Buyers who opt for these 108-month loans apparently prioritise low monthly instalments.
While there was some hoo-hah being made by Americans regarding the relatively recent prevalence of 5-year auto loans over there, that duration is all but deemed child’s play by us Malaysians over here with our 9-year maximum tenure.
Though it should nevertheless come as a shock to most for a staggering 80% of all Proton and Perodua buyers opting for this near decade-long repayment period, as highlighted recently by a research note released by AmInvestment bank. What more is that the investment bank has also stated that there are even some who will even extend that 108-month period even further, if permitted to do so.
The investment bank stated in its research note that Proton and Perodua models are to be the top choice for demographics with moderate to lower incomes. These vehicles are also considered as a consumer necessity by its buyers, rather than a luxury for such income demographics.
In explaining the rationale behind these long loan durations meanwhile, AmInvestment’s research note added for those who choose this option to prioritise the monthly instalment payments for their vehicles. Their financial balance is influenced by the prevailing interest rates, it further elaborates.
“The everyday people closely monitor the Overnight Policy Rate (OPR) as their financial situation aligns with it. This is a factor that the government cannot overlook. Bank Negara Malaysia (BNM) has maintained the OPR rate unchanged at 3.0 per cent since May last year,” it reiterates.
This long loan period however is not to be common practice across the local automotive landscape, with the investment bank finding that “of all the EVs purchased, customers opt for loan periods of five years, and some even pay cash”. This discovery further supports the current notion for these eco-friendly cars to be the hot new thing among the T10 income group who view such vehicles as ‘toys’, with the research note further noting that the various tax exemptions — such as excise duties, sales tax and road tax — do make these new zero-emission vehicles a worthwhile investment for the elite
As for the other points highlighted in this investment note now, AmInvestment Bank has stated for applications and approvals for auto loans to currently be maintaining a strong rate, with it singling out the Perodua Myvi in particular as being among the hottest in this respect.
This high demand for the king of Malaysian roads was attributed to delayed deliveries extending into the previous year, driven by buyers rushing to purchase due to ongoing needs, as well as consumer concerns about potential future OPR increases that might further raise car ownership costs.
Furthermore, the research firm has highlighted that used vehicle purchase are also still high at present and shows no signs of an imminent slowdown. This healthy state of the used market is attributed to some manufacturers faced supply chain issues that resulted in lower production in the middle of last year, which in turn caused excess demand in the used car segment.
“Sales are strong, but mostly for the affordable car segment, especially those made in Japan and domestically. Moreover, the current trend also shows buyers avoiding purchases of cars with large engine capacities. This may be due to concerns about fuel subsidy rationalisation,” the AmInvestment research note states.
Just getting back to the main topic of the 9-year loan duration here, it is probably worth opining for there to really be nothing inherently wrong for buyers to opt for such a long repayment period. Such is as while it may not be the most financially prudent choice stemming from the greater interest repayment, the increased cost of cars these days relative to wages therefore means for these longer loans to be the only way people can be mobile, while still putting food on the table.
Where it is more concerning however is for these longer loan periods to entice the prospect for some to buy beyond their means. A phenomenon which is unfortunately all too common an occurrence over here, if the sheer number of sambung bayar adverts currently out there are anything to go by.
Another concerning facet too with these longer loan periods these days is that in the era of increasingly tech-heavy cars, it does puts increase the risk of having to continue paying for a thing that may be technologically obsolete a few years down the road. A 10 year old iPhone is now all but worthless after all, so what about the current crop of similarly currently cutting-edge high-tech cars of today a decade from now?
