Step 5: How much can you afford?
Use our calculator to help you make a decision.
Here’s something that’s easy to forget: a vehicle’s value goes down each year after you’ve bought it. In other words, a vehicle is a depreciating asset.
Follow the steps below to find out what you’re REALLY able to afford:
- Determine your net monthly income (that’s your income after taking away taxes, EPF, and PERKESO/SOCSO deductions). Now, minus off all the usual stuff you spend your money on every month, such as your home loan or rental cost, personal loan repayments, credit card interest, utility bills, food, petrol and toll costs, education fees, etc.
- Then you’ll need to take away the insurance, road tax, maintenance fees, and other expenses that you’re expecting to pay for your car (we’ve listed those above in step 4!)
- What you’ve got left is the amount that you can afford for your monthly vehicle loan repayment. Most banks have guidelines to determine whether they are able to lend to you. A common guideline is requiring all of your loan commitments (including proposed loan) to be less than 60% of your income
Ask the bank for a monthly payment breakdown for the entire term of the loan. It’s great to have this so that you know exactly how much you owe to the bank, and when payments are due. This way you don’t end up missing a payment deadline!