So you’ve been earning a decent salary for a while now and feel that it’s time to take the next big step in your life. No, we don’t mean marriage! Instead, this is when the age-old question arises: should you buy a car or a house first?
This has got to be one of the toughest decisions a Malaysian has to make in their adult life. Don’t worry though, as we’ve got you covered! We’ve compiled arguments on both sides to help you make your decision wisely:
Buying a car first
1. Better mobility
It may sound simple but having mobility at your disposal is actually really important especially in Malaysia for the reasons as per below:
- Daily transportation to your workplace – Especially when your area doesn’t have any public transportation or if it’s unreliable
- Gives you better job prospects – Some job positions such as sales and PR roles require you to possess your own transportation
- In case of emergencies – When the unthinkable happens to a family or friend, you can be there at a moment’s notice!
Most of us probably have the perception that people buy a new car for the sake of lifestyle or status, but it is actually a necessity in most cases. Plus, buying a car also means access to extra income if you choose to use it for e-hailing services.
2. A lower amount of upfront cash is needed
In comparison to buying a house, a car purchase requires less upfront cash. The 10% standard down payment amount required is certainly attainable for most people to save up without it affecting their lifestyle so much.
Furthermore, the loan term is also shorter with the maximum being only nine years. This shorter tenure certainly makes car purchases a shorter, less daunting commitment in comparison to buying a house.
1. Depreciating value
Did you know that a car’s value depreciates an average of 10% to 20% annually in Malaysia? That means your car will lose almost all of its value by the end of your loan tenure!
Add up all the maintenance fees required throughout the lifespan of the car, it is definitely not a worthwhile investment in the long run. That’s why cars are considered a liability instead of an asset in most financiers’ views.
2. Higher interest charge
Unlike housing loans or mortgages, car loans use a flat interest rate. Here’s what you need to know:
- With a flat interest rate, the amount of interest paid is fixed upon the principal and does not diminish the more you pay.
For example, say you’re purchasing a car with a loan of RM74,000 and the interest rate is 3.4% per annum for 9 years.
- Your interest per year would then be: 3.4% of RM74,000 = RM2,516.
- The total interest paid over 9 years would be: RM2,516 x 9 = RM22, 644.
- RM74,000 + RM22,644 = RM96,644.
So, you’re actually paying RM96,644 for your car at the end of the loan tenure. That’s far more than what the 3.4% interest makes it out to be!
Buying a house first
1. Appreciating value
Unlike cars that depreciate in value, a house is definitely an asset with how the prices of Malaysian houses have hiked in value significantly compared to the past. Just look at these mind-boggling examples:
- From 2016 to 2017, Selangor showed the highest annual increase of 7.6% in its housing price index
- For Kuala Lumpur, it showed a growth of 7.3%. These numbers are huge!
- A single-storey terraced house for RM150,000 in Puchong in 2001 sold for RM512,500 in 2017, an increase of 241%!
- A double-storey terraced house in Segambut for RM178,500 in 2001 was priced at RM571,500 in 2017, a capital appreciation of 220%
That’s crazy, weh! A house would definitely be a long-term investment that’s worthwhile, and you can even pass it down to your children in the future!
2. Lower interest charge
Unlike the flat interest rates of car loans, mortgage interest is applied based on reducing the balance interest rate. Here are all the details:
- The bank only charges interest on your loan’s remaining balance
- Thus, the interest paid on a monthly basis is reduced as the remaining debt level drops
- This is due to the interest charged on the principal loan amount which gets lower each month as you continue to pay
Therefore, the total interest being charged is lower than that of a flat interest rate like car loans!
Source: The Star
1. The long-term loan that spans about 35 years
In comparison to the relatively short loan period of 9 years, a house loan repayment tenure can take up to 35 years! This long repayment tenure may end up locking you into an almost lifelong loan that needs to be paid no matter what economic standing you will be in down the road.
2. The high upfront cash needed to purchase
Another thing that you need to consider is the fairly substantial amount you have to fork out for the downpayment. A house priced at RM500,000 needs a whopping RM50,000 as a down payment, an amount that the average Malaysian needs time to save up for.
The bottom line: which should you prioritise first?
There is definitely no right or wrong answer to this question. At the end of the day, the answer lies within your needs, lifestyle preferences and financial capabilities.
Here are some questions to ask yourself before deciding to sign that long-term commitment:
- How much money am I making and how much money do I have left after all expenses and savings?
- How much do I have to pay if I decide to get a car or a house?
- What expenses can I forgo in order to accommodate the loan?
- Do I have extra money to accommodate the monthly amortisation?
- Will the monthly payments create a strain on my buying capacity?
- Do I have savings or emergency fund that could back me up in case of loss of employment?
Only after weighing all of them thoroughly will you know whether you should prioritise buying a car or a house first.
But if you want both, here’s one way to do it!
Malaysians can actually OWN A NEW CAR with the purchase of their new house with Mah Sing!
This superb deal lets you kill two birds with one stone because for every purchase of Mah Sing‘s state of the art freehold Cerrado suite at Southville City, you’ll get to drive home a brand new Perodua Bezza!
Cerrado Suites is at the heart of Southville City, a freehold and master-planned cosmopolitan address located in KL South. Spanning 428 acres, this contemporary urban centre combines the energy and dynamism of one of the most exciting cities in the region with the spellbinding serenity and breathtaking beauty of nature in one destination.
Just look at all the features that Cerrado Suites have below:
- Gorgeous poolside villas
- Secured residential apartments
- Partially furnished
- A large podium that includes a themed landscaped garden gym
Southville City is a truly integrated development, connected via Southville City interchange (Exit 212A), KL Seremban highway. Comprising of residential towers, retail development, a hotel, a convention centre, a commercial hub, educational institutions and more.
Today, Southville City is one of the most sought-after addresses for businesses and individuals alike.
So what’s your choice? A house, car, or maybe both?
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