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8/17/2004

Favourite car financing company, a small review

This is fairly an interesting subject for people who are looking for a car. Be it brand new or second hand, I hope this article can be useful to you.

This I relate to my past experience of my foolishness in getting a car. As usual, I’ve just started working and was without a car. At first, being a budget guy I was attracted to Perodua’s Kenari due to its spacious feeling and their cheap price. But after consulting my wonderful wife, then lot of questions popped up in my mind. She highlighed things like on how long I am going to use the car?, do you really want to use the car for 7 years?, Do you want to sell the car after 2-3 years?. I knew that if I buy a brand new car, the moment it is out from the showroom it will depreciate at least by 10%. That is not good for me because I know I am going to use the car 3 years max. I settled for a 2nd hand car instead. I bought a 2nd hand Proton Wira year 1999 1.5 GL injection with automatic transmission grey in colour but…..green interiors!

Whoa I am so stupid on colour coordination. I sold the car after 1 ½ years using it. My wife has another car and I still have my bike. The moment I wanted to sell the car, I had problems because the inside of the car is green. I have to admit someone will like it. But the rest doesn’t like it. So, if you want to buy a car , be objective on your goals for the car. Don’t just judge on what you like. Sometimes, what other people like must be taken into considerations as well. That’s why when people want to sell their car, they have to change all their accessories to standard. I made the right decision on my choice on not buying a brand new car, but I slacked on my actual choice of 2nd hand car.

Before I start with car loans, get your reasons right for getting a car . The main questions asked is the usage of the car. Like myself, I wasn’t really sure. I just knew I needed to get a car. But in actual, I still use my motorbike to work… So the car is only for night and weekend use. What a waste of paying every month.

When I wanted to sell the car, people always ask the current interest rate for the particular car with the particular year. So I called up the banks for the rates on my car. By the way, I was dumb because I used B*B finance which at that time was the highest interest rate at 5.85%. The reason is because B*B finance can offer a higher loan margin which is why a lot of agents like to use B*B. But now, I heard that their rates are more competitive.

This is the list I got 8 months ago. I believe it only applies for proton. But you can compare the rates between banks because it does not differ on the margin their getting. At that time, I’m selling the car at RM32k.

Bank

Maximum loan amount

Interest rate

B*B Finance

39k

5.4%

P*bl*c finance

29k

4%

M*yb**k finance

31k

5%

H*ng L*ong finance

28k

4.5%

For B*B you can take a full loan on my car, for the rest, you must add up on the down payment. Yes, the rule is of course 10% out of the selling price. But for many years salesman have practiced the art of manipulating the sale price to get the best loan amount.

To illustrate, let’s say a person would like to buy my car at 32k with no down payment, I will tell the bank that I sold my car at 10% higher which is Rm35.2k. Because of the maximum loan amount for B*B is RM39k so they would permit this to happen. I will just say to the bank that they buyer has paid the 10% deposit (which is RM3200) and the balance of RM32k he will finance the car with the bank. As you can see, if you’re a person who likes to invest in the bank, you can buy my car at 32k, but you can ask for a loan at B*B finance for 39k. The balance of money you can get cash. Huh, don’t do this friend. Car loans are killer loans.

The rest of the banks will follow the nearest market value. Like H*ng L**ng, they know that at RM28k they won’t have any problem selling the car at that value. That’s why they offer a lower maximum loan amount and lower interest for the sake of their own security. For B*B finance, they are betting on people like me to pay and continue their legacy on higher loan margin. To compare 4% between 5.4%, if you take a loan at 28k for 7 years, your difference will be RM2743.72 throughout your payments. Or, RM32.67 a month, or RM392.04 a year. That is a lot of money guys.

To sum up, do your survey on the financing company first. Of course, there are other factors to put in such as easiness, number of branches, a branch next to your house, people skills, the insurance company the are using and the list can go on and on. It can a another subject altogether.

I noticed that for other races, they will never take a loan longer than 3 years. For Malays like me, we will always take the longest years to repay our car. This is sad folks. That’s why we can never compete with them. They understood the effects on taking a longer loan. Now, new cars like the Proton Gen-2 can get loans up to 9 years with low interest rates. 9 years? Do you really want to use the car for 9 years?

By the 3rd year, you’ll get bored and you’ll want a another car. In fact, 3 years is just nice before everything in the car rattles and something starts to break…


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