Go for it la bro. I opted the hard way in life, sometimes regret that i did it, bought two house instead of a good car. Sometimes feel that i might be tòo old when i could  finally aford a good car..

Yep. It really is depends on what the individual want honestly.
Can't have everything in life. I want to drive a good car, I have to sacrifice my other investments.

But if I save up for the investments, I can have a better car later (maybe)
So the question is, how late? Can it wait? Or that particular individual want to achieve something within the window of time? etc.

Sometimes, I do not understand why people absolutely despise the idea of a 9 year loan. You guys do realise that hire purchase interest rates are super low at around 2.5%? Close one eye and you can find ANY sort of investment out there that gives you a better return than 2.5% PA. Having cash in hand is always better than dumping it onto a depreciating item like a car.

Just do some simple calculation of a RM100,000 car. If you had cash to buy the car outright, and you do it, then you have already lost money.

Imagine RM100,000 in an FD @ promotional rate of 4% (there are plenty of promos around, just needs some searching.), placed for 9 years, compounded. If you subtract out what you have to pay in total for installments and 10% downpayment, you already make a nett profit of about RM20,000.

Again. Cash is always better in your hand or other assets rather than dumping it onto a car.

This obviously does not work if you change cars every 3 years or less because this mathematical calculation is assuming that you do keep your car for 9 years.

Seriously, think before you discourage 9 year loans. Use the loan to work for you, not against you.

Oh boy, you have no idea about compounded interest don't you? Try your math again.

I wrote to explain effective interest rate and why the hire-purchase rate 2.8% is merely a myth to attract people to spend. By the way, don't misunderstand I want to boast, for the past 15 years, I bought all my cars and properties in cash.

I give a comparison, let say Mr A borrow 100k from the bank via Hire Purchase of 2.8% fixed per annum and 9 years instalments, the monthly instalment is 1159.26.

Mr B is a depositor and put 1159.26 per month into his bank account for 9 years. For the first year, assuming banks only accept 10k as minimum amount for FD deposit, Mr B can't put into FD to get 3.5% and hence only earn 0.5% per annum. After 12 months, Mr B get 13930 (12x1159.26+0.5% interest-monthly calculated) for his one year saving and transfer to FD account in order to earn 3.5% per annum. Again, beginning of third year, Mr B transfer his 2nd year saving of 13930 into FD again and continues to do so for his saving. See the attached diagram for the calculation.

Mr C put a 100k into FD.

After 9 years, these are the results:

- Mr A got car worth 100k 9 years ago, he pays 125200 for that 100k 'value'.
- Mr B get a total savings of 144433. He earns 19233 interest for saving 125200 over 9 years.   
- Mr C's 100k become 136289. It may seem lower than Mr B but Mr A's principal is 100k while Mr B's principal is 125200.
- Assuming Mr A used that 100k to buy a car and his car worth 30k after 9 years. The estimated cost of ownership is 144433 - 30000 = 114433. Add up maintenance and etc, the final figure is more.

I don't think I am contradicting myself,  you don't understand the meaning of leverage. Loan is a leverage if it helps people to gain more than what they can afford. Loan is not a leverage if it helps people to enjoy more than what they can afford at present level. [attachmentid=5460221]

I feel sorry for you.

Read this boy.

"Dude, I wrote that to explain why one should NOT buy a car with cash, especially if it is more than RM100,000. "

If one has the cash to buy a car, one should NOT do it because NOW, FD % is HIGHER than HP %. Understand?

It took you 3 replies to finally get the calculations right. And even that, you are still not understanding compounded interest. So, you are also still wrong about one thing, if I had the cash in cash,[ I WILL make a profit even after having to pay instalments every month up to the day I clear my loan.
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Seriously, though. Let's create a new thread in the finance forum and discuss there instead. This is going way off topic already.

Drian, my whole point is to encourage taking HP loan to buy cars instead of dumping cash at one go. It is not to encourage taking 9 year loans. Let's just simplify it even more and talk about a ONE year HP loan shall we? Again, this is assuming we have cash and also ability to pay instalments.

RM100,000 car
RM10,000 D/P
RM90,000 Loan
2.8% HP interest
You end up paying RM102,520 for the car.

While you are paying for the instalments, you have the following in FD.
RM100,000 FD @ 4%

By the end of ONE year, you cash out your FD @ RM104,000.

RM104,000 - Rm102,520 = RM1,480
Your RM100,000 liquid cash made money for you. If you had bought the car in cash, the car does NOTHING for you.

My scenario of 9 years is to dramatise the effect, not to encourage it.

If i am cash rich and I want to buy a new BMW, and I want to change car after 3 years, I will take a 3 year HP Loan and place the same amount in FD for 3 years. OK? Remaining liquid cash can be used in other places.

You don't withdraw from your FD! Since when did I say to withdraw from FD?

You can change the scenario into a 3 year HP loan and it is same. I know what is EIR, and needless to say, if you keep withdrawing your FD every year then OBVIOUSLY you are on the losing end. I am saying let your FD COMPOUND year after year.

My goodness. Even after that illustration, you still don't understand. My RM100,000 is in FD from day one. While I steadily, pay for installments every month. Your FD made money for you, despite after paying off all instalments. But a car bought with RM100,000 cash, did absolutely NOTHING, nada.

Does it matter? As long as it is not coming from the FD. Do you see my point now?

At the end of the day, your cashed out compounded FD will be more than what you paid in total for all installments. How is this worse than dumping your big chunk of liquid cash onto a depreciating item like a car??

LOL. Really? And how much are you putting into this FD every monthly installment? Go ahead and tabulate.

First of all, previously you said MONTHLY installments. Your table shows YEARLY installments.

Are you trying to embarrass yourself?

Edited.

Also one more thing, only 8th year onwards your method overtakes. Can the same be said for lower tenures?

I don't need you to proof anything to me. Your first sentence already shows how ignorant you are. There is a big difference in interest earned from 12 months of installments compared to one year's installment. This will greatly affect your end result.

You want to talk about investment but you are trying to justify to me that a difference of RM2,000 is nothing?

You really want to win? OK.

You want apple to apple comparison? Fine.

Tell me which bank offers a FIXED DEPOSIT which allows you to top up a fixed amount every month and yet still gives you 4.0% PA in order to project your wonderful table for 108 months. If you can't find one, fine. How about switching from FD to FD every single month? For 108 months you are going to do that? How about processing time and fluctuations in interest rates in between? Can you guarantee that for 108 months??

If you can do the above. I will admit that you are right. And I will stop.