salary is only 20,000 baht per month, after deducting car expenses, only 7,000 baht will be left. And that amount won’t be enough for you to save for other important (or more important) financial goals.

The car value decreases once you drive it from the showroom. If you buy a car at 800,000 baht, you can’t sell it at this amount at the second-hand dealer as your car will depreciate. It’ll be less value at times and, especially when the new series is launched so you won’t earn any profit from reselling your car.

4. Is the car park available?

The car park is a big problem for those who want to own a car. Some live in the dorms or share rooms for rent where the car park is not sufficient. Some live in the townhouses and extend the area for a car parks or multi-purpose spaces. Those people then have to park the car in front of the house and that will obstruct the traffic. They may have a conflict with neighbors or the risk of a car accident.

Moreover, some offices don’t have ample parking spaces so people need to leave home early to reserve the parking. Or you may have to pay a car park fee to guarantee a place, and that will, of course, increase your expense.

If your house is not too far from the office and public transportation is available, you’d better delay buying a car if you’re still facing one of those challenges.

Most importantly, consider whether a car is really “necessary” for you so that you can plan your expenses well, and that you and your family can make the most of using that car.

Nipapun Poonsathiensap CFP®, ACC

Independent Financial Planner, Writer, and Lecturer