Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Monday, 13 February 2012

Taxi or car ownership?

I recently caught up with Geoff Slattery, CEO of Slattery Media Group, a dynamic and energetic media company based in Richmond, Melbourne.
Geoff raised an interesting question: in these days of high fuel costs, consumer credit and expensive repairs, insurance and rego - rather than buying a car, would it be cheaper just to take a taxi every day?
Well, let’s take a look!  I need to make a few assumptions here, so let’s take the example of:
·         A Sydneysider, who lives 25km from work and travels 50km a day or 350km per week
·         A price of $1.50 per litre for fuel
·         10 year time horizon
·         Assumed zero inflation
·         For simplicity a flat cost of $2,000 per annum for rego, insurance, repairs etc.
·         Same fuel consumption for both cars (in reality the Prado’s would be higher)
Obviously there are infinite options, so let’s look at just three:
1 – Taxi every day
On the plus side, this is convenient.  No effort required. 
And now Australia's cabbies have satellite navigation you are less likely to be asked “I new to job, sir, which direction is Bondi, sir?”  - instead, you will now be asked: “How am I spelling Bondi, sir?”
On the downside, if you use the Taxis Combined phone line the voice recognition system will drive you insane and throw your phone at least once per week, which may cost you in new mobile phone charges.  “Did you say, dog’s eye?”…”NO!”
Cost $1.60 per km - $80 per day.
2 – Buying a new Prado on finance
Let’s try buying a Prado on Finance.  Brand new driveaway $98,734 as quoted by North Sydney Toyota car dealership.
Cost
New Prado
$98,734
Finance repayments
84 months, $300 per week
$105,840
Balloon payment
25% balloon payment
$24,684
Fuel cost over 10 years
350km per week, 8.3L/100km
$15,106
Insurance, rego, repairs etc
10 years x $2,000
$20,000
Depreciated value - 10 years
180,000km on the clock
($20,000)
Total cost
Over 10 years
$145,630
Cost per day
$145,630/10/365
$40


It sounds better than a taxi, but what about parking?  And you'd better hope you don't blow a head gasket...
2 – Buying a 10 year old Rav 4 for cash
Let’s try buying a 10 year old Rav 4 for cash.  Residual value only scrap.  Fuel costs as for Prado.
Cost
10 year old, 100,000 on the clock
$15,000
Finance repayments
Bought for cash
-
Balloon payment
No balloon payment
-
Fuel cost over 10 years
350km per week, 8.3L/100km
$15,106
Insurance, rego, repairs etc
10 years x $2,000
$20,000
Depreciated value - 10 years
180,000km on the clock
$nil
Total cost
Over 10 years
$50,106
Cost per day
$50,106/10/365
$14


The lower depreciation and lack of finance charges save you nearly $100,000 over 10 years.  You won’t look as cool, but you’ll have better holidays.
3- Get a bike
Cost per day will be as near to zero as makes no difference - and you’ll get fit!
Unfortunately with the state of the cycle lanes in Sydney, you’ll quite possibly end up in Waverley or Rookwood rather sooner than you had planned.
Summary
With fuel costs set to rise and traffic increasing by the day, you're probably best to get a Yaris or, better still, live near a train station.
***
Finally heading back to Sydney today, 15 months after leaving.  Can’t wait!