One’s monthly TCO should ideally not exceed 20% of one’s gross income and to follow a 36% rule of debt-to-income ratio, says RinggitPlus
By KEVIN WONG / Pic By TMR
RinggitPlus notes that about half of adult Malaysians are not qualified to apply for loans because of the debt service ratio (DSR) imposed by banks.
The financial comparison website’s founder Liew Ooi Hann said each bank has its own internal policies to assess the indebtedness and capability of applicants to service their loans.
“There are a lot of other reasons for loans to be rejected, but this (DSR) is the biggest reason. That said, it is never about an applicant’s age, as it is the ratio of one’s income level to the current and future loan repayment outcome.
“And as long as you’re above 31 years old, banks will not look at your age but your DSR,” he said after a roundtable discussion entitled “First Car, Big Deal” in Petaling Jaya yesterday.
The discussion focused on whether first-time buyers should own a brand new car or a second-hand one.
Liew added that one’s monthly total cost of ownership (TCO) should ideally not exceed 20% of one’s gross income and to follow a 36% rule of debt-to-income ratio.
“There are in fact many hidden costs that we should factor in while determining our ability to afford a car. These hidden costs create the sum of TCO which includes depreciation, interest, petrol, parking and toll, insurance, road tax and car maintenance, on top of the down payment and loan instalments,” he said.
The other two panellists at the roundtable discussion was Allianz General Insurance Co (M) Bhd franchise head Sazali Abdul Rahman and Bosch Automotive Aftermarket Malaysia marketing manager Go Boon Wah.
On the topic of car insurance, Sazali said whether a new or a second-hand car, there are a set of detariff factors to determine the premium for the insurance.
“These detariff factors include the age of the vehicle, vehicle make and model, gender, insurer’s age, high-risk theft vehicles and cubic capacity.
“Used cars usually have a lower insurance premium when compared to new cars. For example, the premium on a three-year national car is 4.4% lower than the premium for a new national car, and it’s 13% lower for Japanese makes and up to 22% difference for European makes,” he said.
Sazali added that young people need to understand that their car choice will determine the cost of their insurance.
On the TCO issue, Sazali said to avoid increasing one’s car TCO in the next few years, car maintenance is an essential cost factor.
“When it comes to car maintenance and auto parts, choose what is best for your pocket and for your car.
“If you’d like to better optimise your car maintenance budget, either do it yourself in the upkeep of some auto parts such as changing your own wiper blades, or opt for reputable brands for auto spare parts as they can lower your car maintenance cost by 25%-50%,” said Go.
He said regular maintenance is the life of the car and it is important to know relevant information on the supporting ecosystem, which includes knowing a reliable mechanic, the auto parts to maintain and change, and the suitable loan and insurance scheme.
Loan approvals for purchases of passenger cars increased significantly to 21.9% in June, following a contraction of 2.5% in the previous month.
Bank Negara Malaysia attributed the increase to a higher demand of financing during the tax holiday period following the zero-rating of the Goods and Services Tax by the government.