@schnolhamor I own a business, my own salary is above+++ average. Last January 2023 I bought a new proton saga. 10% downpayment, 8 year term. Used it for 10 months then I paid full settlement and sold it. Bought a used Civic early 2024. 8 year term. Now recently purchased an EV priced around 200k+. 9 yr term. Some ppl would criticised me saying its not worth it paying these cars more than 5 years, but for me I want to pay the least amount possible monthly bcs i love investing in businesses. So i saved around 2000+ monthly by not taking a 5 year loan term. Weird statement but with those 2000+ I saved by not using it on car payments i can invest on other things which is rm24k invested a year on current/new business, stocks or cryptos which brings to rm120k investments made over 5 years. But in the end I will pay full settlement for my cars after 4-5 years made from the money i invested and I wont have to pay 9 year worth of interest! Dunno if its a better way to do it, but its my way of doing it.
Discussion : choosing 9 year loan despite high income??
- Thread starter schnolhamor
- Start date
ralphalvarezz
New member
@docpotter Hi bro. I totally agree with your philosophy here.
But I am curious: wouldn't you take quite a bit of losses from depreciation by selling off the cars so early?
But I am curious: wouldn't you take quite a bit of losses from depreciation by selling off the cars so early?
@ralphalvarezz Yes i do take some loss on saga. I had to pay extra 2k to settle after selling bcs i settled too early.
But for my other cars when i sell later, after selling and full settlement I will probably get back my downpayment. That money will then be recycled to the next car purchase.
I consider cars as form of expenses for my own wants. I dont really need expensive cars, but I want them. A cost of lifestyle. So i dont see them as an asset. BUT, i am in the process of registering my civic as a rental car. So if all goes as planned then i will probably only need to pay 40-30% of my monthly payment. Which is a big win for me.
But my advice on your original post. I say its best for you to have cashflow than to focus on paying your car early. Having a short term payment means you have to pay more. Having even a few hundred of extra cash flow, in a few years you'll probably thank yourself when you want to add summore commitment. Since no one knows what the future holds. For eg love life, marriage,children, family or even your self, vacations, new toys, new hobbies etc. Make pros and cons for both. Paying more could mean you miss out on a lot of things bcs you dont have much wiggling room to spend on other things. And one day if you get richer then you have no problem, just settle early!
But for my other cars when i sell later, after selling and full settlement I will probably get back my downpayment. That money will then be recycled to the next car purchase.
I consider cars as form of expenses for my own wants. I dont really need expensive cars, but I want them. A cost of lifestyle. So i dont see them as an asset. BUT, i am in the process of registering my civic as a rental car. So if all goes as planned then i will probably only need to pay 40-30% of my monthly payment. Which is a big win for me.
But my advice on your original post. I say its best for you to have cashflow than to focus on paying your car early. Having a short term payment means you have to pay more. Having even a few hundred of extra cash flow, in a few years you'll probably thank yourself when you want to add summore commitment. Since no one knows what the future holds. For eg love life, marriage,children, family or even your self, vacations, new toys, new hobbies etc. Make pros and cons for both. Paying more could mean you miss out on a lot of things bcs you dont have much wiggling room to spend on other things. And one day if you get richer then you have no problem, just settle early!
@schnolhamor Your friend wants the lowest hit monthly, but as you calculated, will be paying more in interest in the long run. It's not that he can't afford it, he can in this scenario. And let's assume he can afford the extra interest as well since that amount isn't much to some people. But is it the smartest financial decision from a pure numbers perspective? Probably not.
mattmanticus
New member
@schnolhamor there is never a situation where longer tenure is 'better' when it comes to buying a car for ppl who are stretching their budgets.
for ppl who know what they are doing and want cash flow/can make more money than the car loan rate, but that is very rare.
for ppl who know what they are doing and want cash flow/can make more money than the car loan rate, but that is very rare.
dongchau123
New member
@schnolhamor if the repayment for the 5yr bothers you, means you are pushing it. buy a cheaper car. the 9 yr loan's interest is very high.
your friend didnt tell you the whole story, probably he doesnt have quota to get the 5 yr loan. so had to take 9 yr loan because die die want to buy that car.
your friend didnt tell you the whole story, probably he doesnt have quota to get the 5 yr loan. so had to take 9 yr loan because die die want to buy that car.
schnolhamor
New member
@dongchau123 he said car is depreciating asset, no sense to rush to finish paying. Just drag the loan as long as possible to enjoy lowest monthly repayment.
I know he is rich enough he can buy the car (actually more than 100k) by cash easily, but still he chose to take 9 year loan.
I know he is rich enough he can buy the car (actually more than 100k) by cash easily, but still he chose to take 9 year loan.
@schnolhamor It's not like you should NEVER take 9 years loan.
It is that you should never take 9 years loan to buy a car just because you cannot afford it within 5 years.
It is that you should never take 9 years loan to buy a car just because you cannot afford it within 5 years.
@schnolhamor 5k beli apa kete 100k bro. Pakai axia la.
@schnolhamor I'd suggest considering whether your position in your workplace is secure. It all depends on whether you remain earning a stable income to afford either tenure.
amysmith0588
New member
@schnolhamor 9 years. Better cash flow and more debt to income service ratio for other loans like mortgage.
robruss102
New member
@schnolhamor Personal finance is mostly psychological, not about the maths.
My preferred strategy is someone on 10k a month income shouldn't be buying a 100k car on loan. If he has a good savings rate, save up and buy a used car with cash. E.g.
- If he can save 40-50% of his salary, he can buy a reasonable used car (i.e. 5+ year old jap car) for 50k in a year outright with cash
- with this saving habit and mental fortitude, he can continue his savings habit to put money into investments etc and he has set himself up for future personal finance success
Avoid car loans, the only loan I would recommend is a property loan. Even my future car purchase of 250-300k will be with cash.
But this is difficult for Malaysians to stomach, hence why personal finance is psychological.
In answering your question directly, if he had to choose an option:
1. Shorter tenure has overall lower costs. Majority of scenarios this is better, always think of total costs
2. Can't compare ~3% interest rate with market/dividend rates, need to convert to effective interest rate. Add in volatility and most of the time it's net net.
My preferred strategy is someone on 10k a month income shouldn't be buying a 100k car on loan. If he has a good savings rate, save up and buy a used car with cash. E.g.
- If he can save 40-50% of his salary, he can buy a reasonable used car (i.e. 5+ year old jap car) for 50k in a year outright with cash
- with this saving habit and mental fortitude, he can continue his savings habit to put money into investments etc and he has set himself up for future personal finance success
Avoid car loans, the only loan I would recommend is a property loan. Even my future car purchase of 250-300k will be with cash.
But this is difficult for Malaysians to stomach, hence why personal finance is psychological.
In answering your question directly, if he had to choose an option:
1. Shorter tenure has overall lower costs. Majority of scenarios this is better, always think of total costs
2. Can't compare ~3% interest rate with market/dividend rates, need to convert to effective interest rate. Add in volatility and most of the time it's net net.
@schnolhamor A car is a car is a car, isn't it? what can you do with a 100k car that you can't do with a 50k car?
@joep222w Survive certain accidents. Comfortably carry more than 5 full sized adults. Carry oversized items (think IKEA furniture purchases).
The better question is (purely practically) what can you do with a 250k+ car that you can't do with something below 150k. At that level it's about feel/luxury. But between 100k and 50k there ARE practical benefits - even if they don't apply to you specifically. My Alza allows me to do things a Saga/myvi/axis does not. A Vellfire and equivalent can carry people in a way MPVs/SUVs cannot.
The better question is (purely practically) what can you do with a 250k+ car that you can't do with something below 150k. At that level it's about feel/luxury. But between 100k and 50k there ARE practical benefits - even if they don't apply to you specifically. My Alza allows me to do things a Saga/myvi/axis does not. A Vellfire and equivalent can carry people in a way MPVs/SUVs cannot.
@schnolhamor The practical way to determine his affordability - try and save rm2k per month (for monthly commitment, road tax etc). If he can manage, go for 5years. Even for 9years loan, try to save rm1400 per month.
The savings could go to the deposits later on.
No point of suffering financially for a car.
The savings could go to the deposits later on.
No point of suffering financially for a car.
@schnolhamor I can buy my current car with cash, but I still took a 9 year loan, because the effective interest rate is only 4.9%, which I can easily arbitrage with epf and intermediate us bonds. Did some calculations, even with a return of 5.5%, I can save 4 digits, with 6% return, I can save 5 digits
truthinlove
New member
@schnolhamor Open and excel sheet, and calculate loan for different durations vs saving/investing the difference for the same durations. Which option has the higher returns? 5 years you have to pay more upfront, but less in total interest. 9 years you have to pay less upfront, and the difference can be invested, but more in total interest. Sendiri crunch the numbers lah