Why buying a car can be a bad decision in your 20s (or even 30s)


Typically, we don’t encourage youngish folks who’re building their finances to buy a car.


Cars in Singapore are expensive. They depreciate rapidly. And most people can actually get by without one.

Money spent on a car could have been used for important life goals: retirement, dreams, education, travel, family.

That’s the jist of it.

Admittedly, articles like these always attract an inordinate number of people defending their purchase decisions.

So let us first say: We acknowledge the many pros of getting a car:

For many people, cars are not merely a way to get around. There are many benefits (both tangible and intangible) to owning one:

Carrying of bulky/heavy items: A personal vehicle allows you to carry bulky items that might otherwise be unwieldy to carry around on other transport services. Child seats and wheelchairs are great examples.

For people who can’t use public transport: A car makes transportation of crying young children and frail elderly A LOT less stressful. During the pandemic, many opted to buy cars to reduce COVID-19 exposure for their families.

Convenience: Owning a car allows you to be independent of public transport schedules and ride-hailing – both of which usually operate pretty well in Singapore. However, there are areas that are just not as well-served (think Tuas or Changi) as compared to the others.

Identity and social status: For many people, a car isn’t a pure means of transport. It can evoke feelings of self-worth or pride, or grant entry into a community. There’s also the argument that a car helps you to look like a successful person in front of your clients. I’ll just leave it at that.

Recreation and social interaction: Driving and going for joyrides are legit ways to unwind and meet friends. If you’re still looking for a partner, having a car will make all those late-night supper dates a lot more feasible.

Long-distance travel: When we say long distances, we don’t mean Joo Koon to Pasir Ris. We mean intercity trips: Singapore to KL, Malacca kinda stuff.  (From an environmental and urban planning perspective, cities are not the ideal place for cars. Further reading. )

That said, all these benefits come at a price. If cost wasn’t an issue, most people would want a car.

The question now is:

Can you afford a car, and should you?

Let’s take a look at some considerations:

Do you earn enough?

Even if you have the large lump sum downpayment for your car, it doesn’t mean that you should immediately think of buying it. Why? Because cars need money to operate.

Let’s take a look.

New Car

Estimates for the monthly cost of a new entry-level car ranges from anywhere between $1,200 to $3,000 a month.

You can find modest estimates by MoneySmart ($1,296), DollarsandSense ($1,446), SingSaver ($1,252), or Seedly ($1,504) here.

That said, for the purpose of this article, we’ll be using OneMotoring’s estimate of owning a brand new Toyota Vios.  Approximately $1,900  a month. You can check out operating costs for other models here.

If you earn the median take-home salary of $4,000 a month, that would be 43% of your take-home pay. Big yikes.

Used Car

You can expect to pay at least between $480 – $750 a month for an entry-level used car.  However, after factoring in running costs of at least $7,000 a year, you should expect it to look something closer to $1,100 – $1,300.

Assuming the lower end of the estimate, that would be 25% of the median take-home salary.

Now, consider this:

Conventional personal finance guidelines advocate the 50-30-20 rule:

Separating your income into three buckets: 50% on needs, 30% on wants, and 20% on saving/investing.

Unless you’re aggressively cutting costs elsewhere to afford your car, planning and saving for the future might be an issue. You might also have to make lifestyle sacrifices elsewhere as well.

For you to be spending a sensible 20% of your income on your car, you’ll need to earn a take-home income of $9,500 for the brand new car (based on $1,900).

(You can also make a copy of our CARculator Google sheet to figure out if you should buy a car or just ride-hail when needed. Requires Google Login).

Is hailing a ride cheaper?

No cost-based analysis involving car usage can escape the comparison to ubiquitous ride-hailing services – the closest alternative in terms of cost and convenience.

Generally, the more trips you make per day, the more it makes sense to use a car as opposed to hailing a ride. The following calculations are based on estimates of $15-$25 per trip.

Scenario A: Single Professional

Trips per day:

  1. Home-to-office
  2. Office-to-Home

A single professional who only drives to and fro to the office will spend $600-$1,000 on ride-hailing over a course of 20-working days. Not a small amount, but not enough to justify even an entry-level car.

Scenario B: The Nuclear family

Trips per day:

  1. Home-to-physio
  2. Physio-to-Home
  3. Home-to-school
  4. School-to-Office1
  5. Office1- toOffice2
  6. Office2-to-Office1
  7. Office1-to-school
  8. School-to-home
  9. Home-to-physio
  10. Physio-to-home (damn, what a long day)

A family who has two working parents, one physio-going elderly and a school-going child might spend $3,000 – $5,000 a month on ride-hailing.

That’s a pretty solid case for this family to own a car.

That said, in a post-COVID world where work-from-home has taken off, this might mean people take fewer trips than what’s furnished above.

In addition, just because driving a car is cheaper than hailing a Grab, doesn’t mean you NEED to buy a car; just because something is cheaper doesn’t mean you should buy it.

This brings us to our next argument.

Can you accept the opportunity cost?

If you’re just on the cusp of affording a car, then here’s one thing you need to realise:

The money you have in your 20s and 30s have the most potential to grow via investing. On the flip side, the value of a car falls dramatically within a decade.

If you make good investments, you may opt to use the returns to fund future purchases of a car.

If you buy a car, you won’t get those sweet investment returns. Instead, much of your earnings in your 20s and 30s will go towards a depreciating asset.

Let’s use the example of two 25-year-olds, Person A and B.

Suppose Person A spends $18,000 a year on a car (purchasing, fuel, road tax, insurance, maintenance), they’d be set back by $180,000 at the end of 10 years.

Person B doesn’t buy a car. They get an Adult Monthly Travel Pass at $128 a month, and ride-hails every weekend, and as a result, only spend $3,616* a year. They invest the other $14,384 they would have spent on a car, at 7% p.a over 10 years, they’d have $210,796.

Their difference in net worth after 10 years? $390,796. Not a small amount!

Can you afford to have $390,796 less in 10 years? It really depends on what your goals are, and how much they cost.

For some people, owning a car is the goal itself, or the car is instrumental in helping them reach their goal: e.g send loved ones around in comfort.

In my 20s, my goal was to attain financial freedom early and then focus on doing work that might be meaningful, but not pay a lot.

Cars, therefore, did not align with my goals. (They might align with yours).

*Annual public transport cost of $3,456 is calculated by the annual cost of a Adult Monthly Transport Pass ($128 * 12 months = $1,536) + the cost of taking 2 ride-hails every Saturday and Sunday ($20 * 4 rides * 52 weeks = $2,080)

So who is the ideal candidate to drive a car in Singapore?

In summary, they’d look something like this:

  • Would otherwise take 3-5 ride-hailing trips per day
  • Takes home above $9,500 every month – could be as an individual ($10,700 salary before CPF contribution), or a household (for a couple, each party will have to earn a salary of at least $5,937)
  • Have carefully considered the upfront cost, recurring cost and opportunity cost of owning a car

Of course, big focus on the word ‘ideal.’

In reality, if you start to have young children, or have elderly parents who have limited mobility, then you might find yourself considering car ownership/rental.

If you’re not the ideal candidate to own a car, but still find yourself needing one, then you might want to:

  • Buy a used car, that has experienced most of its depreciation (typically one that’s older than 5 years)
  • Rent a car so you can easily let go of it when you no longer need it


If you’d followed this blog for a while, you’d know we typically don’t like to tell people what to spend their money on.

After all, different people can find different ways to justify their spending patterns.

That said, we’ll make an exception for the car. Why?

According to the 80/20 rule, aka the Pareto Principle, 20% of your financial decisions will have an outsized impact on your financial situation.

In our opinion, a car firmly falls within this category.

You can buy 10 cups of Starbucks per month, and it won’t have as much impact as buying a car.

Same with getting the best cashback app.

Or cooking every meal at home.

Or even buying an overpriced diamond ring.

To make matters worse, it’s a big-ticket item that has been treated by previous generations as a ‘norm’ to have. It’s a testosterone booster, it’s a status symbol; we’ve been taught to desire them from an early age.

This might result in people buying cars simply to keep up appearances.

Our take? You can buy a car. But be absolutely sure you can justify it. This is one of those times you could regret your decision; too fast, too furious.

Stay woke, salaryman

A message from our sponsor, CARRO

If you’ve weighed the tradeoffs and decided that it makes financial sense for you to buy a car, consider getting a used car. They might not be the latest bling, but they will get you from Point A to Point B.

CARRO is SEA’s largest used car marketplace where they sell CARRO Certified pre-owned cars (without an admin fee charge) which go through rigorous quality checks and fixes that include:

  • A 160-point inspection check with all defects rectified even before listing
  • 5 days money back guarantee if you change your mind
  • 1 year warranty on engine and gearbox

CARRO also ensures that there is no mileage tampering and that the car has not gone through major accidents, fire or flood damage.

You’ll also know exactly what you’re buying (because no one likes a lemon), with a full inspection report that includes:

  • A 360 video and mechanic note video
  • Road test checks
  • Exterior checks
  • Interior checks
  • Underbody and hood checks

Find out more about CARRO here.

Also, if you need a car temporarily but do not want to commit to full car ownership, you can also consider their car subscription programme, CARRO LEAP.

  • The commitment period starts at 1 month
  • No downpayment needed
  • Can choose from either a new or used car, Internal Combustion Engine (ICE) cars or Electric Vehicles (EVs)
  • The subscription covers road tax, insurance, roadside access and more

Find out more about CARRO LEAP here.

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6 replies to “Why buying a car can be a bad decision in your 20s (or even 30s)

  1. Ride sharing, taxi service, public transportation? Never heard of that in our rural area. Posts like this really drive home how different city life is from rural. We’ve got three cars for just two drivers because we need the tank for some of our hobbies but prefer smaller, faster and more nimble vehicles as our daily drivers. We can afford them, we could afford a Lambo if we wanted one. But one thing is just as true here in the woods as where you are. Payments for excessively expensive vehicles will keep young people poor. It is smart to minimize your transportation costs when you are building wealth. We kept our vehicle costs low in our 20’s and 30’s and 40’s and 50’s and that’s one significant reason we don’t have to now. Very sage advice.

  2. As a car is a need for me, I moved out of Singapore to get a porsche 911 which costs as much as COE I would pay in Singapore. Dream came true.

  3. I think you have downplayed the opportunity cost way too much. When you are chasing after financial freedom in your 20s, a huge opportunity is to ply your trade with a side hustle or part-time business.

    With a car, you can meet clients, rush to appointments after work and bring goods around without having to lala/gogo/grab.

    In this time and age where a single person pursuing financial freedom, one cannot survive with just a day job, I can’t stress enough how much opportunity that a car have saved me time and money.
    The $300k+ that you’ve ‘saved’ over 10 years, becomes so much more in terms of opportunity cost when you have 100% mobility.

    Other opportunities also can present in ways like having spare clothes to change as and when you need to, a decent storage space (car boot) that is always with you, able to eat on the go from a quick fast food takeaway/drive thru. You can’t put a price tag on such opportunities, neither could you negate the opportunity they give you to achieve your financial freedom.

    1. I think this again goes back to how many trips you make per day, as pointed above? The more the trips you need to make then generally the car makes more sense.

      If you drive back and forth for short side hustles that barely pays then also not much ROI? For a housing agent that rushes to many locations per day to close cases (each sale commission is already in thousands$) then the ROI makes sense.

      Of course, owning a car brings about lots of comfort, which is likely one of the reasons ppl want to own cars too. If you feel it works for you then by all means your choice. But I guess what TWS wants to bring up is that looking from a purely monetary perspective, there’s lots to consider first before buying a car. If we are gonna bring in other less tangible reason then it all becomes very muddled and then this article becomes non-conclusive. As they said, it’s a personal choice eventually and TWS is just sharing.

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