The cost of acquiring a car is twofold: firstly, in the one-off cost involved at the initial stage, in the form of down payment, road tax or insurance payments for the car. The second cost is the long-term costs involved, which includes servicing of the loan you take for the car and maintenance costs. While most dealerships offer low or zero down payment and throw in goodies for the car, there is still the long term cost of maintenance to keep in mind.
Savings would be your ideal for buying (and maintaining) a car. Once you have squirrelled away a sufficient amount of cash that can cover the initial costs of owning a car, it is only a matter of making the purchase and ensuring you can meet the monthly loan payment for it. Upon purchase, continue practising the saving habit as you would need to account for the cost of petrol, repairs, regular auto services, and annual road tax renewal. Needless to say, owning a car is a long-term investment.
Take note that financial experts recommend your total debt obligations should not exceed 36% of your gross income. Here’s an example of how to calculate your affordability to buy a car1:
Gross monthly income: RM4,000
36% of your gross monthly income: RM1,440
Total existing debt commitments: RM1,000
How much can you afford to pay for your car repayment monthly?
RM1,440 – RM1,000 = RM440