Forget what body style, how much power it has or even why you need it, the very first thing you’ll need to decide in purchasing a car is if you’re going to go brand new or pre-owned.
The pros and cons of both have been debated over plenty of teh tarik down at the local mamak with nary a clear winner in sight. However, it’s important to note that the weightage of each pro or con is heavily dependent on multiple factors that are well beyond the control of the buyer and occasionally, the carmaker too.
Taking that into consideration, the next few months would appear to favor pre-owned or second-hand cars for a number of factors.
1. No Waiting Period
This one is the primary reason behind favoring pre-owned over new. For the majority of people, affordable cars are purchased as a necessity rather than a luxury and most first-time buyers can’t afford to wait months for a car as it affects their livelihood.
The extended waiting period for new cars in Malaysia isn’t something new and has been a thorn in the automotive industry’s side since the pandemic threw a wrench into the works of production and parts supplies.
However, the global parts shortage isn’t the only element weighing down deliveries. The service tax (SST) exemption for new vehicles that was meant to spur new car sales saw an unprecedented surge in orders that have overwhelmed production.
That, coupled with the global parts shortage, has led to waiting periods of over 12 months for some of the more popular models in Malaysia, especially in 2021 and early 2022.
First-time buyers looking for a mode of transport to their first job or to college can ill afford to wait six months or more for delivery. While that may not be the only reason behind someone being unable to wait that long for a new car, the gist of it is that a large number of buyers don’t have that luxury and need options with immediacy.
The most viable solution for this is getting a pre-owned car.
Pre-owned cars are ready to go and with the right documents as well as a strong credit score, can be driven off the lot in a couple of days.
While some may argue that a pre-owned vehicle lacks a proper warranty or could be susceptible to mileage tampering, platforms such as CARSOME provide their CARSOME Certified cars that undergo a stringent 175-point inspection to ensure they’re free of major accidents and flood damage, and have gone through a thorough refurbishment process. The cars also come with a fixed price with no hidden fees, a 5-day money-back guarantee, and a 1-year warranty.
2. Avoiding a Possible OPR Increase
This has been a hot topic lately. First, let’s try to explain what the overnight policy rate (OPR) is.
The OPR is the interest rate set by the central bank at which a depository institution (bank) lends immediately available funds (balances within the central bank) to another bank overnight to keep their cash reserves in check for a healthy and fluid financial system.
Simply put, the OPR determines the interest rate for a loan. And what is it most people need to buy a car? That’s right, a loan. Therefore, a higher OPR would translate into higher interest rates for a loan.
Bank Negara Malaysia (BNM) has increased the OPR three times already this year, in May, July, and September 2022, from a historic low of 1.75 percent to 2.50 percent at the time of writing this article. There are rumors that the OPR will climb again before the end of the year.
Seeing that car loans (hire purchase) are mostly fixed rate financing arrangements, they won’t be charged on the outstanding balance based on an underlying index and are therefore not affected by an increasing OPR mid-loan.
Nonetheless, any loan approval by a bank is only valid for a period of 3 months before the offer is rescinded. So, if your new car is only going to be delivered in 6 months or more, you might be hit with a higher interest rate when the time comes to sign on the dotted line.
As explained to us by a salesperson, the initial loan submission is done to ensure that there are no issues with getting approval for a loan down the road. Once the delivery date for your new vehicle has been confirmed, the salesperson will resubmit the loan a month prior to the delivery date if the initial approval has surpassed the 3-month period.
The second submission and approval, however, will be subject to the interest rate at that time which could be higher if the OPR does climb.
Taking all this into account, going for a pre-owned car that’s readily available will see your loan be subject to the current interest rates, effectively locking it in for the entire tenure of your loan.
3. Circumventing Depreciation
Most new cars lose a ton of their value to dreaded depreciation the moment that new tire rolls onto the road off the showroom floor. Luxury cars tend to take the brunt of the hit from the depreciation branch a lot more than more mainstream models but ultimately, there’s no escaping depreciation for a new car.
Depreciation hits exponentially from new, meaning as time passes the car loses less and less from its residual value. When the time comes to sell the car or trade it in for something newer, you’ll be on the losing end by a larger margin.
On the other hand, seeing that the brunt of depreciation happens in the first few years, buying a pre-owned vehicle will see you losing less on the residual value during the time of your ownership.
Should you decide to sell your pre-owned car or trade it in for an upgrade, theoretically you won’t feel much of a pinch. Furthermore, if you purchased a popular or mainstream pre-owned model, it tends to hold onto its resale value better down the road. There’ll always be demand for popular models.
Of course, the semantics of this entire depreciation facet can be kicked around for yonks but there is a modicum of logic to it, and is worth considering.
Buy CARSOME Certified for Peace of Mind
Here at CARSOME, we believe in creating an end-to-end buying journey to eliminate the concerns common in a traditional used car buying experience. CARSOME Certified is the new standard for buying pre-owned cars backed up by our 175-point inspection together with our CARSOME Certified Refurbishment Process.
By creating a trusted used car ecosystem, CARSOME Certified provides high-quality pre-owned cars by guaranteeing trust, transparency, and choice.
With CARSOME, the best time to buy a car is now. Shop for your dream car here.
“Better late than never.” Some despise it, others begrudgingly agree with it but he swears by it… much to the chagrin of everyone around him. That unfortunately stems from all of his project cars not running most of the time, which in turn is testament to his questionable decision-making skills in life. A culmination of many wrongs fortunately making a right; much like his project cars on the rare occasions they run, he’s still trying to figure out if another project car is the way to go.