Brace yourself for (yet another) price increase.

According to Paultan, car prices could jump by 10-30% next year due to a “not so new” regulation by the government.

The regulation will change the way of how a car’s Open Market Value (OMV) is determined.

To keep things simple, the OMV is the cost price of the car when it leaves the factory, excluding taxes and excise duties from the government.

Currently, only manufacturing related items are included in the OMV, and the taxes are based on this number.

But from 2026 onwards, the new regulation will add non-manufacturing items to the OMV, such as:

• Sales

• Marketing costs

• Administrative expenses

• Profit

Naturally, with a longer list of items, the final cost of the car will increase, attracting higher taxes.

As usual, these additional costs will eventually trickle down to the consumer.

We will have to pay extra for unrelated costs such as development, IP licensing, marketing, and administration.

According to one of Paultan’s recent videos, the price of Perodua Myvi will jump by RM6,000, Honda Civic +RM30,000, and Toyota Vios +RM20,000.

Imagine paying 10-30% more for McDonalds just because of an ad you saw online.

This revision will only impact locally assembled (CKD) cars.

Therefore, if prices of CKD cars go up by 30%, carmakers will probably stop manufacturing and just bring in imported (CBU) cars.

Over the long run, this would be detrimental to the automotive industry and country, as production and job opportunities decline.

The regulation on excise duty is actually not new.

It has been deferred twice since its introduction in 2019. The first deadline was 31 Dec 2022 and again on 31 Dec 2024.

According to WapCar, the Ministry of Finance stressed that there will be no more extensions and plans to enforce it by 1 Jan 2026.

Is anyone taking action to stop this?

Currently, the Malaysian Automative Association (MAA) is looking to “engage” with the government before this deadline.

“Hopefully, we’ll be able to get some kind of understanding and also an alternative way to overcome this,” the MAA president said.

What are netizens saying about this?

Many are frustrated and are asking why the government is not looking to abolish this regulation entirely.

A user wrote: “If you want to increase car prices, make the public transport better first. Improve then increase the price not the other way around.”

Others question the tax on locally assembled cars but not imported cars, as CKD cars create jobs for factories to local suppliers.

Some brought up Rafizi’s magic formula on reducing the price of Myvi to RM25,000, Civic to RM63,150, and Camry RM71,000.

“I want to buy a car, but how do I know if I can comfortably afford it?”

Here are two general guidelines that you can follow:

i) Buy a car that’s close to your annual salary

ii) Use the 20/7/20 Rule

The first guideline is very straightforward. You simply divide the buying price of the car by 12 and see if your monthly income is within (or exceeds) this range.

Eg. You want to buy a Honda Civic 1.5L RS at RM150,000.

Divided by 12, you should have a salary of at least RM12,500 to “comfortably” afford this car.

Other examples:

This guideline is simple, but it doesn’t take into account the cost of the loan and downpayment, which is why you should consider the 20/7/20 Rule as well.

• Allocate 20% Downpayment

• Choose a 7 Year Loan Tenure

• Set aside 20% of your income in monthly instalments

If you can fulfil these 3 criteria, then you can comfortably afford the car!

That said, owning a car is not only about paying the monthly instalments. There are also other costs such as:

• roadtax

• insurance

• maintenence

• wear and tear (tyre, engine, battery, etc)

• Petrol and toll charge

This is why your monthly instalments should never exceed 20% of your income.

Personally, I keep the entire cost of owning a car (including all the variable costs like Petrol etc.) below 20% of my income, allowing me more wiggle room for my budget.

Ultimately, the guidelines are just guidelines.

You can always adjust the percentages to cater to your needs and wants.

But the most important thing when it comes to budgeting is to ensure that you have a positive balance every month, as covered by Financial Experts Hann and Sani in our live session last week.

If buying a Honda Civic puts you in negative territory, then you definitely cannot afford it, regardless of both guidelines.

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That’s all for this week’s newsletter!

Disclaimer: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.