Do Malaysians Know How to Value a Car?

Mitsubishi Lancer Evo

I have no intention of stirring any shit when I am writing this nor is it directed to anyone. The reason of writing this at 1am on Saturday is because I feel like it and couldn't sleep. No party tonight ma write something lo. Anyway we should all already know the ridiculously high car prices in Malaysia. The fact is that Malaysia is the only country in the world where the price of a car is equivalent to buying a house. We also go into the world record books for having the highest car prices in the world! Aiyo where all this mumbo jumbo originated from?

Mahathir bin Mohamed on the pretext of developing a local automotive company imposed a 300% duty import tax on all foreign cars. As a result the tax collected by the government on the imports are approximately RM2 billion to RM4 billion per year. That is a lot of money to the govt's coffers! Now do you see why the government won't even think of reducing the taxes on imported car brands even if they decide to let Proton or Perodua si ka bo chi teh (die with nothing left).

Feel like vomiting blood? Read on.

Toyota Altis sells in Indonesia for roughly RM46,000. The same car sells in Malaysia for about RM112,250. That is 3x times more expensive (300% tax)

Consider this Honda Jazz selling at ~RM36,000 in Indonesia. Same car sells here for around RM109,800. Also 3x times more expensive. (300% tax)

BMW 535i sells in the US for RM178,000 while we have to pay a hefty price tag of RM450,000! With RM178,000 the best is that we could get a Toyota Camry 2.4L in Malaysia :(

We are paying the highest car prices in the world just to support Proton or Perodua and not to mention the stupiak AP policy to cronies, yet Proton is still struggling overseas while Perodua doing slightly better in the domestic front. Back to the question, do Malaysians know how to value a car after so many years of manipulation? Give you some comparisons:

• Buying a Toyota Altis for RM112,250 while he/she lives in a decent condominium of about RM350,000. Is a house worth only 3x times a car? Most families will settle down on a house only once but many will change car every 10 years on average. If he/she continues the same buying spree, the house is worth the same as the cars in 30 years. Tak masuk akal (makes no sense) to me.
• If you have only RM20 (50% disposable income RM40000/yr salary). Will you choose to eat Char Koay Teow for RM3.50 (Perodua Viva RM36,500) or say Western Food for RM10 (Toyota Altis RM112,250)? With 2/3 of the Malaysian population surviving with less than RM4,000 a month, it takes like RM1000/mth to pay off the Altis for a 9 years loan alone with 20% downpayment. 25% of income is used to buy a car? This also makes no sense lo.

Financial planners often say that your car loan payment should ideally constitute <20% of your net income while the house should be ~35%. It is in my opinion that a house is worth a zillion times more than paying for a car. A car does not appreciate in value, a property such as house does. Having a shelter is a long term good commitment while a car is a repeating medium term liability.  

I'm writing this because I am lucky enough to made a right decision to buy a Char Keoy Teow instead, my 1.3cc Perodua Myvi back in April 2007 during college years and I want to share my experience with others. Currently it only setbacks me 18% of my net income and I will get rid of this burden in April 2012, just a shy 1.5 years away. I gladly pay my current landed residence in Penang which also houses 2 more CKTs; Perodua Kancil and Kenari which means I am more than happy to live in a nice spacious place than to weave through traffic using a big car.

Will we ever see corrected car prices in Malaysia? The answer is NO. Here is a news clip from our dear DPM Tan Sri Muhyudin Yassin about our nation's car policy. Muhyiddin assures govt support for automotive parts and component sector.

1. KUALA LUMPUR, May 26 – The deputy prime minister said special focus
   will be given to “facilitate and encourage” the development of the
   automotive parts and component sector despite the current global and
   regional economic downturn.
2. He pointed out that . .. . the motor vehicle sub sector in Malaysia
   will not be directly impacted because of its heavy dependence on the
   domestic market. 
3. “The Malaysian government recognises the contribution of the
   domestic automotive industry towards the development of the country.”

Point 2 and 3 basically says that the Malaysian motor car industry will continue to be protected. This means we will continue paying the highest car prices in the world for automobiles. Our local automobile players are not national assets, they are national liabilities! I can see that a large proportion of Malaysian income is spent on car installment. The government just knows to protect car manufacturers’ profit, but who is to protect consumers’ pocket? No choice la, you have to DIY by knowing how to value a car properly. For a rough car price guide, check it out at TheStarMotoring.

The bottom line is that Malaysians will have to work harder than the rest of the world in order to purchase the same luxury vehicles. No wonder all wanna buy lottery ticket la. I understand that some families do buy for safety reasons for their child while some do have the financial means but the message to convey here is remember to think thoroughly first before you sign it. To be wise in your finance is not just about making a binary decision (BUY or NO BUY), it is to be able to make multiple decisions by asking questions or seek alternatives; What If I buy something cheaper instead? Can I buy 2nd hand car instead? Why foreign and not local? and etc...

How to get first car for FREE (credits to KC Lau)

Before making a down payment for a new car purchase, please consider getting a used vehicle. The secret is to take advantage of the no-claim discount or NCD. The tactic here is to use a very cheap old car and pay low insurance premium for the first five years. When you've reach the maximum no claim discount, only then would you pursue your dream car.

NCD for Private Car

Example:

Buying a 15 year old proton sage 1.5l (automatic, power steering)

Cost: RM5,000 (pay cash)

Insurance: RM277.50 (comprehensive) or 3rd party which is cheaper.

Maintenance cost for an old car is much lower than the interest payment for a new car. After 5 years, buy your dream car.

Example:

Buying a new Honda Civic 1.8 iVtec

Cost: RM113,800

Insurance: RM3,225.90

After a NCD, you get a 55% discount. This means you only need to pay RM1,451.65 and you save RM1,774.25 every year onwards for car insurance premium alone!

RM1,774.25 x 3 = RM5,322.75. With only three years, you already save that much assuming you did not kiss other people's car and enjoy the full NCD, and did not make a claim. So you can consider your 1st car FREE!