PETALING JAYA: Fresh graduates and others who are seeking to purchase a vehicle have been advised to look for a second-hand one.
Financial adviser Annie Wong said opting for a vehicle in a lower price range would be a better choice as it would be more affordable for fresh graduates who just started working.
She said car loans have become the third cause of bankruptcy from 2019 to February 2023, totalling 3,738 cases, or 11.20% of all bankruptcies.
However, the number of bankruptcies caused by car loans has been decreasing since 2019, when it recorded 1,543 cases.
In 2020, there were 1,006 cases and in 2021 690 were recorded and there were 441 in 2022. As of February 2023, there were 58 cases, with nearly 20% of young adults aged 34 and below declared bankrupt between 2019 and February 2023.
“When referring to statistics from the Insolvency Department, the main reasons for people declaring bankruptcy were personal loans at 49.31%, business loans at 16.95% and vehicle loans at 11.2%. However, from my analysis, it appears that the main reason is due to poor financial management.
“This includes overspending, lack of financial literacy, spending beyond their means, lack of future planning and spending too much on leisure activities,” she told theSun.
Wong said a fresh graduate, with an income of about RM1,800 per month and who has been employed at the same company for at least six months, can afford to buy a new car priced below RM50,000.
“They would need to set aside at least 40% of their annual income as down payment. However, individual circumstances may vary, so they need to consider their financial situation carefully before making a major purchase.”
She said whether it is a new car or a pre-owned one, as long as it is functional, either is fine.
“Fresh graduates should understand that a car is primarily a means of transport to get from one point to another, and it is not necessary to purchase a luxury car to impress their peers.
“However, when buying a pre-owned car, it is important to look for a trustworthy car dealer.
“It is also a good idea to bring along a friend who knows what to look out for when buying a pre-owned car to ensure that it is worth it and not one that would need expensive repairs.”
She said it is important for individuals to understand their financial position, and identify their goals and objectives based on that.
“Once their financial position and goals have been established, a financial roadmap can be developed to achieve their financial objectives. This includes understanding their short-term and long-term aspirations, such as education funding, wealth accumulation and retirement planning,” Wong said.
On “loan kedai”, a second-hand car dealership salesperson, Nur Faridah Mohd Razali, explained that it is the place where a dealership would apply for a loan on behalf of a customer. This is usually in cases where the buyer has been blacklisted, and will not get a bank loan based on his application.
“We don’t usually offer ‘loan kedai’ for our customers unless they specifically ask for it. Of course, we would also look into the necessary documents such as their pay slip to ensure their ability to repay the loan before agreeing. Interest on ‘loan kedai’ is fixed at 10%.”
Nur Faridah said it is entirely up to the customer to choose a new or a second-hand vehicle.
“Second-hand vehicles are cheaper and that is the only advantage. The customer can buy a vehicle of whatever brand at a lower price compared with a new one. Although the interest for second-hand vehicles is higher at about 7% to 10%, the price of the car is lower, which makes it more affordable.”
Nur Faridah said customers would usually test drive a vehicle before purchasing it to ensure they are satisfied with its condition.
“We would also give about a week for our customers to come back if they discover any problems. In some situations, although the time allocated for a possible return has expired, we would still entertain complaints in serious cases,” she said.
