Buying Used Car in Malaysia from Direct Owner Without a Dealer

Buying a used car is seriously a daunting task for first timers. So much so that I believe many people just throw in the towel and buy a new one. Buying a new car saves you lots of time and potential costs of repairing a lemon you may have bought. But the chances of buying a decent used car is actually not bad if you know what to look for, and the time and effort taken to buy one may save you more than 50% of the cost of a new car, which amounts to a lot of money.

If you are indeed looking to buy a used car here in Malaysia, perhaps you might want to read on as I write about my recent experiences in buying and selling my cars, and decide for yourself whether you think you are up to the challenge of doing so.

My article this time is quite lengthy and with minimal pictures, so bookmark this page if you need and revisit it whenever you need to. I'm personally writing this as a reminder for myself ever I were to buy another car!

One of the many forms you may potentially need to fill up.

Buying a Used Car

Owning a car is like being married. Getting married is a pretty expensive endeavor and staying married require a lot of maintenance. If you stop maintaining your marriage and start ignoring your spouse, trouble is on the horizon. Same with your car. A car is also a long term commitment. Buying a used car is even more complex. You have no clue where the car has been, who has been using it (or abusing it) and if you get a lemon, well you are basically gonna spend more time and money maintaining it.

So before you begin, you need to know what car you want. Toyota and Hondas are the costliest of the used car bunch. Just to give you an idea, a used Honda City 2006 model costs about RM38k while a used Hyundai Elantra 2009 model costs RM25k. Toyota and Honda cars (especially Toyota) hold their resale value very well in the Malaysian market, followed by other Japanese cars, local cars, continental cars. Korean cars fare the worse (especially Kia), although Hyundai is gaining better reputation over the past three years.

Note also that used car are priced at the year they were made, not registered. So a car made in 2005 but registered in December 2005 would be priced around the same as a car registered in January 2005 even though the actual usage of the car would be almost a year longer. Hence if you ever decide to buy a new car at the beginning of the year, make sure the car you bought is made in that year as well. If not, then you should get big rebates and discounts for buying last year's model.

The Power of the Internet

Gone are the days where people are at the mercy of unscrupulous car dealers and mechanics. Today, buyers are armed with more information than ever before. 

You want to know fuel consumption of a car? Try Fuelly. 

You want to know what to watch out for before you buy a car Just search YouTube. 

There are also many local forums out there you can search for before you buy your car to see what are the potential problems with your future car, like Low Yat forum, Zerotohundred and who can forget Paultan?

If you want to find your dream car, the you need Mudah.my or Carlist.my.

Using Mudah and Carlist

After extensive search online for best used cars here in Malaysia, I have to say the two best sites are Mudah.my and Carlist.my. They are the juggernaut of online car classifieds here. No one else comes close. I did look at traditional classifieds like the Star and Motortrader, but they have fewer choices and it's so yesterday. 

Carlist.my is now on a marketing blitz and you can see them on billboards all over Klang Valley. While I do like the modern UI of Carlist, it has one major flaw. I am unable to display latest posting due to a bug which rendered a huge chunk of their listing as updated on the 2nd of January 2014. Fifty percent of the calls I made to the advertisers were fruitless because the cars was already sold a long time ago. Also, their photo slideshow is quite bad as it takes forever to load and it's an irritating pop up.

Mudah on the other hand is surprisingly easy although it has a pretty outdated UI. Function wins over form here though, so Mudah is my choice for car searches now.

Direct Owner or Dealer

Now, time to decide who do you want to buy from? An owner or a dealer? I tried to search online for an honest car dealer in KL, but apparently the term "Honest Car Dealer" is an oxymoron from many people's experience. Dealers are known to tweak the odometer of cars, cover up accidents and all do kinds of nasty stuff. Of course, the truth is not all cars they sell are lemons, it's just not easy to find out unless you really know what to look for. YouTube thought me some basics but it's hard to outsmart a guy who does this for a living. Make sure you test drive the car before you make a booking and don't buy into his sales talk. 

Buying from a dealer also has hidden costs involved which they will show you only after you sit down to count the cost. The price they normally show are just the "car price". Expect another RM1k or more for "loan handling fees", 30% more transfer fees and insurance. A car which costs RM25k would be RM28k OTR (on-the-road) after the additional costs. 

Buying from a dealer is not all that bad. In return for additional fees (and higher risks), they make your purchase much simpler. They handle all the documentations and hassle of dealing with JPJ, Puspakom, the bank loan applications. 

Buying from a direct owner on the other hand, has a few significant advantages:

1. You meet with the actual owner. Is it really a lady driver*? Is how often does she maintain the car? Show proof of car service records? Does she engage into D while at a traffic light or N?
2. You see the car in it's current actual condition. Dealers will spend about RM500 to beautify the car externally, give it a nice paint job and clean up. They will do very basic servicing and then put it for sale. My brother-in-law sold his Vios which had a clutch plate failing and top engine problem to a dealer. They took it regardless and I'm sure that's the way they would sell it. With simply a new coat of paint.
3. You get to negotiate with the seller. It's not uncommon to get 10% or more discount from the listed price.

*note: seriously, it really doesn't matter if it's a lady driver or not. what matters is how the previous driver regularly services the car and his/her driving habits. You can only find out if you ask the owner instead of a third party like a dealer.

Of course, there are also risks involved when buying direct, such as someone selling a stolen car or are just being as unscrupulous as a dealer. But so far after meeting a number of sellers, I've not met any bad folks. All genuinely looking to sell their cars.

Buying direct will also be a bit more troublesome when it comes to the loan application and transfer, especially if the seller is inexperienced and you are as blur as she is. Nonetheless, nothing Google can't help you with I'm sure.

When buying direct, you should: 

• Examine and test drive the car.
• Check for the car grant (pink registration card)
• Find out if the seller has existing loan with the bank. If there is a loan, the transfer may potentially take longer. 
• Negotiate a price. 
• If you really like the car, but you find something minor you really feel uncomfortable with, get the owner to fix it. Or ask for a discount based on how much it may take to fix it. But be reasonable, since this is after all a direct seller and they mostly don't have much time to beautify a car like how a dealer would.
• Pay a booking fee. Mostly common amount would be RM500 to show your commitment.

DIY Auto Body and Paint. Save money AND support my site! :)

The Buying Process

The buying process can be daunting, full of paperwork and honestly time consuming. Although this is true, ask yourself, "How often do you plan to buy a new car?". I bet you maybe once in 5 years? Would it be worth it if you took a week of your work time to make sure you bought the right car which you would drive everyday to work for the next 5 years? Do you want to put the safety of your family and passengers to the mouths of car dealers or would you prefer to trust yourself and take some time do see car owners and work through the buying process?

So, once you have paid the booking fees, here is what you need to do.

Buying Cash

1. First of all, is your Seller still owing the bank any money? If so, he needs to do a settlement with the bank first. You probably need to make an agreement with him that you write a cheque and get him to settle the bank loan first. Within a week, the car will be ready for transfer.
2. Seller to proceed to Puspakom to have his car checked. He need to provide you with the B5 (for JPJ transfer). This will cost him RM30. Or he can get a runner to do it, add about RM100 (he will bear it all).
3. You need to purchase the insurance for the car. If you don't know where to look for one, get your insurance from my insurance agent. They provide excellent services.*
4. Bring your Puspakom documents and Insurance cover note and proceed to JPJ to complete the transfer. 
1. Both Seller and Buyer must be present. If not, you need to get a commissioner of oaths to verify the absent parties on a Borang Akuan (JPJ-SAB01 and JPJ-SAB02). Write a simple authorization letter for a representative along with photocopies of his identification card.
2. Fill up Borang TM-1 and two copies of JPJ-K3
3. Transfer costs is borne by the Buyer (i.e. you) and should cost RM100. If you do not have the time, you can hire a runner to do it (add about RM200).
5. Once done, you pay the Seller the rest of the money owed and Seller will hand over the car and keys to you. This can also happen in step 1, depending on your arrangement with your Seller.

Buying with Hire Purchase Loan

1. Find a few banks and send in your application to their hire purchase department. You need the following documents:
• The car grant
• The owner's IC
• Your IC
• Your driving license
• If you are employed, latest 3 months payslip
• Your EPF or bank statement to verify your salary has been deposited
2. Seller to proceed to Puspakom to have his car checked. He must to provide you with the B5 (for JPJ transfer, RM30) and B7 (for bank hire purchase processing, RM60) forms. Runners can do it for about RM150 more, but it's a just a half day work if seller can afford it.
• Please confirm with your Seller that he will bear the B7 inspection. When I sold my cars I did bore it, but when I bought my cars, I also paid for it. Please don't make the same mistake as I did by agreeing with your Seller in advance.
3. You need to purchase the insurance for the car. Since you are taking a loan, the sum assured must be at least 90% of the purchase price as required by the bank. If you don't know where to look for one, get your insurance from my insurance agent. They provide excellent services.*
4. Bring your Puspakom documents and Insurance cover note and proceed to your bank together with your Seller and:
• Buyer (i.e. you) pays RM300 to RM400 for transfer fees. The bank will handle all the transaction on your behalf.
• Write a cheque to your Bank with the amount of 10% (or the agreed deposit) of the car price. The cheque will be held by the bank.
• Sign all the necessary documents.
5. At this point, you can already start to drive the car, if the Seller agrees to it. If the Seller wants to, he can write a simple gentlemen's agreement and have both you and the Seller sign.
6. Within a few days, the bank will send the cheque of the total selling price to the seller.
7. If the Seller still owes his Bank money, then it may take up to three weeks for the transfer to be completed. If so, it is advisable that you get a loan from the same bank to expedite the process.
• If the Seller's settlement amount is less than the selling price, then the Bank will send the Seller the difference in cheque.
• If the Seller's settlement amount is more than the selling price, then the Seller needs to top up to pay the difference to the Bank to complete the transfer.
8. Collect your grant from the bank.
9. Return the booking fees to your Seller.
10. Start paying your installments. 

You can check out http://www.jpj.gov.my/web/eng/guidelines-for-voluntary-change-of-ownership to find out more about transfer of ownership process.

* My insurance is managed by:

Insurpac Agency
Insuract Services Agency
03-78757522 (O) 03-78755392 (Fax)
No. 52M, Jalan SS2/67, Petaling Jaya, Selangor Darul Ehsan.


Loan Calculation

Just a quick note about Hire Purchase calculations. It's actually extremely easy to calculate the payments you need and total interest you will have to pay.

Payment per month = [Loan amount + (Loan amount x interest rate x number of years)] / Number of months

E.g.

Loan amount = RM10000
Interest rate = 3%
Number of Years = 3 years (36 months)
Payment per month = (10000 + 900) / 36 = RM302/month

So far I've done some research and found that the best interest rates for used car goes to Alliance Bank, and have applied for their loans twice. If you need a contact number, just drop me a comment. I would be happy to recommend.

Take note that used car interest rates are higher than new ones (e.g. 3.5% used vs 2.5% new). It also depends on the age and type of car. Cars that are 10 years and above will incur much higher interest rates (typically 4.5%), so it is in your best interest (no pun intended) to buy a car that is newer than a decade old unless you buy with cash.

Important Note on Loan Settlement

If the Seller has an outstanding loan with their bank, please ask him to check with the bank how much he needs to pay in order to settle the loan. The bank normally requires a specific date for the settlement, which in this case is the latest date you will pay the Seller's bank or the date which your bank will pay the Seller's bank.

There is an easy way to find out how much your settlement amount is. Just go to 

http://loanstreet.com.my/calculator/78settlecalc.html

and key in all the details required. All banks use the same calculation and hence makes it very easy to get very accurate approximation.

To settle the loan, the Seller has to go to his bank (normally over the counter) and pay using the cheque. The bank will issue an "e-batal" to JPJ after the cheque has cleared. This would take a few days. If you are taking a loan, then your bank will settle with the Seller's bank.

Driving the Car before Loan Disbursement or Complete of Transfer

You can actually request from the Seller that you would like to drive the car prior to the completion of the transfer, especially in the case of your loan being processed for disbursement to the Seller.

The best time to do this is right after you have gone to the bank to sign your loan agreement together with your Seller. What happens here is that while the money has not gone into the Seller's account and the car is still under the Seller's name, you already have insurance for the car. The Seller may write a simple gentleman's agreement have both parties signed with the following points:

1. That you have accepted the car in good condition - please ensure you have everything from the Seller, e.g. both car keys, service book, owner manual, spare tyre, etc. 
2. Any damage and accidents from this point on is your responsibility
3. Any summons you receive from the law enforcement offices shall be borne by you

There can also be special arrangements made for you to take the car first even before the loan agreement is signed (if the Seller trusts you), in which you drive the car with the Seller's current car insurance until the monetary and transfer transactions are completed. The only risk in this case is that if you meet with an accident, you need to pay the insurance company an additional RM400 for claims, and you potentially expense the Seller's NCB (no claim bonus). But the risk is small, since you probably will drive the car for a week or two before the payment and transfer is fully settled. The bigger risk lies with the Seller for entrusting that you don't just drive away with his car and vanish.

A Note about Outstanding Summons

Any summons the Seller has on this car will not be transferred to you. However, if the Seller has a lot of summons (especially police and JPJ), then he needs to settle it first lest he is unable to transfer the car to you.

A Note About Road Tax

If the car you are buying still has road tax, then you only need to renew the road tax after it's expiry. Road tax are not transferable from one car to another, so if you get a car that the owner just renewed it, then you just saved some money right there. 

Conclusion

Well so there you have it, how you can buy a used car in Malaysia without a dealer. If you managed to read thus far, then I assume you must be serious in your quest and I bid you all the best! Watch out for my next segment on how I sold my car and get an idea of what your seller may be thinking of when you talk to him. And do feel free to drop me a comment if you have any questions about buying a car and I will do my best to answer them. By the way, check out my other article on how to sell your car in Malaysia too.

Finally, if you have benefited from my article, please do support my site by visiting any advertisers that you find may be interesting to you. :)