For many who are contemplating about getting a car, the bad news is that petrol costs has risen so much that it will probably be as much as your installments that you will be paying for your car. The good news is, this may only be true for smaller cars – assuming that the installment is $290 per month and that a 22,000km drive per month costs $236. Of course, if you are driving a bigger car with higher fuel consumption, you may still end up paying just as much as your car installment – but really, the crux of this news is that even small time car owners will be affected by the rise in petrol prices which affects their total cost of ownership of a car.

Will this eventually lead to the reduction of vehicles on the road and hence improve road conditions and reduce ERP charges. If the recent announcement of ERP charges and increase in number of gantries is anything to go by, it’d seem not. If there’s really an increase in public transport ridership, one really wonders where in the world did the additional traffic come from. Or could it be that people are just making more trips? Guess only  the authorities will know.

RECORD pump prices have put the brakes on budget-car sales, as monthly petrol bills begin to match or overtake car-loan instalment payments for some models.

Trade figures for the first five months of the year showed sharp falls of 50 per cent or more in sales of brands like Chevrolet, Hyundai, Kia and Ford. Models priced below $60,000 were hardest hit.

The Chinese brands are also reeling.

Mr Paul Ng, general manager of Vertex Automobile, which distributes China’s Chery, said buyers may be able to afford monthly instalments on a car, ‘but what about petrol, electronic road-pricing and parking?’.

‘Budget cars are bought by budget buyers. With inflation so high, these people would want to take care of necessities rather than spend on a big-ticket item,’ said Mr Ng.

A Straits Times estimate shows that some car buyers may have to fork out as much for fuel as their car-loan instalments.

For instance, the monthly payment on a 90 per cent, 10-year loan for a Chinese car like the Chery QQ is $290. Based on an average annual mileage of 22,000km, petrol bills for the car are not much lower at around $236 a month.

Early last year, the monthly instalment and fuel bills were $280 and $173 respectively.

The same monthly payment for an off-peak Geely is $193. Assuming off-peak cars clock 30 per cent less mileage, the monthly fuel bill would be about $215. Last year, the monthly instalment and petrol bills were $174 and $161.

Mr Kevin Kwee, executive director of Geely agent Group Exklusiv, said rising running costs have dampened buying sentiment, especially in the lower end of the market.

‘We are still very clear that Geely is targeted at off-peak car buyers and buyers who want low maintenance and low insurance cost,’ Mr Kwee said.

‘But based on sales results, we’re not yet successful in reaching out to them.’

Mr Albert Pang, managing director of Chevrolet dealer Alpine Motors, attributed the sharp drop in Chevy sales to ‘a lack of new models in the first part of the year’, but said that ‘the price of petrol has a part to play too’.

Besides inflationary pressure, which affects mostly first-time buyers, industry observers also cite the problem of ‘negative equity’ that many car owners face today.

The term refers to the resale value of their existing car being lower than the loan balance owed to the bank. Motorists in this situation find it harder to trade in for a new vehicle.

According to Motor Traders Association data, 23 out of the 33 member brands suffered a drop in sales in the first five months of the year.

And of the 10 which bucked the trend, seven were luxury brands, including Mercedes-Benz, BMW, Audi, Maserati and Ferrari.

Honda and Subaru were two mass-market marques with improved sales.

Mr Ng of Vertex commented: ‘For luxury-car owners, petrol and ERP are not big considerations.’

Source: Straits Times Interactive,

Article extracted on 27th June 2008

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