Why Is It Important To Understand The Cost Of Car Ownership?

Many new car owners only calculate the purchase price of the vehicle without considering the annual costs that arise afterwards. In fact, according to data from OICA (Organisation Internationale des Constructeurs d'Automobiles) in its official report, the annual cost of vehicle ownership in developing countries can reach 10–20% of the vehicle's value per year.
 

Without planning, this annual fee can significantly burden your finances.
 

Let's start from the cost component that must be paid every year: motor vehicle tax.

1. Motorized Vehicle Tax (PKB)

Vehicle tax is an annual fee that must be paid for the legality of vehicles on the highway. In Indonesia, this tax is calculated based on the selling value of certain vehicles and coefficients in accordance with their respective regional provisions.
 

Vehicle tax components include:
 

• Motorized Vehicle Tax (PKB)
  
  

• Mandatory Donations for Road Traffic Accident Funds (SWDKLLJ)
   

According to the official Samsat DKI Jakarta website, the average PKB fare for passenger vehicles in Jakarta is 2% of the selling value of Motorized Vehicles (NJKB) per year.
 

Example: A new car with NJKB IDR 200 million is subject to PKB around IDR 4 million per year, not including SWDKLLJ.
 

After knowing about vehicle tax, another important component that is no less big is the routine service.

2. Annual Routine Service Costs

Routine service is an important component of car ownership that is often overlooked. In fact, maintaining the condition of the car with periodic service can help prevent costly repairs in the future.
 

The annual service cost components include:
 

• Change of engine oil and oil filter
  
  

• Brake, suspension, and cooling system checking
  
  

• Engine tune-up
  
  

• Tire rotation
  
  

• Battery check
   

Based on data from AAA Automotive Research Center (newsroom.aaa.com), the average cost of maintenance and repair of vehicles in America is around US $ 1,186 per year. This is equivalent to around IDR 18-19 million per year if converted to the current IDR exchange rate.
 

In Indonesia, depending on the type of car, annual periodic service costs can range from IDR 3 million to IDR 8 million for ordinary passenger cars.
 

In addition to routine service, don't forget there are fees for replacement spare parts such as tires and batteries that also need to be taken into account in your annual fee.

3. The Cost Of Replacing Spare Parts (Tires And Batteries)

Tires and batteries are vital components that have limited life. Ignoring timely replacement can cause safety problems or other systems damage.
 

Average lifespan:
 

• Tires: 40,000–60,000 km or around 3-4 years.
  
  

• Battery: 2–3 years depending on usage.
   

According to the U.S. Tire Manufacturers Association, tires should be replaced after 6 years from the date of production, even if the tread still looks good.
 

For batteries, based on a report by the Battery Council International, more than 1 in 5 vehicles on the road experienced battery problems in the age of more than 3 years.
 

Cost estimation in Indonesia:
 

• Replacement of 4 tires: IDR 3-5 million
  
  

• Battery replacement: IDR 800 thousand – IDR 2 million 
   

After discussing the physical maintenance of the vehicle, one other financial component that must be taken into account is car insurance protection.
 

Let's discuss the importance of this protection and how much it costs.

4. Annual Car Insurance Costs

In addition to tax and service costs, protection in the form of car insurance is an important part of vehicle ownership. Insurance protects you from large risks such as accidents, theft, to damage caused by natural disasters.
 

Types of Car Insurance:
 

• All Risk: Covers all types of damage, large and small.
  
  

• Total Loss Only (TLO): Covers severe damage above 75% or total loss
   

According to data from Financial Services Authority (OJK) In the 2023 insurance industry report, general insurance penetration in Indonesia (including vehicle insurance) has only reached 1.8% of GDP, showing that there is still a large potential for protection that has not been utilized.
 

Estimated Annual Insurance Costs:
 

• All Risk:2.5–3.5% of the price of the vehicle
  
  

• TLO:0.5-1% of vehicle prices
   

Example:
 

A car worth IDR 250 million can have an All Risk premium of around IDR 6.25 million – IDR 8.75 million per year.
 

Check Oona Car Insurance here to get maximum protection at an affordable price.
 

With all the components of this cost, you can plan the annual finances for vehicles more wisely. Now, let's summarize the whole discussion in the following conclusions.

Conclusion: Managing car costs, maintaining financial stability

Car ownership is not just about paying installments or down payments, but also about being prepared for annual taxes, routine service costs, spare parts, and car insurance protection.
 

By understanding the structure of this annual cost:
 

• You can make a more realistic budget
  
  

• Avoid sudden costs that interfere with finance
  
  

• Maintain the car’s resale value
   

Don't let unexpected costs damage your financial plan. Manage the cost of car ownership intelligently, starting from today! Car insurance helps control the unexpected costs of accidents or loss of vehicles.