Buying a car is often seen as a rite of passage in Malaysia, a necessary step for commuting and daily errands. However, the process involves more than just choosing a model and color. Here’s what you need to know to make a smart and informed decision.
New vs. Used Cars
One of the first decisions you'll face is whether to buy a new or used car. New cars come with a full manufacturer warranty, which means any issues can be fixed by the dealer at no extra cost during the warranty period. Additionally, many dealers offer complimentary servicing for a certain timeframe. However, new cars depreciate quickly. "A car’s value drops by about 9% to 11% after it is driven out of the sales gallery," notes Ooi May Sim.
On the other hand, used cars are generally cheaper and have already undergone most of their depreciation. However, they come with their own set of risks, such as potential hidden issues and the lack of a warranty. To mitigate these risks, it's advisable to buy from a reputable dealer and have the car thoroughly inspected by a mechanic.
Local vs. Foreign Cars
When it comes to new cars, you have three options: locally manufactured, Completely Knocked Down (CKD), or Completely Built Up (CBU) vehicles. Locally manufactured cars, like those from Proton and Perodua, are often the most affordable due to lower taxes. CKD vehicles are assembled locally but use mostly imported parts, making them slightly more expensive. CBU vehicles, assembled entirely overseas, are the most expensive due to high import and excise duties. "Kuala Lumpur is ranked as the fifth most expensive city in the world to buy a foreign-made car because of these taxes," explains Ooi May Sim.
Types of Car Loans
Most Malaysians opt for a car loan to finance their purchase. The most common type is the hire purchase loan, where the bank owns the car until the loan is fully repaid. There are two main types of hire purchase loans:
Fixed Rate Loan: The interest rate and monthly instalments remain constant throughout the loan period. This makes budgeting easier but offers less flexibility in reducing the total interest paid.
Variable Rate Loan: The interest rate fluctuates based on the Base Lending Rate (BLR) set by banks. This type of loan can potentially save you money if interest rates drop, but it also comes with the risk of higher rates.
Down Payment and Loan Tenure
When taking out a car loan, you'll generally need to make a down payment of 10% for new cars and 20% for used cars. Some banks offer 100% loans for new cars, but these come with specific conditions.
Loan tenure in Malaysia ranges from one to nine years. Shorter loan tenures mean higher monthly instalments but less interest paid overall. For example, a RM50,000 car with a 90% loan at 3.5% interest over nine years would have monthly instalments of RM547.90. Reducing the loan tenure to five years would increase the monthly instalment to RM881.25 but significantly lower the total interest paid.
Additional Costs: Insurance and Road Tax
Car ownership comes with additional costs like insurance and road tax. Insurance is mandatory in Malaysia, with options ranging from third-party to comprehensive coverage. Comprehensive insurance covers both your vehicle and third-party damages, making it a safer but more expensive choice.
Road tax is another annual expense, calculated based on your vehicle’s engine capacity and geographical location. This tax funds road maintenance and other public services.
Buying a car in Malaysia involves a series of important decisions, from choosing between new and used vehicles to understanding the intricacies of car loans and additional costs. By considering these factors and planning your finances carefully, you can make a purchase that fits your needs and budget.
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