Planning to get your first car to ease your traveling hassle to the office or college? Here are five tips to help with your smart decision making to determine your car purchase.
Tip #1: What car can I afford?
First of all, you need to compare the necessity of owning a car or going for public transport, which one will make your life easier and convenience. If you have chosen to own a personal car, it is better to understand your own financial ability first in order to know which car you are able to afford, be it an SUV, hatchback, Sedan or even compact. You will waste more time shopping for a car only to know that much later that the loan is rejected.
Other than car loan, you may also need to consider the payment for car insurance, petrol costs, and so on. After paying for all the payments, how much is left for food? Most importantly, don't put yourself in a financial stress through car financing.
Tip #2: Cost of Maintenance
Most first time car buyers have only car price as main consideration, and often overlooked maintenance costs. Car maintenance is necessary to be done over a frequent period and it is crucial to understand the costs and warranty voiding consequences. In general, the local car and Japanese made cars such as Toyota, Nissan and Honda often have one of the lowest cost of maintenance due to lower costing parts. Meanwhile for the petrol consumption, usually the cars with higher CC will need to consume more petrol. So do not consider of buying a sport car if you don’t think the fuel cost is what you would enjoy paying.
Tip #3: Resale price
A new car’s value depreciate as soon as it is driven out of the showroom when you first got hold of the car keys. In general, cars depreciate around 15% per year. For example, a 100k car can cost about 10k after 5 years, then the individuals will end up paying too much to the bank after they make the repayment. Therefore, before buying a car you need to consider about its resale price if you have planned to sell off the car after few years, or you are ready to drive until you finish repaying the car loan.
Tip #4: New car vs Second hand car vs Reconditioned car
If you’re considering of purchasing a new car, it will likely be more reliable as it comes with new condition and warranty from the dealer and guaranteed accident-free. However, the cost often comes the highest among the three, but often compensated with lower interest rate for car loan.
Meanwhile, reconditioned car is basically an imported car and it is given a makeover in terms of faulty parts or refurbished. Therefore, the purchase can be considered risky as it may have accident history abroad which may not be truly reflected with clarity when it is being sold here. If a reconditioned car is unregistered despite being used abroad, it can be sold as new car with lower interest rate for car financing.
Second hand cars are also known as used cars - which means what it is, used by others and resold to you or dealerships. Generally if you aren't professional, you can't really tell whether the car condition is as what the seller claimed it is. Hence, although the prices of the cars are much lower, you may be required to pay higher interest rates for car financing. Typically used cars are of much value from car price standpoint. The risk sometimes far outweigh the cost of cars - cost of repairs, cost of parts (older cars affect the availability of the parts and may have to be imported directly from the country of origin of the manufacturers, inaccurate information on condition of cars, etc.)
Tip #5: Car loan
The bank will usually evaluate the individuals’ income to derive their debt service ratio (DSR) in order to check whether they are able to repay back the loan or not. If the individuals have no commitment based on record of Central Credit Reference Information System (CCRIS), they are deem “too clean" for a bank. This will result in difficulty to get approval for car loan.
If it happens, buyer must get the involvement of a guarantor in the form of qualified borrower - with a good income and manageable debts in order to lower down the risk by the actual buyers to guarantee that they are able to repay the amount accordingly. In case you are unsure, you can talk to us at Autosentral to get financing eligibility in getting a car loan for your car of choice assessed before committing to a purchase. We will be able to give you a full picture after cross-checking your income documents against CCRIS and CTOS reports.
