The car trap: How owners are forced into debt

By Rosli Khan

For many in Malaysia, car ownership is no longer a sign of freedom – it is an unavoidable financial burden.

Behind every new car purchase – over 450,000 units were sold in 2024 – lies a deeper issue: a transport and urban development system that encourages debt, discourages alternatives and fills government coffers.

Successive governments, regardless of political symbol or colour, have created and maintained a policy environment that incentivises mass car ownership, a lucrative source of income.

Dependable revenue streams

The federal government controls the national tax system – and motor vehicles are among its most dependable revenue streams.

Taxes and charges tied to private car ownership include:

• Import duties of up to 30%
• Excise duties ranging from 60% to 105%
• Sales tax of 10%
• Road tax based on engine size
• Approved permit fees
• Fees from registration, driving licences, transfers, fines and insurance levies
• Vehicle inspection fees

It all adds up. The Road Transport Department alone collects over RM5bn annually. Billions more are generated from petrol taxes, toll revenues and auto-related expenses, including maintenance.

More cars mean more taxes. More driving means more tolls.

Car dependence is a model which the federal government has every incentive to sustain, if not promote.

Rewarding car dependence

This policy framework does not exist in isolation. It intersects with Malaysia’s broader economic strategy – where consumer debt props up domestic demand, and car sales function as a gross domestic product (GDP) booster.

Nearly 90% of new cars in Malaysia are bought on credit, often with seven-to-nine-year financing durations.

Car loans now form over RM200bn of household debt – second only to housing.

The result? A nation where financial institutions profit from interest, dealerships profit from volume, and the federal government profits from duties and taxes.

Ordinary people, meanwhile, pays for a depreciating asset they were compelled to buy because they have no viable alternative. Most cars lose 30% of their value as soon as they are driven out of the showroom.

Urban landscape designed for cars

This is where state governments come into the picture.

While taxation and automotive policy sit with the federal government, land use, development planning, township approvals and transport-oriented design fall under state jurisdiction.

Over the decades, state governments have facilitated – and in many cases, encouraged – sprawling, car-centric development.

New housing estates are routinely approved far from economic centres, with poor or non-existent public transport integration.

New cities are designed around highways, flyovers, parking lots and six-lane roads, rather than walkability, cycling paths or efficient bus and rail links.

Rejuvenation of old towns and cities often involves elevated highways passing above them, bringing more cars instead of heritage preservation.

George Town, Malacca and Petaling Jaya are but three of the many examples in the country today.

Without coordinated federal-state planning, Malaysia’s cities have grown outwards, not upwards or inwards – reinforcing the need for long commutes and a dependency on cars and, ultimately, perpetuating a tax-and-debt loop that benefits the federal system.

Public transport left undone

One might ask: why hasn’t public transport evolved as a real alternative?

Federal and state budgets have consistently favoured roads over rail, highways over bus rapid transit (BRT) lanes.

Even where public transport infrastructure was introduced, it was often underfunded, poorly integrated or politically manipulated.

Outside the Klang Valley, the majority of people have no reliable, safe or affordable transport options – even in urban areas.

As long as public transport is framed not as a national backbone but as a welfare service, its development remains an afterthought.

Trains and buses do not deliver the same fiscal returns as toll highways, fuel sales and vehicle taxes – so they are not prioritised.

Manufactured necessity, normalised debt

It is not that Malaysians are naturally car-obsessed. They are structurally boxed in.

Townships are approved with no rail or bus access; express buses are unsafe or uncomfortable for daily commuting; most cities lack any form of urban transit; and basic walking or cycling is unsafe or unplanned for.

So, the car becomes essential.

And when even the lowest-income earners are sold nine-year loans for the most basic of vehicles, the system entrenches itself – not just as a transport model but as a debt machine.

Meanwhile, social pressure reinforces the trap. Cars are seen as markers of status and success.

For many, not owning one is seen as failure – even if it means monthly repayments with no long-term gain.

A co-dependent structure

What we see today is a co-dependent model:

• The federal government designs and profits from a taxation system that incentivises car sales.
• The state governments, through land use decisions, township approvals and urban planning, shape an environment that necessitates car use.
• The financial sector profits from long-term loans for vehicles.
• And the public is caught in the middle – paying for both the car and the consequences: fuel, toll, congestion, accidents and maintenance.

This is not just about transport. It is about national priorities, intergovernmental coordination and public accountability.

Understanding the trap

Car ownership in Malaysia is not about freedom of mobility anymore – it is about structural dependence. Every road, toll and duty reinforces a loop that keeps the public mobile only by staying in debt.

The federal government profits from volume. The states create space for sprawl.

Public transport, which could disrupt this cycle, remains underbuilt.

If we are serious about solving traffic, reducing debt and building liveable cities, we must first understand why there is no incentive to change the current system. – Free Malaysia Today

Rosli Khan, a traffic planning consultant, has a masters in transport planning and a PhD in transport economics from Cranfield University in England. 

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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