i got my saga flx se 1.6 from RHB islamic with 3.75% for 9 years

Its not about whether the car can last long or whatever la. Its about AFFORDABILITY. If they cant afford to pay monthly installments for a 5-7 year loan thats a clear indication that their salary isnt sufficient. Thats why car repossesors are having good business these days because of ppl not living within their means. But some (very few) ppl may choose to extend their loans as they would prefer to dump the extra downpayment sum into other investments that earn more profits.

Financial guru advice / guideline:

Max 15% of monthly income and not more then 5 years for the car loan. Even you plan to use the car more then 5 years.

We should invest the money not spending all the money on car loan. Car works for us not we work for the car. Let the investment generate some extra money for us.

well this is a forum and we are in a discussion and it's getting kind of out lol..
anyway back to topic..

from Bank Negara Malaysia: New Guidelines for Loan Borrowers

1) Propsective loan borrower will be assessed based on net income basis (instead of gross income) after deducting statutory deductions for tax and EPF and all other debt obligations (eg. car loan, other housing loan, credit cards) – effective from 1 Jan 2012;

2) Maximum car loan period not exceeding 9 years – effective from 18 Nov 2011.

On the maximum car loan period, it is not expected to have a signficant impact to many potential car buyers are currently there is only 2 banks offering car loan more than 9 years and approx 98% car loans are within 9 years.

if i'm not wrong, that is up to the bank

1) Identity Card
2) Malaysian Driving License
3) Pay slip (3 or 6 Months Latest)* some still taking 3 months

Supporting Document (if Any):

1) Bank Statement (3 or 6 Months Latest)* some still taking 3 months
2) EPF Statement
3) Copies of last 2 years' income tax returns (J form or EA)
4) Confirmation Letter of Employment (latest)
5) Proforma invoice from seller

Guarantor: (If Required by Bank)

1) Identity Card
2) Pay slip (3 or 6 Months Latest)* some still taking 3 months

Applicants are encouraged to submit all document needed support by extra
documents in order to get better interest rate and approval chances…
if i'm wrong, then i'm sorry
as far as i know...those are what is needed

Max 7 year loans for cars are acceptable. So with a 4000 salary, u can afford a new but reasonable car. The idea behind these financial guru's is that ppl need to spend less on cars since its always a losing investment. Minimise expenditure on cars and target investments which actually put money into your pocket e.g property, gold, equity funds, etc.

Buying a car should be based on need rather on prestige. Evaluate on a case by case basis. If ure a person who drives long distance alot, then safety is paramount thus spending a little more and getting a better car makes sense. But if ure just driving around town, why bother spending half your salary paying for a car just to keep up to the times and peer pressure? But if ure earning well, and uve got enough investments (generating good income elsewhere) then giving yourself a bit of luxury isnt bad.

But its sad to see mere office clerks (whos husbands are also holding low paying jobs) driving cars like Forte. Every month their salaries are finished by the 3rd week and they're gasping for breath till the next pay day.

Car loan work like that.
You borrow 50k. If the 50K interest is 3%, and for 5 years, means 50k x 3% x 5 years = 7.5K interest for the whole loan period (average 1.5K pa).

First year, you loan 50K, paid 1.5K, yes it is 3%.
But second year, you already down 10K, left 40K, you still being charged 1.5K. 1.5/40 = 3.75 (no longer 3%)
Third year, loan left 30k, still pay 1.5K interest, 1.5/30 = 5%.
4th 1.5/20 = 7.5%

So the longer you drag the loan period, the more happier the bank is.
That's why the longer loan period, bank can give more lower rate.

I don't see how the standard advise deviates from reality. I'm earning about double of the salary you mentioned and yes, I'm driving a kosong Viva. Stretching to the max (e.g. 9 years) is only feasible for me only if I can sleep in the car. There are many more financial challenges one should be prepared other than the four wheels.

Cheers.