Being newly-employed opens a whole new world to a person. For the first time in their life, this could be the first time they had a never before amount of money at their expense. This can be good, and also can be bad for any newly-employed out there.
It can be bad, particularly for the first time, they could be buying their first car which could be their second biggest financial commitment after a house/property (if they have one). But, buying your first car could be your biggest mistake. Biggest financial mistake. Why?
Here’s some of that mistakes:
- Getting the car with maximum installment you can get – Take for example, you got a salary of RM2500 per month. You’ll be eligible for 65% of that amount of any loan(s) installment, which is, after deducted EPF and Socso, you’ll have about RM1300 to pay monthly for any loan(s).Then, you tell yourself, let’s get that car that I can pay RM1000 per month since I can afford it. After all, i still got RM300 to save. For most cars, with zero-downpayment scheme (or scam), with 4.2% interest rate and 9 years term, you’ll be eligible for an RM78’000 car. Let’s go shopping!
High interest rate.
Lengthy repayment period.
Disaster, this. Avoid for the obvious reason.
- New car with zero-downpayment scheme (or scam?)
You had only worked for 3 months, recently being confirmed position. Then, you tell yourself, I got to buy a car, public transport sucks! But, you don’t have enough for downpayment yet.
“Owh, this RM78’000 car got zero-downpayment scheme! Great! I gotta sign this up!”
Please stop right there. Think about the installment amount. Can you pay this for 9 years? How confident are you?
Run, Forrest! Run!
- Brand over sense – “I’ll look cool and establish if I am driving this. This will make me look successful”, you said to yourself.
Please, don’t believe in others’ opinion of you dictates you are successful or not. There’s so many millionaire out there doesn’t have expensive and unnecessarily-luxury car to show their success. Take Bill Gates, the founder of Microsoft, he only flies economy class while making a dollar every second.
- Bragging rights over prudence
“My car is bigger, better than yours. I am driving an import. Imports have higher quality than local brands. This badge (pointing towards the car badge) is more superior than yours.”
Please. Don’t make your car as a material to brag about. Your car is as good as long as you can maintain and afford it.
That said, some locally-made cars with the same price tag of imported ones are superior in equipment levels and safety level (airbags number, stability control, more rigid body for crash protection) than the imported ones. Do research and compare.
- Impulsive shopping – Think this is only happen in shopping malls? Think again.You are in a taxi, or in your office with your smartphones, then you saw an advert or a car driven on the road that caught your attention. I got to have this car! Then you check with your calculators, I can afford this car! I am going to buy it!
Impulsive. It stucked in your mind. This is your must-have car. It exudes your identity.
Stop. Again, do shop around. Do come to your senses. Do you really need it?
- You know nothing about car (maintenance, running costs, etc)
First car buyer often neglects research of running costs. It’s not only the installment, or fuel costs. It’s more than that.
Maintenance also means periodical service costs; the engine oil change, brake fluid, transmission fluid, power steering fluid, air-cond gas, and also filters.
Maintenance also means wear and tear items; tires, fuel filters, air-cond filter, air filter, and some of the most expensive ones are water pumps, gaskets, timing belts and belt tensioner.
And there’s annual insurance and road-tax to pay.
Here’s a rule of thumb; the more expensive the car, the higher the maintenance, insurance and road-tax to pay. For example, bigger cars need bigger tires. Bigger tires are definitely more expensive than smaller ones. You don’t use A-segment car tires like Perodua Axia’s on C-segment car like Honda Civic, do you? These tires cost more than RM100 more on Civics than on Axia, each!
And you’ll have to change it every 2-3 years, depensing on usage!
These are wallet-busting items and some people would like to max out their credit cards for it.
That’s another financial hell!
So, what is the solution to this?