How Much Should You Spend on a Car?

car investment in Malaysia

Being the third largest motor industry in Southeast Asia, it is a known fact that Malaysia is a growing market for cars. Approximately 4% of the country's Gross Domestic Product (GDP) comes from the automotive industry, and presently the country is expecting a boom in car deals in the current financial year.

Today many Malaysians are seeking to own a vehicle for their daily commute. But there are several factors that need to be considered before you start investing in a vehicle. After all, an investment gone bag can put a dent to your finances.

Some Factors to Keep In Mind Before Making a Car Purchase

Cars in Malaysia are Expensive

Most cars are priced at exorbitant rates in Malaysia, with a decent model starting from approximately RM70,000. This is mainly because of the taxes imposed on cars. To buy a car in Malaysia, you need to pay the car's down-payment (a minimum of 10% for new cars and 20% for used cars) as well as excise duty, import duty, sales tax, road tax, and other local taxes.

When you add petrol charges, insurance payment, parking fees, and annual maintenance fees, you will be paying a lot more for your vehicle than somebody else from another country for the same model. For instance, the Ford Mustang is priced at approximately RM370,000 in Malaysia and USD35,190 in the US. When converted, it is around RM144,310, which means you are paying double the amount for the same model in Malaysia!

What you should do:

  • Do a research on the best vehicles available in your budget. Compare prices and car specs to narrow down your choices.
  • If you are a lower or middle-income earner, you can look for car leasing options.
  • If you have the money but don’t want to invest in a new vehicle, opt for a second-hand car.

Your Priorities Matter

Did you know that more than 80% of car buyers in Malaysia do a proper research before buying a car? Just like having basic knowledge of basic car specifications is important, you should also try and figure out why you need to buy a car in the first place. Are you looking for more luggage space to accommodate your groceries and shopping bags? Or are you looking for an affordable vehicle to travel to your workplace in comfort? No matter what the reasons are, you need to choose a car that will suit your lifestyle requirements.

What you should do:

  • If you are new to the country and want a vehicle for just a couple of years, look at car leasing options.
  • If you travel to work every day, look for a comfortable vehicle available at affordable prices. You can opt for local manufacturers – Perodua or Proton. They have some fuel-efficient and affordable models available, including Perodua Bezza 1.0 Standard G – Automatic (from RM39,300 onwards) and Proton Iriz 1.3 MT (from RM760 onwards).
  • If you are a regular weekend shopper, looking for an inexpensive car that accommodates a large family, you can opt for 7-seaters like Perodua Alza, Proton Ertiga, and Proton Exora. The prices range starts from RM52,500 onwards.

A New Car or a Second-hand Car?

If you are a first-time car buyer, this question could confuse you. While a new car is a hassle-free buy, a second-hand car will give you great value for money. You can consider the car’s depreciation value. If you are looking to sell your car after a few years, you could lose up to 40% to 50% of the car’s original value. However, if you are going for a second-hand car, you need to check it properly if the car is in excellent condition before buying it.

What you should do:

  • If you want a car that can service you for the next 5 to 10 years, buy a new vehicle instead of a second-hand one.
  • If you want a good model in an affordable price, choose a second-hand vehicles. There are many websites and car dealers from which you can choose your new second-hand vehicle.
  • When you’re buying a second-hand vehicle, take it for a test drive, make sure all the car's papers are in place, and check if the seller has an existing loan.

Should You Lease or Buy a Car?

Many Malaysians are now opting to lease a car instead of buying one as the lease payments are much lesser than car loan instalments. Also, leasing is a good option if you want a car for a short period of time. However, you won’t be given ownership of the vehicle and once the lease period is over, you need to return the car. Looking at the pros and cons can help you decide which one to opt for.

What you should do:

  • If you are looking to pay lesser payments every month, you can lease a car.
  • You can also lease a car when you have many financial commitments but need a car urgently.
  • When you lease a car you won't be able to own it. If you want a car in your name, you could buy a car within your budget.

Your Affordability

Most people like to have a nice fancy car, but the question is are they able to afford it? When you buy a car by taking a car loan, you pay the car loan instalments, as well as, you need to allocate funds to get your car serviced often. You also need to set aside an amount for car insurance. Keep all these factors in mind before deciding on a realistic budget.

What you should do:

  • Look at how many funds you can set aside for buying and maintaining a car. Don’t forget to calculate taxes and insurance payments.
  • Do a web-research and find cars within the budget you can afford.
  • If you are still finding it difficult to find a car within your budget, buy a second-hand car or look for car leasing options.


Before walking into different car showrooms to test drive the car, you need to make up your mind how much you are willing to spend on the car. If you have a dream car in mind, ask yourself if the vehicle is really worth the amount you are paying, especially if you are a middle-income earner. Once you check your affordability and your lifestyle requirements you will be able to zero down upon a car easily. You can take a look at some of the car loans banks are offering in Malaysia.

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