Ever wonder why your paycheck disappears by the end of the month? 😳 Most people get shocked when they realize that a huge chunk of their salary goes to monthly car payments. The reason? Buying the wrong car or not following the right buying formula.
In this video/article, I’m sharing the step-by-step method to calculate your car’s monthly installment so you don’t end up struggling financially.
Step 1: The Simple Rule You Already Know
I’ve shared this before, and it’s easy to remember: buy a car that costs about one year of your salary.
For example, if you earn RM5,000/month, your annual income is:
So, aim to buy a car under RM60,000. Simple, right? ✅
But let’s take it a step further with the “2515 Formula” for car buying. This is slightly more advanced, but I’ll break it down step by step.
Step 2: Understand the 2515 Formula
The 2515 Formula helps you calculate how much car you can really afford:
20 → Put 20% down payment.
Example: Car price RM100,000 → Down payment = RM20,0005 → Loan tenure 5 years
15 → Monthly installment should not exceed 15% of your net salary
Example: Salary RM5,000 → 15% = RM750/month
Step 3: Real Case Study – Buying a RM60,000 Car
Interest Rate – Let’s assume 2.5% fixed
Down Payment – 20% of RM60,000 = RM12,000
Bank Loan – RM60,000 – RM12,000 = RM48,000
Annual Interest – 2.5% × RM48,000 = RM1,200/year
Total Interest for 5 Years – 5 × RM1,200 = RM6,000
Total Payment – Loan + Interest = RM48,000 + RM6,000 = RM54,000
Monthly Installment – RM54,000 ÷ 5 ÷ 12 = RM900/month
✅ To afford this car comfortably using the 2515 formula, your net salary should be at least RM6,000, because RM900 is 15% of your income.
Step 4: Why This Works Better Than Other Rules
Even the simple “one-year salary rule” works, but the 2515 formula is stricter and smarter:
Takes into account down payment
Calculates loan tenure
Ensures monthly payment fits your salary
No more worrying at the end of the month about money running out for essentials! 💸
Step 5: My Personal Experience
I’ve followed these rules and now own three cars:
One fully paid off
Two well within my budget
The first-hand car I bought was a Japanese car – wise choice because Asian cars hold their value better than European luxury cars, which lose value fast in Malaysia.
Even my friend, Bos James, agrees: buy second-hand European cars, but first-hand Japanese cars are okay if you can afford them. Smart buying = smart saving. 🧠
Final Tips
Follow the 2515 Formula or the “one-year salary” tip, and you’ll avoid:
Overspending on car loans
Month-end cash problems
Sacrificing essentials for car payments
🚀 Pro Tip: Don’t forget to account for insurance, tolls, petrol, and maintenance – these add up!
Liked this guide? Want more smart money tips?
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💬 Comment below if you have questions about buying cars or managing finances.
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