Is your salary enough to afford your first car?
So how much do you need to earn in order to afford your first car? Read on to find out!
So you’ve landed that first job. Or maybe it’s that recent promotion at the first job that made you wonder if it was finally time to ditch the bus for good and buy yourself a snazzy set of wheels. Cars in Malaysia aren’t cheap as we’re all aware but just how much is it all going to set you back? And can you afford it on your monthly wage?
Owning a car is more than just the monthly repayment and no matter how good the deal looks on the car dealer’s pamphlet – calculating affordability is trickier than you think. Thankfully, with a significant amount of research, we’ve compiled all the costs associated with buying your very first car into this handy dandy article.
So how much do you need to earn in order to afford your first car? Read on to find out!
What do you need to have before you buy your first car?
Before we break down the individual costs, we should probably dive into the prerequisites involved with buying your first set of wheels. Unfortunately and in some cases thankfully, one cannot simply walk into just any auto dealership in Malaysia and purchase a car within the same day.
There are several documents and forms of identification that you will need to have in your possession before you buy your first car, especially if you plan on taking up a car loan.
So here’s what you will need to have before you walk into any auto dealership to buy your first car.
For general registration, you will need
1: A Malaysian Driver’s License (Competent Driving License) & Valid Malaysian NRIC (myKad)
2: Passport with valid Visa (For non-Malaysians only)
If you intend to take up a car loan, you will need
1: Official Payslips dating back at least 6 months (for salaried employees)
2: Official company accounting slips (for business owners)
3: EA Form or EPF statement (required by some banks)
4: Guarantor (required by some banks)
What are the costs involved with buying your first car
Example: The Perodua Myvi
Fact: the Perodua Myvi has been the best selling car in Malaysia from 2006 to 2013
Question: Why do Malaysians seem to absolutely adore the Perodua Myvi?
The Perodua Myvi is the quintessential perfect car for first time car owners. The Myvi is not just extremely affordable (when compared to other name brands) but also easy to handle and economical on fuel.
A brand new 2014 Perodua Myvi 1.3L EZI will sell for RM44,936.45 in Peninsular Malaysia.
Conversely, the price of a used 2009 or 2010 Perodua Myvi 1.3L EZI will cost you around RM31,000 (according to motortrader.com.my). As expected, the Perodua Myvi actually carries a fairly decent resale value.
For the purpose of illustrating the cost of buying your first car, we’ve decided to use the Perodua Myvi as our automobile of choice. Cost of ownership can be split into two distinct categories; established costs and volatile costs.
Established costs represent costs that are “set in stone” and you can expect to bear such as monthly car loan repayments, road tax etc. Volatile costs represent costs that may differ depending on the situation such as petrol consumption etc.
The established costs
1: The downpayment
Most banks will require a minimum downpayment of at least 10% of the total cost. However, some banks might offer special deals with 0% downpayment, though this will ultimately result in higher interest payments for you. When it comes to downpayments, always remember that more equals less. The higher the downpayment, the lower the interest charges.
Brand new 2014 Perodua Myvi 1.3L EZI
Minimum downpayment of 10% x RM44,936.45 = RM4,494.45
Used 2009 or 2010 Perodua Myvi 1.3L EZI
Minimum downpayment of 10% x RM31,000 = RM3,100
2: The subsequent monthly repayments
Banks in Malaysia will typically offer car loans for terms of either 5 years or 9 years. Choosing a 9 year term will mean a lower monthly repayment, though with more interest. Conversely, taking up a 5 year term will slap you with a higher monthly repayment but with less interest.
Given the wide variety of different car loans offered by banks in the market, sifting through the details of every single one is (suffice to say) utterly exhausting. In fact, the thought of filling up a mock excel sheet filled with interest rates already brings a tear to this author’s eye. So instead of trekking through each and every bank, you could instead use a compare website like RinggitPlus.
Using the compare tool on RinggitPlus, we can observe that the Public Bank Aitab Hire Purchase-i offers the lowest interest rate in the market for both new and used cars (but then, always remember that the rate you get will depend also on your credit rating and the type/make of car you are purchasing). So how much is the monthly repayment?
Brand new 2014 Perodua Myvi 1.3L EZI
Loan of (RM44,936.45 – RM4,494.45 downpayment = RM40,442) = RM458.72 every month for nine years
Used 2009 or 2010 Perodua Myvi 1.3L EZI
Loan of (RM31,000 – RM3,100 downpayment = RM27,900) = RM337.38 every month for nine years
Disclaimer: The figures above reflect nine year loans, if you want to find out the monthly repayment for a five year loan, you are more than welcome to check out the RinggitPlus car loan compare tool.
3: Car insurance
Car insurance premiums will vary from person to person depending on a variety of factors such as engine capacity etc. In the case of our first time car owner, the cost of insurance might be a tad bit steep. However, if he/she manages to survive through an entire year without making a claim then he/she can expect a drop in the cost of the premium (no claim discount).
If your windshield is still a little foggy regarding car insurance, then you can check out our car insurance buying guide.
Brand new 2014 Perodua Myvi 1.3L EZI
Monthly premium of RM90
Used 2009 or 2010 Perodua Myvi 1.3L EZI
Monthly premium of RM85
4: Road Tax
Police road blocks are everywhere these days, which means that if you skip out on your road tax payment then you absolutely will get B-U-S-T-E-D. Thankfully though, road tax is Malaysia is relatively cheap when compared to our neighbours in the south, which means that you have absolutely no excuse for missing your payment.
Brand new 2014 Perodua Myvi 1.3L EZI and Used 2009 or 2010 Perodua Myvi 1.3L EZI
Annual road tax of RM70 (1300cc car) = RM5.83 per month
Total Established Costs:
The Formula:
Downpayment + monthly repayment + car insurance premium + road tax
Total established costs for a brand new 2014 Perodua Myvi 1.3L EZI =
RM4,494.45 downpayment + RM554.55 monthly (nine year loan)
Total established costs for a used 2009 or 2010 Perodua Myvi 1.3L EZI =
RM3,100 downpayment + RM428.21 monthly (nine year loan)
The volatile costs
1: Petrol
Calculating the exact cost of petrol for an entire month can be somewhat challenging. Your expected monthly petrol costs will depend directly on your travelling habits. If you frequently spend your weekends blazing through the Klang Valley like an episode of “Speed Racer”, then you can definitely expect a decked out petrol bill.
According to Perodua, the Myvi 1.3L EZI carries a fuel economy of 17 kilometers per liter (RON95 costs RM2.10 per liter). Assuming that you travel everyday from Subang to Bangsar for work, you can expect to travel an estimated 40 kilometers everyday (round trip). Discounting the cost of getting stuck in bad traffic, then you can expect a daily petrol cost of approximately RM5 (at minimum).
However, a traffic jam free Malaysia is an elusive dream. So for the purpose of realism, we shall assume a daily petrol cost of RM8.
Minimum monthly petrol cost for brand new 2014 Perodua Myvi 1.3L EZI and Used 2009 or 2010 Perodua Myvi 1.3L EZI = RM8 x 30 days = RM240 per month.
Disclaimer: The figure above is an approximate assumed amount. Of course this will vary with usage.
2: Car Repairs
Car accidents can happen at any time (or place) even if you’re an ultra safe driver. While the fault may not always be yours (or so you tell yourself), the cost of the damages could very well be yours to bear. But wait, I have car insurance, aren’t I protected from any damage arising from accidents?
Unfortunately, making a car insurance claim (even for a tiny little dent) will only make your subsequent car insurance premiums more expensive. Sorry to burst your bubble but car insurance companies are not in it for your welfare (its a business not a charity). So why spike up your insurance premium if the damage is only cosmetic?
Determining the “person at fault” at an accident scene is tricky business and in most cases, ends up becoming a meaningless blame game of “who hit who first” or “my lane, my right of way”. Think that it can’t get any worse? Well, what if the perpetrator who just hit your car decided to scoot away from the crime scene like a bat out of hell? Are you going to pursue and re-enact the car chase scene from “Ronin’?
But are car repairs limited to just accidents? No! There is always the chance that your car can break down at any time, especially if you are driving a used car with a heavy amount of mileage. Fortunately, brand new cars usually come with at least 3 years of warranty against manufacturing defects such as faulty batteries etc.
For the very reasons listed above, it is always advisable to tuck away a small sum of money every month for “emergency car repairs”. For starters, RM100 a month should suffice (unless you plan on getting rear-ended on a daily basis). If you manage to keep your “hot wheels” out of trouble for at least a year, then you’ll have RM1,200 nestled safely in the bank, which should be more than enough to pay for broken windows, minor re-sprays, small dents, busted batteries and every other adventure you find yourself in.
Monthly savings for “emergency car repairs” (Optional but highly recommended)
= RM100 per month
3: Car Maintenance
Keeping your car clean and shiny is as easy as breathing (okay, maybe not that easy but you get the point). All you really need to “return your wheels to factory condition” is a bucket of water, soap, a sponge, a dry cloth, effort and a set of strong wrists. Unless you have a weird fetish for dirty cars, then keeping your car clean should be on your list of priorities. A medium sized bottle of car soap costing RM10 will probably last you for up to 30 washes. Assuming that you wash you car twice a week, this translates into a 15 week supply.
Washing aside, it is also in good practice to wax your car at least once every 2 weeks. Applying wax to your car creates a protective layer that works towards repelling dirt and water. A bottle of car wax from brands like Soft 99 will cost around RM40. Each bottle should last you around 3 to 5 months depending on how many layers you apply each time.
Car maintenance cost
= car soap + car wax
= RM10 + RM40
= RM50 (3 months)
= RM17 per month (rounded)
4: Parking
Want to escape the smouldering heat of El Nino? Then why not visit one of the over 40 air-conditioned malls located within the Klang Valley. Unfortunately, some malls (like the ones we touched on in a previous article) come with insanely expensive rates that will cost more than your lunch.
Thankfully though, there are other the malls within the Klang Valley that do offer fairly reasonable rates for weekend parking. For example, Sunway Pyramid has a weekend rate of RM3 for the first 2 hours and RM1 for every subsequent hour. Assuming that the average person spent approximately 6 hours every week at a mall with parking rates similar to Sunway Pyramid, then this would work out to a cost of RM7 every week.
Parking charges
= RM7 x 4 weeks = RM28 per month
Disclaimer: For obvious simplicity sake, this figure does not include parking for home and work.
Total Volatile Costs (according to estimates):
The Formula:
petrol + car repair savings (optional) + car maintenance cost + parking charges =
RM385 per month
What is the monthly cost of owning a car?
The Formula: Monthly Costs (after downpayment) =
monthly repayment + car insurance premium + road tax + petrol + car repair savings (optional) + car maintenance cost + parking charges
Cost of owning a Perodua Myvi
Monthly cost of owning a brand new 2014 Perodua Myvi 1.3L EZI =
RM554.55 monthly (nine year loan) + RM385 = RM939.55
Monthly cost of owning a used 2009 or 2010 Perodua Myvi 1.3L EZI =
RM428.21 monthly (nine year loan) + RM385 = RM813.21
How much do I need to earn every month to afford my first car?
The Formula: Monthly cost of owning a car + L =
monthly repayment + car insurance premium + road tax + petrol + car accident savings (optional) + car repair savings (optional) + parking + L
Minimum income required to own a Perodua Myvi
Minimum income required to own a brand new 2014 Perodua Myvi 1.3L EZI
= RM939.55 + L
Minimum income required to own a used 2009 or 2010 Perodua Myvi 1.3L EZI
= RM813.21 + L
I’m lost….What’s “L”??
“L” represents your cost of living. To put it simply, “L” encompasses your entire monthly living expenses such as your rent, food, entertainment etc. If you want to find out how much you need to earn in order to afford your first car, simply add your living expenses to either of the two figures above.
What do you think about the calculations used in this article? Are they too high? or too low? Is there anything you want us to add? Leave a comment below expressing your grief/happiness.
Joshua Ong is an Investigative Journalist of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
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