Did you just pass your driver’s test or save enough to finally purchase your very first car? As exciting as it may seem, are you really ready for it? Chances are, you will be looking to getting a car loan to finance your first car purchase, but how much do you really know about car loans in Malaysia?
1. Loan Tenure
In Malaysia, you may take out a car loan for as little as 1 year, up to a maximum of 9 years. Depending on your loan amount and its associated interest rate, shorter-tenured loans usually also mean higher monthly repayments!
Depending on the car loan you obtained, you may or may not save money with early settlement. If you are on a fixed rate car loan, make sure to check if any rebates are justified before paying off the loan in a lump sum!
2. Interest Rates
Just like any other type of loans, you will need to pay interest on the car loan you applied for. Interest rates for car loans are mainly set based on 2 factors. Firstly, if the car is a national car or a foreign-made car. Secondly, if the car is a new or used car. Generally, car loans for national and/ or used cars come with higher interest rates.
Other than the 2 car-related factors, other significant determinants such as loan amount and tenure, reference rates, borrower’s credit history and status, as well as bank-dealer pacts and promotions come into play as well!
3. Down-payment
Unlike buying properties, you may opt to take a full loan (no down-payment!) when buying a car if you are eligible for special loan schemes. Do note that regular requirement for car loans is a minimum 10% down-payment for new cars and 20% for used cars.
Generally, it is wiser to pay some down-payment to reduce the borrowing amount, which will eventually save you on interest charges. Even though larger car loans come with lower interest rates, you will still end up paying more overall interest!
4. Guarantor
Depending on the bank offering car loans, some banks may need a guarantor. If you do not have a strong financial position, it is advisable to get a guarantor for your car loan. Not only it helps to get your car loan approved, you might possibly get car loans with lower interest rates!
Even in the absence of a guarantor, it doesn’t mean that you can run away without paying up your car loan. The car that you purchased is technically a collateral to the car loan and the bank has the rights to repossess your car in the event of a default!
5. Insurance and Road Tax
It is compulsory for all car buyers to purchase insurance and road tax for their new rides. Insurance payments are usually much higher than road tax payments. So keep this in mind when calculating your car loan amount!
Banks will usually arrange the car insurance for you with their selected insurers. If you want to get your own car insurance, do remember to ask them if that is possible.
When the time for you to get a car loan has come, remember to engage both the dealer and bank for the best deal possible. You will definitely want the lowest price for your new ride and lowest interest rates for the car loan that you will be taking!