Due to the high prices of cars in this country and our huge dependence on it, car loans, petrol and maintenance are among the biggest financial burdens faced by every Malaysian from all walks of life. Undoubtedly, Malaysia’s household debt has sky-rocketed over the years and more disturbingly, more young Malaysians have been declared bankrupt; with car loans believed to be a major culprit behind it.
While you may have looked through a good number of car reviews and car buying guides on AutoFreaks, many don’t know what are the other aspects that they need to be concerned about, ranging from aftersales, financial, maintenance and so on. Hence, here are the five things Young Malaysians need to know when buying and owning their first car.
1. Use the Internet to your advantage
We’re fortunate that we are now living in the Internet age, so utilize it by performing research on many things. A proper research on the car’s specifications, known problems, DIY tutorials, car parts, owner’s reviews and so on can decide if that car is right for you. That also leads to tremendous money and time savings.
2. The Rule of Car Loans
Bank regulations state that bank loans must not be more than 1/3 of your salary. That means if you earn a nett pay (aka take home pay) of RM2,400 monthly, your car loan must be not more than RM800 per month.
On the car loan duration, there are pros and cons for taking the shorter loan repayment period or the maximum 9 years loan. Longer loan duration means less deduction on your monthly salary, but that translates to higher interest rates which leads to more money going to the bank in the long run. It’s vice-versa should you go for a shorter loan duration.
However, our recommendation is to take not more than 1/5 of your net pay, and the lower, the better. Do consider you need to pay your other expenses – ranging from rental/mortgage, expenses, food and many more. Do factor your long term life commitments – from future property purchase or family planning. The last thing you want is a long car loan that could burden your future planning. Hence, buy a car or a vehicle within your means. If you can’t afford it in the long run, don’t buy it.
Not forgetting, we need to factor in the price of petrol, parking and tolls as well. Knowingly the Malaysian government is working to eliminate the burdening fuel and tolls subsidiary, the rise of petrol prices and toll rates are invertible. Be prepared for such consequences. Take our word for it and save a chunk of money in preparation of items no 4 and no 5 below.
3. Get to know the scope of the warranty coverage
The warranty will be a life-saver for new car purchase. The ubiquitous vehicle warranty from manufacturers ranges from the standard 3 years or 100,000km mileage or whichever comes first. There are some manufacturers offer a generous 5 years warranty or more, so scout around to see which manufacturer gives the best warranty.
Also, check with your dealer on the things that will void your warranty. Adding fancy upgrades for your car such as ICE, rims or aftermarket performance parts could void your car’s warranty as the manufacturer has no assurance that these non-standard parts caused the problem on the car.
While on the warranty period, perform your servicing at the authorised service center, as even changing the oil at any third party workshops may void the warranty. However, once the warranty period is over, you can perform your car servicing from any third party workshops.
4. Get to know the annual rates you need to pay for the car
Two things that require every car owner’s attention annually – insurance and road tax. Road tax remains constant as it depends to your vehicle’s engine capacity, and can be bought yearly; or twice yearly, once the first year of ownership has passed.
Car insurance meanwhile is different. Vehicle insurance will be the most expensive when it is new and the rate is proportional to the vehicle’s value. As years go by, car prices depreciate which explains why the insurance rate for cars will get steadily cheaper. More so if you’ve accumulated the Non-Claimable Bonus (NCB) from your insurance. However, once you made an insurance claim, your NCB will reset to zero, but it will be offset by your car’s depreciation. The max you can claim from NCB is 55%.
Our advice will be to allocate a certain amount of money within your annual budget to pay off insurance and road tax.
5. Keep an eye on servicing and wear & tear
Maintaining your car is essential to ensure your car can serve you without problems, hence the a need for regular servicing of your car. Common things to look at are – engine oil, gearbox oil, brake fluids and so on. Get to know when such fluids require changing. Look at your car’s service schedule and do your best to be punctual on your car maintenance. Do note that you may need to prepare approximately RM100-RM500 every time you send your car for servicing.
Car components will last a certain mileage hence here are the most essential wear and tear parts you need to know for a car – battery, tyres, brake pads, spark plugs, air filter, absorbers, suspension arms and so on. Some car manufacturers also offer a warranty on wear and tear parts during the warranty period, so look out for that, it can save you a bundle.
Investing in your vehicle’s maintenance is worthwhile, as this will help prevent more major problems occurring on your car, which easily translates to more money is needed to repair it. That is also why we suggest keeping your car loans as low as possible (just like in point 2) so you can allocate some funds for emergencies. Well, if all else fails, there’s still the 2-wheel option that AF featured some time back. It’s cheaper, more fuel-efficient and will save you a lot of time. Getting your license for a bike is a lot cheaper too.
[Image Source: AF’s Image Archives]