Agreed.
If one is always on the assumption that I'll eventually sell the car; then to me it's not a wise choice to pay it up all in cash. Why pay a full amount in cash when one knows the asset they are holding is going to depreciate when selling off. Thus a wiser thing to do is to assume when one is going to sell his car as well as the expected prices during then to calculate how much down payment one's going to put down as well as interest they are going to pay so they don't end up losing out that much.

If you can invest with something that can beat the car's interest rate, then should just pay minimum down payment and use the rest of the money for investment..

NONSENSE
buy cash if u have the cash

60k invested for 3% gains is only rm1800/year which comes up to rm150/month, I highly doubt that is enough for his monthly car installments...

For me, I would spend as little as possible for the car (e.g. 40k for 80k car) and focus majority of my cash for building future wealth... If possible, wouldn't purchase a car at all and continue using the old/2nd hand car if still in working condition

As the saying goes, suffer early enjoy later "先苦后甜", I'm pretty sure this won't be your final car this lifetime

This post has been edited by CSS: Sep 17 2011, 02:16 PM

A 3% car loan, is never a "3%" net interest you are paying.
It is much higher than 3%.

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Added on September 17, 2011, 2:15 pmYou don't get 2% out of it.

Car loan math is not like that.


This post has been edited by cherroy: Sep 17 2011, 02:15 PM

exactly. 3% car loan is equivalent to about 5.9% compounded interest rate..

It is not easy to find an investment that can generate more than 5% in current environment.

There is reason for some director not pay in cash.

The money can be used for own business purpose, for cashflow which is bread and butter for any business, and can be cheaper than using OD facilities.
The loan interest is tax deductible under company car.

But for company that are cash rich, there are company that pay in full cash.

This post has been edited by cherroy: Sep 17 2011, 02:27 PM

Of course it's nonsense if one lives in a single point-of-view world only
Then again, it depends.. U may be right!

Ah... many of them do buy car with cash. Some purposely avoid to pay by cash at one go mainly because they are afraid of LHDN comes knocking on their doors


Agreed! A few of my friends got their first Japanese car when they first enrolled into local public university. The parents wanted to pay by cash but they worried this might get the unwanted attention (LHDN). So, the parents put a downpayment of about 60% and the rest borrowed from bank with a repayment period of just 3-year (the shortest). So, the parents did not pay at one go not because they think they can get better return using the cash they have elsewhere. It was because they do not want to get into trouble with LHDN

By the way, those people i just mentioned are no doubt born silver spoon fed. One must always have some cash on hands. Cash is king during recession after all. If you only have RM120k now and want to buy a RM120k car. I will definitely advise you not to proceed with your plan. Instead, buy a cheaper car. Put a downpayment of around 40%-50% and the rest go for loan.

This post has been edited by MilesAndMore: Sep 17 2011, 02:52 PM

I my opinion if you intend to sell after 5 years AND still have another 2 years to pay the bank, it might be easier to sell it off because the purchaser can just take over the bank loan.

If lets say you buy a 50k car with cash. 5 years down the road the car might only be worth 40k, you are obviously wanting all that money straight up. The new purchaser has to go through the trouble of getting that 40k loan.

with RM120k value of new car.. i couldn't accept the depreciation, TS i would only buy a old junk car which still will depreciate but not so much.. So i think ppl who going for 120k new car had to be extra rich or else that's a not so wise choice..

This post has been edited by alwjmonster: Sep 17 2011, 05:31 PM

reinvest your 120k until you get 500k, then buy a 200k car with cash. still got 300k on hand.

It takes a genius to turn 120k into 500k.

Genius OR persistence + a good plan & time OR bloody lucky "sai lang" / "show hand" short term trade

Anyways, these are beside the point as Thread Starter may be a multi-millionaire and this $120K may be like 0.5% to 1% of his net worth since he has the cash on hand.

This post has been edited by wongmunkeong: Sep 17 2011, 08:51 PM

Conclusion:
a) if TS money lying around in the bank or under his pillow, he can opt to buy CASH.

b) if TS has other place to put his money such as paper assets, properties etc, then its not very wise to buy CASH. Unless, the his investment does not need the the extra CASH.

Still, its personal choice.

Thank you everyone for your contributions in this thread.

I agreed with Edyek's conclusion and decide to go with the latter option.

Cheers.

To my humble opinion,

whenever you decide to purchase a tangible asset, in this case, a 120k car, it can also be a 300k property,

if u do it with cash in a lump sum, LHDN or inland revenue will be alerted. Simple audit will figure whether your legal earnings (those figures that you report to Tax dept. annually) enable you to do so.

Back to the question, if HP interest rate is 5%, and you take a 9 year loan, cost of car + ins. appx.1.5k,
100% loan spread 9 years, you will have to bear appx. 55k in interest. Need not be overwhelmed with the interest considering inflation rate of appx.3% annually and theres no econs crisis, i would say you may have actually earned if HP % surge steadily with inflation.

Assuming you are a typical wealthy person whom is eager to settle things on the spot....
you may consider, paying a minimum downpayment to get the car on the road instantly without flashing your LHDN friend. Commit to your instalment plan, actively repay in comfortable amount say 10k, 15k every couple of months and settle the loan in 2 years spread.

I am not sure whether it will work for u, welcome to comment and advise.

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Added on September 18, 2011, 5:31 pmprovided your investment doesn't take years, otherwise the 500k may worth not much than 120k in future God knows when.

This post has been edited by scottlwt: Sep 18 2011, 05:31 PM

Looks like I'm late to the party. Nevermind, I'll add it in anyway.

If you're comparing hire purchase interest against term loans/OD, bank deposit returns, investment returns, etc; KIV the different way HP interest is calculated.

For instance, if you take a RM10,000 loan from a bank, at 3% pa, for 5 years, the installment would be about RM177 per month, and after 5 years, you would have paid RM10,795.

If you take a RM10,000 HP, at 3%, for 5 years, the interest would be RM1500, and you would pay back a total of RM11,500.

Since the money is under the pillow, My advice is pay cash if you are buying a used car.

Your money work 2x harder for you by saving the HP interest cost which is higher than any FD rate in Malaysia.

Your car is fully paid and your money is "protected" from unwise spending in the future.

But if you are buying a new car and your income tax records doesn't commensurate with your spending, then you must take a car loan. The different between buying new car and used car from the tax point of view are:

New car: Excise duty, sales tax are paid under your name. Therefore you actually officially inform LHDN that you are buying a new car.

Used car: No LHDN tax related documents involved.

If u can generate return more than 2 times of ur car interest with the same lump sum cash... then go for loan... else pay full cash...