Complimentary e-newsletter
Month: September 2005
Why Do We Buy A Car? Is It Because of Our Greed, Status Or Convenience?
In this competitive motor market, most of us are easily influenced by the many new models and variants of cars. The competition in the financial market, where low interest rates and special loan packages are offered for new cars, motivates most us to change and buy new cars without a second thought about the effect of the purchase. Today, most of us feel the pressure from the continuous rise in fuel prices, so some cars with high fuel consumption may be not the favorable choice anymore. This may be part of the reason in making a decision to change or buy a new car with better technology in terms of cost saving. Usually, people purchase a car to upgrade themselves or as a basic convenience for daily use. However, as far as personal financial planning is concerned, regardless of your intention, wise spending with proper budgeting, cash flow management and liabilities monitoring are crucial in making any purchase or investment.
BUYING A CAR
PERSONAL FINANCIAL PLANNING
BUYING NEW CAR
There are many gimmicks used by car sellers in promoting their new cars. You must not easily be influenced by their promotion, and you should make wise decision based on the following: 1, Objective of change or purchase, and the choice 2, Personal finance You should investigate the objective of the purchase, rather than succumbing to impulsive buying. A constructive objective usually depends on the following: • • Use – for convenience or comfortable driving Type of vehicle – for leisure, family or work use. This will guide you to choose between a car, MPV or SUV, which is suitable for the use. Quality – a better quality car under a selected category with reasonable and affordable price can be the best choice, however, this is subject to your personal finance. You may get a quick guide from any motor magazine, which have selected top cars in their category. Cost of usage – with skyrocketing fuel prices, you should look for a car with a fuel-saving engine. The cost of regular maintenance should also be taken into consideration. Frequency of usage – a reliable and low maintenance car is suitable for heavy usage. It is not necessary for you to use the car if you have better alternatives such as access to good public transport. This will help you to reduce the cost of usage.
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eFP Consulting Sdn. Bhd,
Complimentary e-newsletter
Month: September 2005 The issue of whether you can afford to own the car arises when you are not too clear about the impact of the purchase on your personal finance. Due to greed, our personal finance can be overstretched from the purchase of the car and this will give us hardship. Following the advice of many finance gurus, a car is categorised as a liability or a bad asset to the owner instead a good asset. The depreciation is great and, usually, it is much higher than your loan interest and eventually you do not gain much. Chances are you will suffer losses when you sell it later - just like ‘Rent a Car from the Bank!” Whatsoever reasons of your intention to purchase a car, the bottom line is still on how to re-adjust and manage your personal finance the engagement of this liability. Few key factors should be considered before you commit yourself to the purchase: • Down payment – The higher the down payment and the lower the amount of loan, the more you save on the loan interest. You should not be attracted with low down payment offers from the bank, as this will lead you to pay more to the bank. Interest rate – usually, in Malaysia, the car loan offered by banks is a flat rated package. The interest is charged on your initial amount of loan rather than on the balance of principal owed to the bank (as in housing loans). For example, the effective rate of a packaged car loan of 4% interest for 7 years for a loan amount of RM50,000 would be compounded at 7.29% yearly. The installment – Paying for the installment is a medium to long term commitment. Ensure that your financial strength is not affected and your cash flow is healthy enough to pay for this installment and other commitments, while maintaining a sufficient emergency fund. Extra commitments for the car – you should project and budget all the costs involved in maintaining the car, such as servicing and repairing, fuel, parking, toll and car wash. This will help you to maintain a healthy cash flow. Liability – Obviously, you will increase your liabilities once you purchase a car. The liability is greater if you borrow more from the bank. It is very seldom that the financier would advice you to look at risk management, and the impact of financial losses becomes significant to your loved one if you pass on. This is especially so if the amount of the car loan is very large compared to your available liquid assets value. Herein, you have to review your insurance planning.
Getting Advice For Motor Insurance & Claim ? CONTACT
enquiry@e-financialplanning.info
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eFP Consulting Sdn. Bhd,
Complimentary e-newsletter
Month: September 2005
BUYING A USED CAR
Many people choose not to buy used cars because they are afraid of getting lemons. People tend to worry about whether the car is a stolen one or is an insurance write-off, has an outstanding loan, was involved in a bad accident, has outstanding police penalty or may have done more miles than the odometer suggests. Sellers may repair, re-spray and touch up their cars to give the impression that the car is still in good condition, but you may regret after the purchase. In the case of buying a used car, you should be more careful about the above-mentioned issues, in addition to general planning as in the purchase of a new car. You must check out the condition of the car thoroughly (internal and external) and test it out on the road. If you do not know a lot about car, you may bring someone who does, like your trusted mechanic. You should know the background or occupation of the past owner, how many people have owned the car and the age of the car. The used car buyer would not face such a great depreciation in the value of his/her used car compared to first owner. You would save money from paying high installment amount, insurance premium and be able to own a better quality car at an affordable budget. References: “Buying a Used Car”, Personal Money Issue#45, May 2005, The Edge Communications Sdn. Bhd., pp. 33-34. The Money Book, Consumers Association of Penang, 2004, pp. 116-124.
DISCLAIMER- Although the statements, opinions, graphics or formula in this article have been obtained from and are based upon sources that the author believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed and are subject to change without notice. It's for informational purposes only and is not intended for other purposes.
eFP Consulting Sdn. Bhd,
Complimentary e-newsletter
Month: September 2005
eFP Consulting Sdn. Bhd,