This article first appeared in The Edge Malaysia Weekly on March 11, 2019 - March 17, 2019

THE saying “Camera eats first” is now commonplace. For some, it would seem that the car also eats first, referring to the larger share of monthly income spent on a car — not just on petrol but also the monthly instalment that can be as long as nine years in Malaysia.

The cost of owning a car or motorcycle actually exceeds spending on food for some individuals and couples without children in the Klang Valley, researchers from University of Malaya’s Social Wellbeing Research Centre (SWRC) have found in a survey. The study was commissioned by the Employees Provident Fund (EPF) to come up with a reference budget, dubbed Belanjawanku, as an indicator for individual budgeting, salary guide for employers as well as public policy decisions on social benefits.

“One key insight from a detailed examination of Belanjawanku is that apart from spending on food, an oversized share of Malaysian household spending actually goes to transportation when using their own vehicles,” says the report, released on March 4.

In fact, the cost of car ownership was found to take up 31%, or RM770, of the RM2,490 a month that researchers think a single person needs to spend a month — more than the estimated RM550 for food as well as RM300 for housing. The same was found for married couples without children, whom researchers reckon needs RM4,420 a month to achieve an acceptable standard of living.

Car-camera-consumer

The RM550 estimated for food a month looks modest at only RM18.33 a day. Sunshine and love would have to be at work with only RM14.5 per person a day for the married couple.

Their car gets roughly RM5 extra a day compared with food. The absence or lack of monthly car instalments, compared with those starting out, is likely why elderly couples were allowed more money on food (RM850) than transport (RM500) in the report.

For the consumer, there is the RM250 for singles and RM400 for couples, which researchers set aside as monthly savings. There is also an amount for discretionary spending (insurance, vacation, contribution to parents) as well as social participation (festivities, weddings and funerals).

Incidentally, the RM2,490 monthly income that SWRC researchers reckon individuals who own a car needs, based on its Klang Valley survey, is just below the RM2,500 median income for wage earners in Kuala Lumpur and Selangor, according to 2017 data from the Statistics Department. That would imply half of wage-earners in Kuala Lumpur and Selangor should have just enough to own a car.

Still, what is a minimum acceptable level of living is subjective.

At least half of the wage earners in Kuala Lumpur earned below the monthly “living wage” that researchers at Bank Negara Malaysia came up with a year ago. They had looked beyond the basic necessities (food, clothing and shelter) to derive what they deemed as a minimum acceptable standard for Kuala Lumpur using 2016 data.

In a paper published in March 2018, the central bank researchers estimated a higher monthly living wage figure of RM2,700 for individuals who rent, eat out and use more public transport. Bank Negara’s monthly living wage estimate was RM4,500 for couples without children who rent, eat out half the time and own a car and a motorcycle. The monthly living wage was RM6,500 for couples with two children who rent, own two vehicles and only eat out during weekends.

All that is below the monthly median household income of RM9,073 for Kuala Lumpur and RM7,225 for Selangor.

At the time, Bank Negara researchers found that up to 27% of households in Kuala Lumpur were earning below the living wage. Many are likely to be couples with two children or single-adult households. Recent graduates, for example, have average starting salaries of RM2,207 (degree) and RM1,346 (diploma), they noted.

Public transport and savings

For individuals taking public transport, SWRC researchers estimate only RM200 spending on transport, freeing up RM570 every month compared with car owners.

“Increasing the use and availability of public transport would go a long way towards tackling the cost of living burden and give households a better chance of meeting their aspirations,” states the Belanjawanku report.

This is where the RM100 monthly pass, which covers train and RapidKL bus services, and the RM50 monthly pass just for buses, as announced in Budget 2019 with an allocation of RM240 million, can make a difference.

Certainly, there is still a need to improve the first and last mile connectivity, such as pedestrian access, bicycle lanes and feeder buses as well as park and ride space. In a 2016 report, the World Bank estimated that there were two cars to one resident in Kuala Lumpur and about half of even the poorest 10% of households owned a car in 2012.

Going by the RM770 that SWRC researchers accorded for a car, they may have assumed a monthly instalment of about RM550, having considered the need for petrol, insurance and maintenance.

A monthly car instalment of RM550 is enough to buy a RM50,000 car, which would end up costing RM63,500 at 3% interest over nine years — five years’ worth of the minimum wage of RM1,100 a month.

Half of that could be saved by choosing a more affordable car with a RM23,000 price tag (the cost of a Perodua Axia 1.0 Standard E-manual), which will cost RM29,592 on the maximum nine-year loan at 3.2% interest with a RM274 monthly repayment.

The converse is true if one were to choose a pricier car despite not having enough in the retirement kitty. A RM90,000 vehicle, for instance, would cost RM115,000 over nine years — that is nearly nine years’ of retirement savings at a minimum of RM1,100 a month, or five years if one saves RM2,000 a month.

That is potentially significant considering that most EPF members reportedly use up their savings within five years.

If owning a car was not necessary, even the RM29,592 spent on the car over nine years could have potentially lengthened the retirement kitty by up to 2.2 years using the minimum monthly wage of RM1,100.

Apart from better public transport, a shared-ownership structure that allows people full utility of a vehicle without bearing the full amount of its cost could also help expand the retirement kitty.

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