Nifty Tips for First Time Car Buyers
There was once a time where you can’t even afford a PS2 game; now you have enough money to pay for a car’s down payment. Achievement unlocked! But before you flaunt those cash to eager car dealers, take a look at our guide to prevent all those rookie mistakes newbie buyers may commit.
But what sort of mistakes could this be?
Inexperienced car buyers are more prone to drive off with the wrong type of vehicle for their use, grab a set of wheels that they can’t afford, or both; mistakes that will surely haunt their bank account for years to come.
First time buyers are also clueless about car loans and may be stuck with high installments for five or nine years! Just because the smartly dressed manager said that it’s a good deal, doesn't make it true.
Over-insured; Normally, the insured value for a new vehicle will be the purchase price. But as car depreciates every year, your insured value should also be reduced – a detail that most people tend to overlook.
So to avoid overspending on your very first vehicle, keep these questions in mind!
Can you afford it?
You may think that you are able to afford a car worth RM70,000, but there are other payments that you need to worry about. The cost of owning a car is usually much, much higher than what you have pictured in your head, and here are some pointers on what these costs are:
10% down payment - You know all about this, but the rule of thumb is to always pay more if you can afford it. The higher the down payment, the lower the monthly repayment and interest charges.
Loan financing – Think 2.9% p.a. for your car loan is a good enough rate? Don’t be fooled by the dealers and proceed to make your own investigation! Find the lowest interest rate for your car at comparison websites like RinggitPlus (hint: 2.9% is not the lowest rate out there).
Road tax – The cost of your road tax depends on your car’s engine capacity and location (Peninsular or East Malaysia). On average, expect to fork out RM20.00 to RM90.00 for 1000cc to 1600cc yearly.
Car insurance – What is included in your insurance? As a first time buyer, make sure that you know what you’re paying for, the coverage amount, and plenty more. So give them the third degree until you’re immensely satisfied with the answers.
Petrol costs / Fuel economy – Driving around a swanky sporty car sure feels good, but can you afford to top-up your petrol every week?
Servicing and maintenance – If your car cost is below the RM50,000 mark, expect to pay at least 0.8 to 1% of the car price yearly for your servicing and maintenance purpose. On the other hand, expect to pay 0.6% of your total for cars priced RM50,000 and above.
Cost of Living – Food, bills, shopping, and groceries; don’t forget to add in your monthly cost of living as well, and not to mention the toll costs in Malaysia!
Will this affect your credit score?
How you pay your first loan, even if that loan is in your parent’s name or guaranteed by your parents, will affect your credit report for years to come. Even though you have yet to purchase your car, keep this warning etched in your mind: Don’t ever make a late payment on your car. If you tend to forget things like monthly payments (how convenient!), use these tips:
Mind those payment rules – if the term said to pay by 20th of every month, set a reminder on your phone or go the old fashioned way and circle the date on your calendar. To make it easier, set a direct debit from your bank account to avoid a late payment.
Once you've completed your first payment, call the bank to ensure that they receive your cash.
Always update your information with the bank – especially if you've changed your phone number and address.
Are you getting a good deal?
The adrenaline rush upon entering the car showroom might cloud your car buying judgement; so before you agree with the sales person (“you are right, Mr. Salesman, I can indeed afford this RM105,000 vehicle with my RM2,500 monthly salary!”), be sure to go through these steps:
Never buy your car on your first visit – and always test drive the car. You would never buy shoes without trying them on, so why should you buy a RM50,000 to RM70,000 metal machine (hypothetically) without trying it on?
Careful about the “add-ons” – We’re talking about tinted windows, skirting, plus a funky sticker for your brand new car that you don’t actually need. Before you say yes to the dealer, remember that the more you purchase the add-ons, more numbers will be “added on” to the total price.
Don’t relax until you get your car – Although dealers can appear sincere and friendly, their main job is to sell you a car! Be aware of any additional items that they offer even after you have settled the car purchase price and all car financing matters.
Purchase during the promotion period – We get it, public transportation in Malaysia could use a little (or a lot) upgrade. Unless you’re desperate for a transportation and the KTM or LRT are simply not an option, hang on to your money until the promotion period. Usually, car dealers have offers during the festive season and at the end and start of the year.
Got all of that? Good! You’re now one step closer to your own set of wheels – and we don’t mean a skateboard.
Balkish Rosly is an Investigative Journalist of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
