Economics of Buying a Car

When buying a car, there are a few factors to consider.

As a salesman tried to tell me: "Buying a car is like choosing a girlfriend"
I tend to disagree with his statement, as Economic Efficiency is what improves the human race.

To be 'Economic Efficient' means that:
- No one can be made better off without making someone else worse off.
- More output cannot be obtained without increasing the amount of inputs.
- Production proceeds at the lowest possible per-unit cost

Translating that into the context of a car:
- Lowest possible impact on the environment and to other people
- Better fuel efficiency vs power output vs size & space
- Low capital and maintenance cost

To measure these, variables include:
- Impact to environment: CO2 Emission, Greenhouse Gas Emission
- Impact to people: Active and Passive Safety, Well-being consideration for onboard passengers
- Fuel Efficiency: Liters per 100 Kilometer
- Power Output: Power to Weight ratio, Power to Fuel Consumption Ratio, External Size vs Internal Capacity ratio
- Low costs: Comparative advantage over competitor's pricing for purchase and running

Download your Analysis Spreadsheet HERE

How does $ link in with life stages

Infant - Teenage Kids in.0 | exp.15k | sav.0
Nothing much to worry at this stage of life, everything is paid for and well controlled. Food, clothing, toys, accommodation, holidays, travels are all responsibilities of parents. However, you get to control some of the spending as you get older and maybe start earning a bit. Saving up for the life to come would be a wise idea.

20-30 YUPPIES in.39k | exp. 30k | sav.9k
As you start to get into Uni, more $ will be in your control. A governance model should be established to control the money better, or else all will be spent. During this stage of life, you will start earning more money, spend much more on traveling and life, and start leveraging for some life-essential assets (eg. house, car, furniture, investments etc). A financial plan will help your retirement, as well as keep track of career and life goals.

30-40 DINKS in.84k | exp.80k | sav.4k
By 30, you maybe married, if lucky DINKs, which brings financial freedom. The savings/investments you made earlier in life would be used for deposit for a property. You would be earning a bit more as you go, getting adequate life insurance/assurances, and start investing in offspring which is an expensive exercise.

40-50 Family Life in.95k | exp.90k | sav.5k
This would be the stable time of life you start to bring up the kids. Still have to pay for the family expenses, the house mortgage, the outings and traveling and start planning retirement. It will probably the age where you reach the best wages you can get, so invest in a lower risk portfolio for your retirement.

50-60 Mid-Life Crisis in.95k | exp.90k | sav.5k
Getting into the last stage of your career, the income would be good. Kids would be away developing their own life and career and its the time to finish off and start to enjoy life.

60-70 Moving into Retirement in.65k | exp. 55k | sav.0
As life reaches the end of the journey, you can finally rest a while. It is time to get the investment and savings out and enjoy the rest of your life.

*after-tax income considered for 35% under 70k and 45% for 70k and up

Cost of Living away from Home

Did an estimation for a colleague of mine who wants to move out of home.
This estimate is for Brisbane, Australia and accurate as at 15th Jan 09.
It is divided into establishment costs and ongoing costs.

Establishment Cost
- Dining Table (200)
- Dining Chairs (70 * 4)
- Sofa (800)
- LCD HD TV (1000)
- Washing Machine (600)
- Rental Bond (1280 / 2) House Sharing
- Extra Lighting Features (120)
- Sofa Table (100)
- TV Cabinet (500)
- Towel & Linen (300)
- Shoe Shelf (25*2)
- Phone & Broadband Setup (100)
- Bed + Mattress (350)
- Desk & Chair (200)

Kitchen
- Microwave (150)
- Electric Kettle (80)
- Groceries (300)
- Fridge (800)
- Plates & Bowls (100)
- Kitchen Accessories, Forks & Spoon (100)

**Upfront: 6710
Extra Provisions 3%: 240 (DVD Player / Wii / Xbox360)
Total: $7000

-----------------------------------------

Ongoing Cost (p/m)
- Electricity (80)
- Home & Contents Insurance (100)
- iiNet Naked ADSL (59.95)
- Rent ($1390 / 2) House Sharing
- Toilet & Laundry Supplies (20)
- Groceries (200)

**Ongoing: 1155
Extra Provisions 10%: 120
Total: $1275