If you’re thinking of buying a brand-new car as a fresh graduate, you might want to hold that thought. The Malaysian Department of Insolvency (MDI) reported that car loans are the second largest contributor to bankruptcy among Malaysians. Across the span between 2018 and 2022, out of 49,133 cases of bankruptcy reported, 14.39% are caused by poor financial planning and the high cost of car loans. However, cases have consistently decreased from 3,392 in 2018 to 441 in 2022. MDI’s data shows that car loans ranked only fourth as the cause of bankruptcy cases as of 2022. It seems more Malaysians, especially fresh graduates are slowly learning the consequences of poor financial planning the hard way.
The cold, bitter truth for Malaysians is, our nation is abhorrently a car-centric country. Public transportation is underdeveloped and unreliable, which forces the hands of many white and blue-collar workers alike to fork out half their pay just to get from point A to B reliably.
Buying a brand-new car with your hard-earned money is seen as a symbol of success. Some people will go to lengths to impress others but are unable to keep up with the monthly installments. They either get declared bankrupt or forced to sell their car to someone else under sambung bayar.
While this writer laments that financial literacy should be an essential class taught in schools, we can, however, learn from the mistakes of those who fell into the brand-new car trap. Getting a used car as a fresh graduate does not have all the glam and glory of a brand-new one, but it can get the job done for a fraction of the cost. Furthermore, with the rumors of a car price hike going around, there is no harm to prepare before the storm. Here’s why used cars are future-proof for a fresh graduate.
Low Initial Cost
Putting aside the elephant in the room, getting a used car shaves off a huge fraction of the initial cost to purchase a car. According to Carlist.my, a new car can lose up to 30% of its value in the first year of ownership. This means that a fresh graduate who buys a new car could be left with a vehicle that is worth significantly less than what they paid for it. If they need to sell the car for any reason, they may find that they are unable to recoup their investment. This can lead to financial hardship and even bankruptcy.
Brand-new cars, even locally assembled Complete Knockdown Units (CKD) are still expensive despite today’s standards of living. According to Glassdoor, fresh graduate salaries in Malaysia are still stagnant with an average of RM2,500 as of 2023. Getting a used car can mitigate this problem as cars are always a depreciating asset.
By getting a used car as a fresh graduate, you reap more or less the same benefits of a brand-new car but with a cheaper downpayment, installments, and even insurance. As my parents used to say – start small, then slowly work your way up until you can afford a better upgrade. Moreover, some car brands and dealers even offer extended warranties. Do your own diligent research or ask any reputable used car dealer.
Read More: How to Claim Your 1-Year CARSOME Extended Warranty
Existing Information on Make And Model is Widely Available Online
Image Source: Carlist
Here’s a problem when it comes to newer cars even I still struggle with sometimes – what will happen to a brand new car once the warranty wears off? Newer cars these days seem to fall for this trend as there are reports of cars being sold immediately due to their unreliability after the “honeymoon” period is over. If your new car starts to have issues, there will be little to no information online as such problems have yet to be documented by other owners.
People always advise to never buy a car that is more than five years old (unless it’s a Toyota, as time after time again they have proven its reliability) or a used continental car, but such statements can be a two-way street. There are reliable cars, be they older than ten years or running continental cars out there. You just need to look for a reputable dealer and a meticulous owner. Even if you still managed to get yourself a used continental, and your car starts showing some problems, some brands and models have dedicated communities online to assist you. Forums like toyotanation.com, bimmerforums.com, and benzworld.org can provide you with all the input you need from experienced owners of said model.
Some brands like BMW are aware of this problem and have extended warranties even on used ones, so be sure to check with the dealer about it.
Read More: Car Loan Rejected as a Fresh Grad? Here’s Why & How You Can Buy Your First Car
Cheaper on Maintenance Due to Plenty of Aftermarket Support
For fresh graduates, you’d want something that is durable and reliable all for a bargain price. Our suggestion is to get a domestic or Japanese-branded car in the used market. Japanese automakers are known for their simplicity in design and rigorous testing before they are released to the public. Toyota tests its cars in extreme environments to ensure that they perform well under all conditions. Such tests help identify potential issues before the cars are released to the market, thus reducing the risk of mechanical issues later on. Domestic branded cars are also cheap and reliable for fresh graduates as mechanically, they share the same DNA as their Japanese cousins at Toyota, Daihatsu, and Mitsubishi.
The Toy0- I mean, Perodua Myvi shares the same parts as their Japanese cousins.
Parts for these cars are a no-brainer to source in Malaysia in addition, these parts can be installed plug-and-play at any workshop. Did you know you can source Mitsubishi parts and use them in a Proton or Daihatsu parts in a Myvi? As a fresh graduate, it’s important to pick a car that is easy to maintain and cheap to own to give you peace of mind during your daily commute. Buying a used continental or a brand new one may have a much more “wow” factor to impress your family and peers. But in the long run, you’ll waste too much time looking for car spare parts, leaving your car aside till you save up for it.
Need vs Want
There is a Chinese idiom that says – ride a cow to find a horse. As a fresh graduate, buying a used car is a financially safer option as it allows them to lower their total cost of ownership, and have greater flexibility in managing their finances. Once you get a higher salary later down the line, then maybe you can consider upgrading to a much better car.
At the end of the day, the choice is really up to your budget, preference, and the plans you have with it. If you’re someone who’s into modifying cars like me, it is best to start off with a used model as it has a lower initial cost which allows me to have more budget to buy more parts. If you’re looking for a car as a mere transport to get to places reliably, why splurge so much money on a brand new car just to impress the wrong crowd? As such, fresh graduates should consider their financial situation and budget it out thoroughly before making a major purchase decision.
This article was originally published by Wapcar.
