Common wisdom has it that buying a brand-new car is not advisable.
More often than not, expert articles on managing personal finances will say new cars are unnecessary, dangerous to one’s financial health or even an outright waste of money.
Those living in Malaysia are likely giving serious thought to personal finances, what with the economic fallout from the Movement Control Orders to fight the Covid-19 pandemic.
But is buying a new vehicle as opposed to second-hand really such a bad idea? Is there any way to justify indulging in those brand-new wheels?
Do the homework
The decision to buy or not to buy a car is personal. Whether an individual is thinking to buy a new or an old ride, do the research first.
Even the world’s richest, most passionate car collectors, and drivers who spend hundreds of thousands of ringgit a year on cars, are making the mistake of buying on a whim.
Such impulsive thinking opens the door to emotion-based decision-making – falling in love with a nice paint job or because of the really nice salesman – instead of deciding based on facts.
It is worth spending time investigating residual values, reliability, servicing scores and prices.
Given that the availability and prominence of any given model (the two factors that determine pricing) can vary widely by region, it is crucial to identify the average price individuals in one’s area paid for a particular model.
Crucial questions to ask
In Malaysia, cars don’t come cheap, especially foreign cars, since duties and taxes are high.
The decision on whether to go for a new or second-hand car depends on one’s financial situation.
Here are several important questions to ask oneself before buying a car:
- What is the overall budget for the car?
- Is at least a 10% down payment for the car feasible?
- How long will the vehicle be used?
- Are the yearly road tax and insurance costs affordable?
- Have the maintenance costs of the car been factored in?
These questions are key to not making serious mistakes. For example, someone looking for a vehicle to transport a big family, would need to consider a bigger car, such as an SUV or MPV.
Pay cash if possible
The cheapest way to buy a car is to fund everything, or a portion of it, in cash. Taking a loan or any other financing deal means paying interest.
Make sure there are sufficient savings left for an emergency after paying for the car. If the savings don’t cover the full cost of the car, pay as big a deposit as possible.
Some people may be concerned that buying in cash might trigger a tax audit.
If the amount is below RM50,000 it is not likely to trigger an audit by the Income Tax Department and as long as the source of the funds can be explained, savings or an inheritance, it is not a major concern.
Personal loans could work
Someone with a good credit rating could get a personal loan at a good rate from the bank, building society or finance provider.
This can be used for the initial down payment without having to wait to apply for a loan when one has found a car to buy. Personal loans also are useful when buying a very old vehicle or a project car to work on.
The costs can usually be spread over one to seven years. Do not secure the loan against one’s property. If it is a struggle to keep up the payments the home will be at risk.
Search for the best interest rate by comparing the annual percentage rate (APR), which involves other charges that must be paid in addition to the interest. Be aware that personal loans can carry higher rates.
Consider the extra costs
Apart from the loan, managing the insurance and road tax for the car must be taken into account.
Insurance for new cars is higher, as the value is higher, than for used cars.
As for road tax, the same rates apply to new and used cars. The annual road tax for 1,000cc vehicles in Peninsular Malaysia is RM55 and for 1,500cc vehicles it is about RM90.
Weigh the pros and cons
New and used automobiles have advantages and disadvantages.
Unlike property, new cars depreciate in value very quickly and are not a good investment. But new cars work well, last longer than used cars and typically have fewer maintenance issues.
Used cars are far more cost-effective in terms of pricing, so payment can be made in cash.
A used car is a more viable option for those who do not mind driving an older car, or who don’t want to spend the money and time taking care of a new car.
Used car owners can enjoy the ride and worry a little less about the depreciation rate.
This article first appeared in MyPF Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.
from Free Malaysia Today https://ift.tt/2RbmKhw
via IFTTT
No comments:
Post a Comment