Reason 1.Cars are Expensive
New cars in Malaysia are extremely expensive. One can say cars here are the most expensive in the world. How expensive? A new Honda Civic 1.8L - base model is MYR114,980.00. I did a quick check with Honda Thailand, the same model is selling at 789,000 baht, MYR 80 549.37. We are paying MYR 30k premium for the same make. When we check the MRSP in United States, USD 15 655, MYR53 109.56. That is like MYR60k premium! These premium goes to the government tax.
Reason 2. We Malaysians are poor.
A fresh grads in Malaysia get a gross MYR 2000 per month. A 5 year experience senior executive or manager get a gross MYR5000 per month. After deducting EPF and income tax, they get MYR1800 and 4300 respectively.
I have a table worked out. At the current 3.5% hire purchase rate, one need to service MYR2000 loan a month for the car and that is beyond a fresh grad pay and it is close to 1/2 the net income for someone who have been working for 5 years. According to a famous financial consultant, Ali Azizi, for a car hire purchase lending term beyond 5 years is as bad as committing suicide (financially). I think he is right. If one could not afford a car with 5 years hp term, that simply means one could not afford the car.
The fresh graduate could not afford the car even with 9 years term, while the senior executive barely make it with the 7 years term. Poor Malaysians.
Reason 3. Cut throat bank interest
Despite of the expensive tax, we still need to pay the cut throat bank interest. From the example above, the monthly interest is MYR300, that work out to MYR18k for 5 year term or MYR32k+ for 9 year term. That is 15% of monthly installment paid as interest to the bank for 5 year term (very close to credit card interest) or 24% of the installment paid to the bank as interest, loan shark rate? 3.5% per annum is the most recent lend rate. Imagine, I have paid 5.5% for a 4 year term for my 1st car 7 years ago.
Reason 4. Car value depreciate as much as 55% in 5 years
I have did a little research using a car price list from 2005 and a reference to The Star Classified for the current price (Dec 1st 2009). This is just the asking price, the actual transacted price could be a few Ks lower. As we can see below, the Toyota Camry 2.4 year 2005 has got the worst resale value (-55%) while surprisingly, the Honda Civic 1.7 2005, a less popular model has got better resale value (-36.31%). In average from the 7 car make below, we have an average of (-43.91%) in loss for a 5 year old car.
Say if we buy a new Honda Civic 1.8L now. In just 5 years, the car would worth MYR64,492.28 (estimated) with the loss of MYR50,487.72 (base on -43.91% average). If we include the cut throat interest paid in 5 years for a 7 year hp term (MYR 300 in interest per month), we could work out a monthly loss of (MYR50,487.72 + (MYR 300 x 60 months) )= -MYR 68,487.72 (-MYR 1,141.46 per month). Reason 5. Repair and maintenance at the service center is ridiculous
I find that the listed price for the scheduled maintenance is not cheap either. A friend of mine who drive the Honda Civic 1.8L said that he is paying an average of MYR300 per visit for regular oil change. 3 months once, 4 times a year. That is MYR1,200 for normal regular service. if we send the car to the normal workshop for the same treatment, we could save 1/2 of what he is paying. I know because I drive a Honda Civic 1.6L, I only pay close to MYR100 for the regular service. (with the same engine oil filter and a branded engine oil)
However, what surprises me is the repair. A friend of mine who drove a Toyota Vios has got her fog lamp stolen. When she send it to Toyota Service Center, she was quoted close to MYR11k. No, it is not typo, it is indeed ELEVEN THOUSAND ringgit for a bumper change + 2 fog lamp and some simple wiring. She can't send the car to other shop as it would void the warranty. She ended up not fixing it.
Conclusion
Back in 1984, my dad could afford a brand new Honda Accord when it was MYR 34k new. My elder brother paid MYR18k for his first car. It was a 5 year-old Toyota 1.3LE back in year 1989. At present year 2009, with MYR34k, we can't even buy a 10 year old Honda Accord (present value is MYR45k to 50k!). Things have changed so much in past 20 years. Hire purchase car loans are being stretched longer where 7 and 9 years terms are common while some banks are offering 12 years! Why are we Malaysians moving backwards? Are we getting poorer over years? Question is how many of us have became slaves after being tax ridiculously in NAP? In exchange, how the government repay us? More expensive toll highways? More substandard cars from Proton, Perodua and Naza? Another 10 years extension of the AP to their cronies so that they could rip off more hard earn money from us? There were hopes and promises made in AFTA (free trade for the car industry) back in 2002 where car taxes will come down gradually to 0 but that is not happening. I foresee that the car prices will continue to be expensive, hp loan term will further stretch to 12, 15 years or more. Lastly, more youngsters will be made car slaves in the coming years.
