Friday, August 10, 2018

Bosch Automotive Aftermarket Malaysia Organises A Session with RinggitPlus & Allianz General Insurance to Talk About Car Ownership Costs, Especially For First Time Buyers

Bosch Automotive Aftermarket Malaysia (Bosch) organized a comprehensive experts roundtable session yesterday morning (9th August) with the folks from RinggitPlus (a mostly financial comparison website) and Allianz General Insurance Company (Malaysia) Berhad to discuss and provide insights on financial planning, vehicle protection and car maintenance factors and their cost-benefit perspectives when purchasing a first car. I attended the short session so that I can share some of the findings with you readers out there.

The topic pushed forward was that a car is usually one of the first major purchases most Malaysians make in their lifetime. However, the decision-making process could be tough for some as there are so many variables in terms of cost, affordability, protection, maintenance that come into play when someone considers purchasing a car, be it new or used. Some think that they can afford a car, but actually they may not be able to do so. Or some think they can afford brand 'A', but in reality, they cannot fork out the maintenance of the car in the long run and should have bought cheaper brand 'C' in the first place.

So in today’s climate, most Malaysians who are just starting out in the workforce would earn an average starting salary of somewhere between RM 2,500 to RM 3,000 (with a university degree). This, combined with escalating cost of living especially in the larger cities like Kuala Lumpur, Penang and Johor Bahru, the ability to afford a car, either new or used, shrinks a fair bit.

Mr. Hann Liew, Founder and Director, RinggitPlus Malaysia had this so say about affordability, “When purchasing a car, you have to ask yourself 2 important questions – ‘Do you need it?’ and ‘Can you afford it?’. The biggest misconception most first time car buyers have is that as long you can afford the down payment and the car loan installments, you are in the clear.”

Insurance takes a large portion in the annual expenditure of maintaining a car...

On the topic of insurance, which is actually very important in terms of annual budget for maintaining a car, Mr. Sazali Abdul Rahman, Head of Franchise, Allianz General Insurance Company (Malaysia) Berhad said this, “Be it a new or used car, there are a set of detariff factors that we take into account to determine the insurance premium. These detariff factors include age of vehicle, vehicle make and model, gender, insured age, high-risk theft vehicle and cubic capacity”.

Mr. Sazali also stated that used cars usually have a lower insurance premium when compared to new cars. For example, comparing a 3-year old car vs. a new car, the difference in premium is 4.4% for national cars, 13% for Japanese cars and 22% for European cars. This is usually the case when you factor in the No Claim Bonus (NCB) and other factors like the insurer's age, marital status and also make of car (especially whether the car is a popular one or not, etc). And Allianz also wishes to say that one could also choose an insurer which gives extra services like the picture below....

Hidden Costs are the Killer to some Car Buyers....
Mr. Hann and Mr. Sazali both also stressed that there are in fact many hidden costs that we should factor in while determining our ability to afford a car. These hidden costs create a sum called Total Cost of Ownership (TCO) that includes depreciation, interest, petrol, parking and toll, insurance, road tax and car maintenance on top of the down payment and loan installments. As a rule of thumb, your monthly TCO should not exceed 20% of you gross income and to follow a 36% rule of debt-to-income ratio.

To avoid increasing your car’s TCO in the next few years, car maintenance is an important cost factor.

A well maintained car can keep maintenance costs down as everything is operating within the manufacturer's tolerances - servicing the car may keep major damage away in the long run.
“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 optimize your car maintenance budget, either DIY 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 Mr. Go Boon Wah, Marketing Manager, Bosch Automotive Aftermarket Malaysia.

Mr. Go concluded the session emphasizing that a regular proper maintenance is the life of the car and it is important to know relevant information on the supporting eco-system such as knowing which mechanic you can trust - sometimes you can save if you use the mechanic you know rather than stick with the manufacturer especially after the warranty has ended. You can also save some money which auto parts to maintain and change from those you buy from the manufacturer to an OEM replacement part from Bosch.

Other factors include which loan is best and which insurance works best for you especially when you are searching for the best interest rates for the loan and especially since the current insurance detariff allows insurance companies to charge a variable of minus 10% or plus 10% insurance rates from the suggested average. 

There are so many factors in place. I personally think that another good way to actually budget properly is that if you can afford to pay monthly installments for a Honda Accord 2.0, you could actually be better off with a Honda Civic 1.8 in the long run especially if you are unsure of hidden charges in the long run. Note that I suggested the 1.8 normally aspirated variant here. Usually turbocharged cars could cost as much as a larger car in terms of long term maintenance. So again, do your research before making the plunge. 

Knowledge allows you to make the best decision based on cost, affordability, protection and maintenance when buying your first car or your third car in fact, regardless whether it is new or used. 

In short, Motoring Malaysia has decided to cover this story as it could actually help many of you out there who are first time buyers. So think wisely before making that plunge.

From left: Sazali Abdul Rahman, Head Franchise & Special Scheme, Allianz General Insurance, Go Boon Wah, Marketing Manager, Bosch Automotive Aftermarket Malaysia, Liew Ooi Hann, Founder & Director, Ringgitplus Malaysia

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