Real Cost of Cars?

Buying cars has never been easier than right now -- or so it seems.  For example, you can get a Hyundai Elantra at Sulit.com for a down payment of only Php28,000 (US$700) with the balance payable in 5 years at Php22,728 per month. At any given time, one of the big car brands has a sale be it in their main or affiliate dealerships.

But do buyers really get their cars at a cheaper price?  I have an inkling that they don't. I hadn't really bothered with the numbers though, not until I wrote this post.  What you'll read below is just my amateurish way of grappling with the economics of buying a car in the Philippines (i.e. I'm no accountant).  I just wanted to see approximately how much more people really pay for cars at "promo prices".

For this post, I looked into the Elantra promo at sulit.com and got the following numbers.

The suggested retail price (SRP) of the car on Hyundai's website is Php868,000.  That's a great price, especially now that Elantra won the North America Car of the Year award.

The promo I mentioned earlier has an initial shell out of just Php 28,000, which just leaves the buyer a balance of Php840,000 that ought to be paid in the next 5 years or 60 months. But it's not just simply 840,000/60=14,000 monthly payments.  The dealers must contend with interest rates and so the monthly payments are at 22,728.

So,
Php22,728 x 60months = Php1,263,680 (Total monthly payments to be made in 5 years)

That's Php523,680 more than the retail price! Every year, the buyer pays an additional Php104,736. You can buy a brand new car with all the interest rate payments.

When we factor in Philippine inflation at 5% for the next 5 years (compounded), it gets worse.
Year 1 payout: 272,736 (22,728 x 12 months)
Year 2 payout: 286,372.8
Year 3 payout: 300,691.4
Year 4 payout: 315,726
Year 5 payout: 331,512.3
Total: 1,507,039 + 28,000 downpayment = Php1,535,039  (the cost a buyer will pay for his Elantra)

By 2017, a buyer will have spent Php1.5 million for a car priced at only Php868,000.  That's almost double the price.

And then there's depreciation cost, which I won't get into because it's too depressing.

So what should Filipinos do to get the most bang for the buck for a brand new car? Pay it all in cash? Get a used car instead? I haven't really figured it out.