Simple Way To Pay That Mortgage Increase
It is an issue keeping people awake at night but may have a simple solution. The media loves to wind people up with talk of financial cliffs and mortgage distress but there are some good solutions out there. One you may not have considered is to sell the car and ride a scooter.
I’ve done the numbers calculating the cost of a car/scooter, annual rego, ctp and insurance, average costs of servicing, fuel consumption at 260 kms per week, interest costs for financing and the retained value of the vehicle at 30% of the purchase price 5 years after purchase and the results are below:
Let’s look at the numbers, if you own an average priced car, say a Honda HRV or equivalent which costs about $40,000 new and finance it over 5 years and retains 30% of it’s value at the end of 5 years, add the costs of an additional 4 years rego, insurance, servicing and fuel, your total cost of 5 years of car ownership is $59,935 or $11,987 per year.
You may think that owning a 2nd hand car is cheaper but if we do the same numbers with say a 2017 Hyundai Tuscon at $25,000, you will need to factor in extra servicing costs, a higher finance interest rate than a new car and slightly less fuel efficiency so the annual cost works out to $10,737 per year.
If you purchase a Peugeot Django 150cc scooter at $5790 including on roads, add the ongoing servicing, rego, insurance and fuel and calculate the value remaining after 5 years at 30% of purchase price your total cost of ownership over a 5 year period is $13,876 or $2775 per year, saving you $46,059 over 5 years. Hooly Dooly is right!
You can purchase a less expensive new scooter at $3890 ride away for a Kymco Agility RS 125 and have an annual expense of ownership and running costs of $2375 per year!
If you purchased a property with a mortgage of $500,000 with an interest rate locked in for a period of time at 2% you are paying $2129 per month. As your locked in rate period ends and interest rates go up to say 5.5%, you are now paying $3080 per month. That’s an extra $11,412 per year. That amount of money keeping you up at night wondering how you are going to find that to cover the extra cost is answered with 2 wheels.
What about public transport? Aside from being cumbersome, time consuming and not taking you directly to where you want to go all of the time, a weekly Opal card will set you back no more than $50 per week or $2600 per annum. Yes, that is more than a new budget scooter cost per annum and close to the cost of a mid-range scooter. I know what I choose.
If you have a 2 car household, consider selling the second car and picking up a scooter to ride instead. If you have a 1 car household it may be time to ditch the car and scoot instead.
Looks like it is time to sell the car and ride a scooter and remove some stress and add more enjoyment to your life!