Cover Story
By Tan Mei Kuan and Nantini Krishnan
In view of the weakening ringgit and a likely price hike for new cars next year, Ipoh Echo checks out the potential of second-hand cars making waves in the market. We spoke to former luminaries of the business, used-car dealers, banks and the end-users themselves to let our readers decide if a pre-owned car is indeed a worthy investment despite perceived negativities.
Used Cars: Then and Now
According to Roland Rama Rao, from the 1960s onwards, the two biggest car dealers in Ipoh were Wearne Brothers and Universal Cars. His father was then the sole proprietor for the Motor Show-room which dealt with the two market players. Back then, second-hand car companies did not exist as a separate entity, as the new car company themselves would absorb the used vehicles via trade-ins.
Roland, who is happily retired now, has over 40 years’ experience in the motorcar industry. He noted that there were not many players in the market then. Customers would look for the dealers and loans were provided by the car company itself.
For him, websites like Mudah.my are for individuals seeking a better price for their cars after consultation with the car dealers.
“The scenario is very different today. Nowadays, the car buyers are very well-versed because they are able to access the information online. However, now would not be best time for the industry with the drop in petroleum price, introduction of GST and the increase in toll rates. Previous economic downturns were in 1997 and 2005,” said the Teluk Intan-born Roland to Ipoh Echo.
“Government policies only take new cars into consideration, leaving the used-car dealers unprotected and with many uncertainties. Everything is dependent on prevailing market sentiments. If new cars don’t sell so too would second-hand cars,” he reasoned.
Prominent Dealers in Ipoh
Established 35 years ago, Yew Xin Enterprise is a family-owned business offering Perak-based cars with some sourced from Kuala Lumpur. Lam Wei Jun, 30, son of founder, Lam Chack Tin, defines a good second-hand car as, “A car without accidents, its engine in good condition, well-cared for by its previous owner and without interior damages.”
Yew Xin offers both new and used models from Toyota, Honda, Nissan, Perodua and Proton with prices ranging from a few thousand ringgit to below RM100,000. Besides dealing with car insurance and loan, it provides excellent car service, reasonable price and a two-week guarantee for buyers.
“It’ll be a tough market next year. It’s like a cycle, if the sales of new cars decrease, we would be affected too because without new cars, there would be no trade-ins. What is the use of a huge demand if we cannot provide? Moreover, the current purchasing power is low,” he posited.
Address: Lot 3050 (S), Jalan Raja Permaisuri Bainun, 30250 Ipoh. Tel: 05 241 4997 Opening hours: Every day from 9am-6pm except Sunday from 11am-3pm.
Lim Weng Choy, 40, is the executive director of Onn Fatt Credit Sdn Bhd (Aun Fatt Used Car), also a family-owned business founded by his father, Lim Moon Soon, in the 1970s. Onn Fatt offers Japanese cars, national cars, four-wheel drive, saloon cars and commercial vehicles with prices ranging from a few thousand ringgit to RM150,000. Loans are arranged for customers and the car warranty lasts from one week to ten days. Dealing with new and used vehicles, hire purchase and general insurance, Onn Fatt does not accept flood-damaged vehicles.
“We’ve plenty of repeat customers, as we walk the talk and keep our word. Once we inspect the car we’ll know whether it’s good or bad,” said Lim who is also the committee member of The Perak Motor and Credit Association since 2012.
“Banks calculate loan repayment points, which I feel is a little unfair. Those working as hawkers will have difficulty proving the legitimacy of their income. Previously banks considered gross income but today they calculate the nett income,” he pointed out. However, he is sure business in used cars will boom in the near future due to the hike in prices of new cars.
Address: Lot 29822, Jalan Pasir Puteh, 31650 Ipoh. Tel: 05 254 3972, 255 3972 Opening hours: 9pm-6pm every day except Sunday.
Established in 2000, Tai Ming Motors Enterprise is owned by 46-year-old Chan Kum Ming who is also the deputy chairman of The Perak Motor and Credit Association. Tai Ming offers Japanese cars with prices hovering between RM30,000 to RM120,000. For him, a good second-hand car is one which is accident-free, has low mileage and a nice coat of paint. The most sought after models are Honda City, Toyota Vios, Toyota Camry and Honda Accord. Tai Ming makes a point not to accept cars over ten years old.
“The weakening ringgit and the increase in new car prices are music to our ears. It’ll make second hand cars more saleable. But right now the association feels that the market is sluggish,” Chan told Ipoh Echo.
“Banks are stricter now. How many among us actually have all the required documents to apply for a loan? Guidelines and policies differ from one bank to another. For instance, some require a basic salary of RM2500 while some require fresh graduates age 23 years and below to have a guarantor,” he lamented.
With a 40-year history, The Perak Motor and Credit Association members are made up of credit companies, used and new car dealers. The registered association serves as a meeting place to solve issues relating to the auto industry besides organising talks and seminars on related current issues such as the GST margin scheme. Ipoh alone has over 100 members in it. Members meet every three months. A national-level meeting is held every December in Genting.
Address: Lot 2796s Jalan Raja Permaisuri Bainun, 30250 Ipoh. Tel: 05 255 7737
Opening hours: Every day from 9am-6pm except Sunday
Danny S.C. Cheah, 53, considers Public Car Dealer as a “baby” (newcomer) of the industry, as they were established just six years ago.
“In Malaysia, we need cars as the public transportation is not efficient enough as compared to Singapore,” said Danny, who has been with the company since its inception.
Japanese cars of three to nine years old are available at Public Car Dealers with price ranges from RM20,000 to RM60,000. They offer a one month guarantee and handle the loan for clients.
“Currently, business is bad. The difficulty in obtaining bank loans is the reason. For example, even if you have a salary of RM5000 but a commitment of over 70 per cent, the banks would reject,” Danny moaned.
Address: Lot 13247, Jalan Raja Permaisuri Bainun, 30250 Ipoh. Tel: 05 255 7924 Opening hours: 9am-6pm every day except Sunday
Loan Applications
Car loan is also known as hire-purchase loan. The term hire-purchase is derived from the fact that when you take up a car loan, the car technically belongs to the lender (the bank). The interest rate for a used car is significantly higher compared to that of a new car. But even with the higher interest rate, used cars are still much cheaper than new cars when factoring average depreciation cost. To get the best deal on your used car loan, don’t settle on the first bank you see. Do a bit of homework and also footwork.
Some second-hand car loans in Malaysia have a maximum financing margin of 90 per cent, so you should always expect to pay at least 10 per cent upfront to the car dealer. If you can afford it, consider paying a higher amount upfront, which will in turn lessen your principle loan amount and the interest.
In Malaysia, the maximum repayment period for a car loan is nine (9) years. The longer you stretch the repayment period, the less instalment amount you will pay per month, though at the expense of incurring more interest over the long run.
According to a former bank manager, with the weakening ringgit, banks are worried about their asset quality because of non-performing loans. The requirements for a second-hand car loan are very stringent, and qualifying is by no means easy. This is because when the clients do not pay back the car loan on time, the bank will repossess the car. Once the physical car repossession process is completed, banks often choose to put the car on the auction block in an effort to recoup the remaining balance. The amount from the sale is then subtracted from the balance on the original loan, but the value of a second-hand car drops faster than the loan value.
Beside banks, credit companies do provide car loans. This is what the former banker terms as the “grey market”, where loans are provided to those who don’t qualify. The downside is, the interest rates are much higher than established rates. “It operates like an ah long (unofficial money lender),” he remarked.
Feedback from Buyers
A survey was conducted with people who had bought second-hand cars. They were asked about the car they bought and their satisfaction level, including problems and complaints.
Fadzi Haron, 45, who previously owned a second-hand Kia Sephia is one unhappy customer. According to Fadzi, car salesmen use clever wording to help persuade you into buying a vehicle. The first thing most used car dealers do when they take a car in trade is get rid of any repair records provided by the previous owner. “They’ll also remove any service reminder stickers from the windshield that may provide a clue as to when the vehicle was last serviced or when the next service is due. They want the car to be sold as a clean sheet of paper. I’ll definitely not encourage people to buy a second-hand car,” Fadzi implored.
Hakim, 23, once owned a second-hand Proton Wira. He too had a bad experience. According to him, used cars are a good purchase for some people while new cars are a great choice for others. “I chose to buy a new car because I don’t want a car that would break down. I want to avoid a fat repair bill. The good point of owning a new car is that you don’t have to worry about it breaking down compared to a used car,” said Hakim. “Moreover, new cars are more attractive.”
According to Qilah, 25, the advantage of buying a used car is that it is less expensive. The relative advantage of the used-car is that it allows a buyer to pick a nicer model. “If you want a used car, start by checking the prices of the vehicles that interest you. Before buying, try to arrange a test drive at night and another on a rainy day. You can get a much higher spec on a second-hand car than a new car. And buy one from a reputable dealer,” she added.
Conclusion
Prices of new cars are set to go up effective 2016. Some are already up by as much as ten per cent. The reason points to a depreciating ringgit caused by a number of economic factors, falling petroleum price being one. And once the prices go up they will remain there for good. So buying a cheaper used car is an option to consider. We have mentioned the pros and cons. The choice is yours to consider.
