Making loan for your dream car is the most crucial part of owning the beauty itself. However, from my observation that I faced, the customers' financial readiness is what it takes to make it a failure. Here are guidelines for you as many of my customers ask for advice. I have taken many practical and relevant consideration into account; the type of car, duration of loan and deposits.
Type of car:
People say, 'Hey dream big'. However, to choose a car is like to choose your liability. Many missed that which causes them a considerable amount of difficulties later in the future when they need to buy a bigger, better car. Bear in mind, you can really want to drive and loving the car for maximum 5 years. From my observation, most of my prospects starts surveying their next car after using the old ones for 5 years or more. Later than that you would be oggling at other cars dreaming about owning it next. Buy a car that:
- fits your monthly income. This is the most crucial part. What I meant is not by having RM1500 but settling for RM700 monthly installment. The best way to do it is by dividing your salary into 4 sections. So if you have RM1500 monthly income, you should be budgetting cars that cost you around RM400 maximum. With this guideline, I am also considering your maintenance and fuel bills. From Proton, the best car that is Savvy or Saga.
- fits to your prestige. This definitely is the main criteria for most people, but please reconsider and put the first guideline above as your first priority. Everybody goes for prestige, so from my observation this point should be as simple as possible. Buy a car that gives you the feeeel :D
Duration of loan:
This is usually what traps most of my customer into being 'unillegible' to buy a car. When you want to buy a new one, you would want to sell the old one. Everybody would expect, selling a car is profittable. I would too as I understand selling = profitting money. Nope, not in the automobile industry. Cars valued down up to 70% once you buy it, even for a minute. However, with the changes in Hire Purchase Act 1967, deposits are compulsory to buy a car, you will just be in a worse situation. Do loan that:
- shorter duration: most would think this is so unpractical. Reality is if you choose to take the duration of 9 years, for the first 4 years you are paying up the interest only. By the time you need a better, bigger car; your current car market value has gone down the hill yet your settlement is still sky-high. You will get a negative margin. If you can afford it, get a 7 year loan. By 4-5 years (or by the time you are bored with the old car) you will not face stagnant-forced situation to buy a new one.
- longer duration only when you are having other liability/ commitments. However, in the long run, you can solve the 'stagnant-forced situation' above by paying more than the set monthly installment whenever you can spare. Bit by bit you will be in-front of the schedule. This is crucial especially when you are planning to get the bigger-better car in the next 5 years (or someday).
Deposits:
The more the better. Most of us would not have the deposits. However, the genius one will have. You would solve two issues with having deposits. You can get your dream car and you can lessen the loan duration. The more deposit you can provide, the lesser strain on your neck and I am talking in the long run situation.
- For veteran drivers (owner of a car). If you follow the guidelines on 'loan duration' you can get your next car with ease when you sell you old car. You can do the maths. The trick is, any car exceeded 5 years, the market value dropped down like a steep slope. So be sure to sell the old car less than 5 years old.
- For new drivers, especially when you are newly employed, there is the Graduate Scheme loan which enables you to buy new car without deposit and even 10 years of installment. Do remember again about your next dream car and make the 100% loan in a shorter duration.
Special service by banks are usually for government servant and government-link-companies. They would offer you up to 10 years installment or 100% loan. Do your maths and consider your situation in 5 years time. Will you need a new car? If you don't, would you be able to keep the maintenance? Most cars 7 years older will need double amount of maintenance (especially with that many loose screws :D). So, make sure you do not miss out from owning something great just because you made a mistake in your first step.
Enjoy your dream car
