Friday, May 22, 2009

You want to buy a car, NOW ?

Thanks to the new PM effect and various new policies in place including the RM 5,000 rebate, almost ALL of my Average income friends are Really interested to buy new cars.  Although soon they find out a lot of inconviniences because there are too many rules about the RM 5,000 rebate which make stuff not that practical but now friends still want to buy new cars no matter if he can gets the rebate.

If you also have a property 
that you can refinance
you should seriously think about
 refinancing your property 
to buy that car
 instead of getting a car loan.

Car Loan rate is 3.5% now.  Following the rule of thumb that car loan rate is 1.9x house loan rate, the 3.5% car loan is almost more than a 6% house loan.  With today's BLR-2.X offer, your house loan is most probably serving at 3.X% only.

6.X %  to 3.X % is a HUGE difference for crying out loud !

There are even some level term loan offered by insurance companies at 4.75% now, which is still so much BETTER than the 3.5% car loan ( which is 6% ) no matter which angle you look at it.

Despite the fact that car is the biggest personal finance killer in Malaysia, and if anyone buy a car NOW by taking a CAR LOAN while having the choice of refinancing his property .... Please ... at least share with me here why you do it, why do you want to spoil your own personal finance plan while I am already feeding you nice food near your mouth ?  Why do you still split it out ?

I will start with the most common excuse, "I scare income tax will find me if I pay my car in full as if buying it with cash!"

True concern but only valid for those illegal drug dealers etc.  If you Really have a property that can get Approval from banks to refinance, there is Absolutely no concern at all on tax filling.  Upon enquiry by tax department, simply submit your house loan documents and declare no other income whatsoever un-declared in the past.

Assuming all people start to do exactly what I share here, there is only one person they will go after - me!  They will blame me for causing them and the banks to lose so much more income.  Bank may start reducing the amount they lend to a property, they will ask if you are using the extra money to buy a car and then they may deny your loan application in future!

But I doubt that will happen at all, truth for the past thousands of years show that human just like to stay in their own shell even if it has been hurting them for so long, they get used to it and they will just refuse to walk out even one step to the more comfy zone.

What ?  You want to buy a car nOW !?


Father Sez said...

Hi, Michael,

I so wish I had known you years ago.


Michael Tsen said...

samo samo here

ChampDog said...

2 colleagues of mine just bought a new car and sold his < 2 years car.

The fact that they keep persuading me to buy a new car. But the fact that is I still love my MyVi very much. :)

I think changing new car can be addicted too. :)

Michael Tsen said...

as long as one is aware of how deep the hole he is digging, he has the right to pursue his own likings.

Yow Chuan said...

Good one! At times like these, one should really be looking at how to earn more rather than spending more.

Unless of course, if somebody can come up with an idea on how to generate income with a car.

I think we can start with advertisements :-D

Michael Tsen said...

yes indeed, business is a totally different ball game than pure personal finance. by advertisement, you mean buy a transparent huge van and have naked ladies taking shower inside while driving downtown ? count me in ... :D

Mior Mohd said...

i notice one thing..

home loan usually long termers (30-40 years)..while car loan max 9 years...

based on my lose more at the end if you compile both loan...

Anonymous said...

if you want to 'abuse' the 'method' then the answer is yes, you can always get things screw up. What you have put up here is not an apple to apple comparison.

and the spirit here is to get things work, and work better. This is referring to the same number of years, home loan is WAY much better than car loan, both hands up.

The reason car loan can NOT be longer than 9 years is that once it goes over 9 years, its total effective paying interest is so HIGH that it cannot be categorized under 'loan' but more like an OverDraft or Ah Long's rate range.

al_husni said...

even nicer if the house loan then is paid by that's a free!!

Michael Tsen said...

yes indeed .... thats why we have fathers around ... to pay our loan ... hee hee hee ... and girls can get additional payors called husband. :)

*ahem* sorry ... a bit over there ....

LMF said...

found your blog and i'm glad what you wrote clear my doubt and uncertainties on the subject.