12 Year Car Lifespan In Malaysia

November 18 23:59 2013 Print This Article

The government, yet again managed to agitate it’s rakyat by suggesting a 12 year car lifespan in Malaysia. Actually I have already heard about this before the Bajet 2014 was released not too long ago, but at that time it was 10 years, not 12 years.

 12 Year Car Lifespan In Malaysia

12 Year Car Lifespan In Malaysia

Actually, I personally know the deputy transport minister that was unfortunate enough to be the one presenting this idea (I think in parliament?). To be fair, he didn’t ask for this job, but was appointed. Furthermore, since MCA didn’t want any posts in the government, he and Hishamuddin had to fill in.

To be fair, the idea is not such a bad idea. It’s just the way and timing it was suggested couldn’t be any worse. Let’s look at the main points of the arguments for and against the motion.

For the motion

  • As a safety precaution. Old cars are not safe because of their outdated safety features.
  • If you read between the lines, the government wants to stimulate the car industry in Malaysia.
  • Too many cars on the road.

Against the motion

  • A typical car loans last 9 years, after settling the loan, 3 years later they have to make another loan to buy another car. That really sucks.
  • The people can read between the lines and know that the car companies, banks and government just want money from the people to top up the deficit.
  • People cannot enjoy a debt free period after settling their car loans. Apparently the government doesn’t know the value of RM600-800 extra cash in hand a month means to a middle class citizen.
  •  It’s like being bonded with car loans all life without any option because the public transportation services still suck.

It actually can be done if…

I can choose to be very anti about the plan but this time I choose to be constructive and give suggestions on how it CAN be implemented. Of course if the can be avoided, it will be the best scenario, but if it has to go on, then here are some suggestions on how it can be implemented. First and foremost, the tax just has to go down. There are no two way about it. No drastic tax reduction and the plan is dead in the water.

Besides the argument that if the tax is reduced, it will effect the 2nd hand car market cannot be used now because with a 12 year car lifespan put on cars, the 2nd hand market is even worse off. Who wants to buy a car with a time limit it can be used?

Remember the “Kempen Turunkan Harga Kereta”? Lets use that as a reference.

Tax

Lets take the MyVi example from the video. Cukai eksais is 75% and cukai jualan is 10%, so the total tax is 85%. So, according to the video, if the car is price RM46,000, the true price of the car is RM26,860. We’re not asking for all the tax to be abolished, but just the cukai eksais. If that is done, it only leaves only 10% tax on the car, which makes the car price RM29,546.

Loans

Since the car price has now dropped, we can now play around with the loan amount and duration. Let say, now we want to set the max loan duration to 5 years, it is possible. So with a 10% down payment and 3.2% interest, the buyer just have to pay RM514.10 for that MyVi. And a MyVi is a reasonable car. In fact, that repayment figure is more or less the amount that a MyVi owner pays right now, only after the tax reduction, he/she has only a 5 years of loan to pay instead of 9 years.

So, now he has 7 years of debt free time where he can save money for his childrens education, invest or where ever he needs the money.

Refund

Since the government was the one that came up with the law, of course the people will expect some kind of refund for “recycling” the 12 year old car. I’m not sure if it’s a viable option to sell the car in 3rd world countries after that period of time, but I’m sure for a MyVi, the scrap metal alone should amount for at least RM 5,000 if it’s sold in parts, not as a whole.

To facilitate the recycling process, why not legislate the car makers to make cars more easier to recycle and dismental into components. in other words, recycle friendly. I’m also sure a whole industry can be made from that recycling activity alone.

So, the car owner, having got his RM5,000 from recycling, then goes to the showroom to buy a new car with a new bank loan. And by that time, maybe his salary has risen and he can buy a better car.

Who benefits who looses?

The People

Well, straight away we see the people benefit from the reduced cost of living (reduced amount and duration of loan) and quality of life (gets a new car with superior specs). They might not be happy because they have to take  a new loan to buy a new car, but at least they have 7 years of a loan free interval before they have to take another 5 year loan.

The Banks

Although the value of the loan has gone down, the number of loans will raise because the need to buy a car every 12 years. The banks might not profit in the short term, but in the long term as people start scraping their cars, they will get the profit.

Government

Like the banks, they might not gain much in the short term, but in the long term, as people scrap their cars and buy cars every 12 years, the numbers will add up. Furthermore, the government can start a new business — the car recycling business — which can create more jobs (hopefully not only for banglas) and collect taxes from them.

The bottomline

In short, you don’t need to do the math to know that by enforcing a 12 year lifespan on cars, the volume of cars sales will rise, which will make the car makers and government happy. With the rise in the volume of cars bought, the volumes of loans will also rise, which makes the banks happy.

And with the car tax reduced, the people are happy with less loan time on their hands. Furthermore, the tax reduction supposedly does not effect the cost of making a car or the amount of money earned per car, but instead the raising sales volume will raise the profits of the car makers, which in turn also makes the government happy (more tax collection). And hopefully with raising profit there will be rising bonuses maybe?

But of course this is a very idealistic view of the issue. I didn’t take into account the various “shady characters” who take a cut of the pie and will fight tooth and nail not to allow a fair plan to be implemented.

My suggestion might not be the best, I don’t expect it to be. I just want the ball of ideas to start rolling instead of just say no to everything.

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iMyn
iMyn

iMyn is the Co-Founder and some say Chief Content Officer of RinggitKini.com. Has a craze in travel, writing and current issues.

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