[VIDEO] Buying a car: Highway to debt?
PUBLISHED 13 september 2018
Should you really buy that car you've always wanted? When you purchase a car, you're not only committed to the payment of car instalments, there's also the maintenance fee, fuel, toll, parking, road tax, and insurance. Can you really afford all of that? Find out more about what you should consider when purchasing a car on this episode of RUMIT.
FULL TRANSCRIPT
Hello?
Hi, I’m Jazmin. I’m 22 and well, adulting – it’s been tough. Think you can help me adult?
[INTRO MUSIC]
“EPISODE #4: CAR”
JAZMIN SIEH | Host
If I had to choose between the powers of telepathy and teleportation, I’d teleport the heck out of this traffic jam. As they say, biar kedekut harta, jangan kedekut signal! But what if the harta that I have now could hardly get me past the toll booth? Kata senang. Kata tak susah.
NIRMALA SUPRAMANIAM | Manager, Financial Education, AKPK.
We would always want to cross the bridge when it comes. Where are you going to look for that money?
[MUSIC]
NIRMALA
The first thing that you can tell about a person is by looking at what car the person owns. If you have this car means that you’re rich. If you are rich and you don’t have this car, there’s something wrong.
How much am I going to pay monthly from my salary? It’s not just going to be the instalment. We have maintenance to do on the car. There are repairs, fuel, toll, parking, road tax and insurance to renew on a yearly basis. Okay, now can I really afford this car?
To own a car at the present moment is pretty easy, actually. What we fail to see – this is not like a house, you know, it appreciates as you go. This is a machine that you need to maintain. It is a depreciating asset. It doesn’t matter whether you start early or start late – take the car out of the showroom and it’s already 30% down from the price.
NIRMALA
So now, I’m going to buy a car. Is it for a productive purpose? If you have the option of public transport, then by all means. So then you wouldn’t have to worry about your car being stolen, being destroyed. Second, what is your affordability? Nothing should go more than 40% of your income, also considering all other loan commitments you have. Third is your credibility. The bank will see – okay, 60% from your salary, good track record, look where you are employed as well. If we have defaulted, we have bad records, this loan will not be approved.
The problem that happens is we look for the car first, and then we see the added part – can we afford? Are our records good? Because if you have fallen in love with that car in that show room, you will make all this okay. You would probably not eat on a Sunday. So it’s not just necessarily it shows off your status. But also look at your location. If you are in Puncak Alam, maybe getting a Grab might be tough. Because I stay in Sungai Buloh, you don’t know the buses there! [laughs]
NIRMALA
It’s a very simple calculation – 40% is for loans, 10% is for savings, 50% is for your living expenses. If you have anything less than 50%, it’s a sign of trouble. But this is inclusive of the other expenses that you’re going to spend for the car. We have emergencies. Protection is very very important. So you probably have to put another 10% and 20% spread out.
Some jobs you enter, you are paid on a commission basis. So you have a very low basic [salary], but you can earn very high commissions. It could be high, it could be low. If you were to take in a long-term commitment, it could cause problems.
If you want to sell the car, look for a buyer. If you couldn’t find the buyer, then you would contact the financer – you would actually send it back to the bank. And what they would do is they would auction the car. If you get a good price, then you can cover up the loan amount. That’s why I said the resale value of the car is very important. You don’t make money from car sales.
[SAD VIOLIN MUSIC]
NIRMALA
Let’s say you have bought a car. Due to some reasons you couldn’t pay back. And so comes your friend, saying that, “It’s okay, I will pay up the loan for you. I’ll just use the car.” This is where you use the term of sambung bayar.
“SAMBUNG BAYAR”
“The act of pawning vehicles to a third party in order to cover loans without the bank’s approval.”
NIRMALA
When we come to this sambung bayar, it’s definitely wrong. In fact, it’s illegal. And what is the risk to this? What if that person doesn’t pay the loan. He absconded with you car. You still have got to pay the full amount with the bank.
There are a lot of things that we have to weigh here. We have just started working. But if I get committed just right after the first pay check, I’m going to be stuck for the next five or seven years just because I have to pay the loan. So why would you commit yourself to something so big at a very young age? All that money can go into your savings. And you can have that good holiday that you’ve always wanted.
CREDITS
