If you have a property, you can refinance your property. Take out 120k loan to buy car and deposit your 120k cash into your offset account. Then you will not be charged for any interest and still maintain the flexibility of the money in case u ever need them in emergency..

as long as you got other alternative investment can yield better return than the car loan interest rate...then i will just take loan...or in some cases where your company got subsidize car loan interest...then let your company pay the car interest rate la...and you can just keep the cash balance even in FD...


i think 99% i won't pay cash la...

And I believe Gourmen will launch some 'inspection' on you if you pay that large amount of cash to buy a car

But if you buy second hand car, will LHDN know?

I dun understand yr method ^. If you refinance your house and take the 120k cash to buy car, then there is no more money to "deposit your 120k cash into yr offset account." where did this moeny come from? magic? drop from the sky? You will still be charged interest based on the home loan interest rates

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Added on October 1, 2011, 10:39 pmMy opinion, if you are buying a car, then aim to avoid taking up a loan and pay full cash if you have the means. This is becuase car is a depreciatable item and certain car (continental) depreciate faster than others. You want to avoid a situation where the car depreciates faster than the repayment amout, which essentially means even if you sell the car, you still owe bank/finance company money.

This post has been edited by mercury8400: Oct 1 2011, 10:39 PM

When you buy car cash, no more loan.
When you buy car minimum amount, you need a loan.
Lastly you need to pay the interest.
The different is, you have cash and you can spend for petrol and accessory.

If you can earn high interest than the Car's Hire Purchase Interest (within the loan period), you should go for installment.

Better buy house or another assets.
Value the car will decreased every year.
Value of house will increased.

TS already have 120k to buy the car cash. The question was whether he should use it all to buy a car cash, and have no spare funds. Or take HP.

The refinance house thing is a proposed third option. Buy the car cash. Then refinance house, and put the money back in the bank. This way you get "spare cash". IINM, interest would be much much lower than HP. Plus you're not actually using the cash, so costs would be even lower compared to HP. And you still have the flexibility of having 120k to chase up any business opportunity that comes up.

if you pay 100% cash, the next day income tax fellow will find you

its still better to pay 50 : 50

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Added on October 2, 2011, 10:33 pmdude, TS probaby has a house already. he was asking which is the best method to buy a car

This post has been edited by squarepilot: Oct 2 2011, 10:33 PM

many people misunderstood this, it only apply to those who understate their tax payable

I agree with @yhtan. @Squarepilot, if I've declare my income (say RM 1mil) , I can buy any items with CASH (say items costing around RM 100k) anytime without LHDN coming knocking at my doors. Unless I declare my income (say RM 100k), and buying CASH (say items costing around RM 100k), then I will have problem with LHDN.

better pay installament rather than paying full cash.
car interest not much come to house interest ..

no penalty but most likely will need pay part of the initial interest.

i tried asking bank when i have around 1.5 years installment left, they give me very little discount.

example balance rm10000, they give me like 3% discount only.

Personally I won't pay cash for 120k....

First of all, I don't really know all the details as I'm not in the banking line. But it would be safe to make a guess that there would be some sort of fees, charges, and/or penalties, as after all, it is an agreement that is about to be broken.

The bank expected to earn x amount of the loan, and giving a you a certain interest rate, and later on, you are trying to break their expected earnings without them putting up a fight?

I think the "Rule of 78" still applies to early settlement of a car loan. See this http://www.thestar.com.my/Opinion/Letters/...s-up-to-age-60/

I'm not sure whether the rule of 78 applies to loans above 5 years, but someone I knew was really cursing left and right when he blindly signed to the longest loan that was on offer, I think it was 9 years, and about 3-4 years later, tried to fully settle the loan.

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add on....

Unless one has a specific reason to purposely decide to take a 5-year loan, and fully paid it off in 2 years, by all means go ahead.

If there is no specific reason, IMHO, the best is to work out how much we can afford to pay each month as installment, and use that to calculate how long it would take to pay off the loan amount. Then round it to the nearest month, not year.

Up to you... you asked, I replied. No need to make assumption what or how I do it.

Try to understand how the rule of 78 would applied to a car loan. House loan is different.

You still can, but car loan interest is not counted as same as house loan, so banks may impose some penalty charges or extra charges for too early settlement, as banks do not earn much in the early stage of the loan.
Somemore the total loan period interest (5years interest) is calculated already before derived the monthly repayment already.

It is not the like housing loan interest is counted based on reducing balance, whereby the more you pay or settle early, you save interest.

Borrow 100K car loan, 3% interest 5 year, 15K interest amount, equivalent to 3K per annum which spread out to 5 years.

1st year 3k interest out of 100K loan - 3%
2nd year 3K interest out of 80k outstanding loan amount - 3.75%
3rd year 3k out of 60K outstanding loan - 5%
4th year 3k out of 40K left - 7.5%

From here, you can see where bank makes the most profit.
If bank allows early settlement at 1st and 2nd year without any penalty or charges, they basically may earn little or close to nothing, if OPR rate is at 3.25%.

This post has been edited by cherroy: Jul 12 2015, 10:02 PM

Here's what I did:

Car price: 125k
Down payment: 30%
Loan: 70% @ 5 years.

I think this is a good formula to follow in assessing if you can afford the car.

Rule #1
Cash is king.

Rule #2
Cash is king.

Rule #3
Cash is still king.

Isn't it better to keep the king in YOUR POCKET? Of course take loan la! Now if you buy selected VW car, 0% interest!