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INTRODUCTION
- Problem Statement
- Purpose of the Research
- Research Objectives
- Research Questions
- Significance of the Study
Types of car leasing and leasing method in Malaysia are limited, consumers usually have fewer choices. The main purpose of this study is to find out which popular types of car leasing programs are available in Malaysia versus the popular ones in other countries in order to make a detailed comparison between them.
LITERATURE REVIEW
Underlying Theories
- Consumer Behavior Theory
- Social Exchange Theory
Usually, the usual studies in the past on consumer behavior were related to consumer behavior in purchasing goods, but in the context of this study it would be related to services. Part of it, the satisfaction of the supplier would be over profit, they want to get a reasonable profit from this exchange.
Definition of Lease
- Finance Lease
- Operating Lease
- Sale and Leaseback
- Full and Non-Payout Lease
- Leveraged and Non-Leveraged Lease
- Specialized Service Lease
- Net and Non-Net Lease
- Open-Ended Lease and Close-Ended Lease
According to "Leases" (2018), a financial lease is a rental contract that transfers all the threats and benefits associated with the possession of the listed asset (p.62). According to "Leases" (2018), an operating lease is a lease that does not transfer all the threats and benefits associated with the possession of the listed asset (p.62).
Leasing Business Model and Past Studies
This could lead to an overestimation of the residual value of the vehicle at the start of the lease, leading to a low monthly payment but a high final payment (Starkey, 1997). A risk-averse household prefers a predetermined sales price at the end of the lease with no additional payment during the final payment.
Context of Malaysia Automobile Industry
- Duty and Taxation
- Vehicle Permits in Malaysia
- Driving License
- Hire-Purchase Information
- Vehicles available in Malaysia
- Passenger Vehicle
- Commercial Vehicle
However, the full amount of the rental rate is tax deductible in Malaysia as it is an operating expense. In addition, the Malaysian government had imposed several taxes and duties on the vehicle, which increase the cost of the vehicle.
Vehicle Leasing Program Available in Malaysia
On the other hand, Orix is one of the leasing companies that provide Islamic leases, and the company has been recognized by ISO specializing in vans and light commercial trucks ("Automobile," n.d.). Apart from providing only operating leases, the two leasing companies directed from Japan, SMFL Leasing (Malaysia) Sdn Bhd (“SMFL”) and Hitachi Capital Malaysia Sdn Bhd (“Hitachi”) offer both leasing and operating leases to corporates and listed. company ("Service," n.d.). Some of the banks provide loans to the customers, such as CIMB Bank Berhad (“CIMB”), Bank Muamalat Malaysia Berhad (“Bank Muamalat”) and Bank Islam Malaysia Berhad (“Bank Islam”).
Mercedes-Benz, Mini-Cooper, Volvo and BMW were creative, offering a similar package which was actually a combination of both financial leasing and operational leasing. In short, the car leasing programs in Malaysia were operational leasing and financial leasing. the ingredients of the programs were similar, but a few of the companies were more creative and provided very flexible and attractive packages, such as trade-in car, mileage cap and payment for a combination of financial and operational leasing.
Conceptual Framework
Hypothesis Development
- Relationship between Convenience and People Willingness
- Relationship between Vehicle Ownership and People
- Relationship between Cost and People Willingness towards
- Relationship between Flexibility and People Willingness
For financing, the ownership of the vehicle belongs to the people at the end of the repayment of the loan amount, but for leasing, there would be two types of leasing packages, which are operational leasing and financial leasing. With financial leasing, the lessee has the right to acquire the vehicle at the end of the leasing period. Cost is the main concern for most ordinary people as inflation in Malaysia has increased by 0.6% in one month in May 2022 (Consumer Price Index Malaysia, 2022).
Therefore, the price between financing and leasing would be one of the main factors that would influence people's willingness to lease vehicles. Nowadays, most financial institutions require 10% of the asset value as a down payment for financing, but the leasing contract does not require this, which could become an interesting point for vehicle leasing.
Conclusion
METHODOLOGY
- Research Design
- Sample Size and Target Respondent
- Sampling Methods
- Survey Instrument
- Data Collection Method
- Analysis Method
- Descriptive Analysis
- Inferential Analysis
- Pilot Test
- Conclusion
Due to the limitations of time and manpower, it is impossible to collect the data from the entire Malaysian population. For section two, it focused on five areas, including convenience, cost, flexibility, vehicle ownership and people willingness in vehicle rental. Content analysis method is used to find out the type of vehicle leasing program in Malaysia and compare the similarities and differences of leasing and financing a vehicle in Malaysia.
It is used to perform analysis on a small sample of data to make inferences about a larger population. This coefficient represents a linear relationship between two continuous variables, it is used to describe the correlation between variables such as convenience, cost, flexibility, vehicle ownership and people's willingness to rent a vehicle.
FINDINGS & ANALYSIS
Survey Responses
- Respondents’ Gender
- Respondents’ Race
- Respondents’ Age and Education Level
- Respondents’ Household Size
- Respondents’ Role in Household
- Respondents’ Income Group and Correlations
- Respondents’ Vehicle Usage
71% or 183 respondents studied up to a diploma or bachelor's degree, 35% and 14 of them have a master's degree and only one of the respondents was a PhD. Referring to Table 7, 88% of respondents between the ages of 18 and 30 were a diploma or degree holder. 54% of the participants role in the household was a son or daughter, this related to the largest age group was between 18 years and 30 years.
However, age was not the reason for restriction to high income group as 1% of respondents between 18 and 30 years old were able to earn above RM10,000 monthly income. The responses from the respondents reflect Malaysia's public transport infrastructure was underdeveloped, vehicle is an essential need of the population.
Results of the Study
- Convenience
- Vehicle Ownership
- Cost
- Flexibility
- Willingness in Vehicle Leasing
For vehicle ownership, the majority of responses ranged from neither agree nor disagree to strongly agree, with a minority of people not seeking vehicle ownership at all. Most responses ranged from neither agree nor disagree to strongly agree, with the mean ranging from 3.7 to 4.0. Most people agree that the rental rate would be the main factor influencing their decision to lease vehicles.
FL3 is about the option to change the vehicle during the rental period, but 90 of the respondents believe that it showed indifference towards their vehicle rental decision. WI3 has the lowest standard deviation, most of the people are very concerned about vehicle safety, as no one rated strongly disagree.
Reliability Test
Flexibility has the highest score for the Alpha coefficient, according to the rule it is considered "very good" level. It showed the highest consistency, most of the respondents share the same opinion on this. The second highest variable was cost, it was measured by 4 items and scored at 0.821, which is also considered a "very good" level.
The variable, comfort was measured by five items in the group, its Cronbach's Alpha coefficient was recorded at 0.797 and falls under the category of "good". Despite that, it was the lowest ranking, but it still falls within the "good" level.
Inferential Analysis
- Pearson Correlation Analysis
- Multiple Linear Regression Analysis
The correlation between people's willingness to lease a vehicle and vehicle ownership was weakly positively correlated. H1 is accepted, where the convenience of vehicle leasing has a significant influence on people's willingness to lease a vehicle. H2 is rejected where vehicle ownership does not significantly influence people's willingness to lease a vehicle.
H4 is accepted where flexibility of vehicle rental package has a significant impact on people's willingness to rent a vehicle. H1, H3 and H4 are accepted, but H2 is rejected because the significant relationship between vehicle ownership and people willing to rent a vehicle was not identified.
Conclusion
Introduction
Conclusion
66% % of the respondents were under income group B40, their income was below RM5,000 but there are respondents from each level of income group. From the answers collected, it appears that the respondents have less concern about the problem-free disposal of vehicles. A reliability test was performed to test the strength of the association of each of the variables.
In the Pearson correlation analysis, most of the correlation coefficients showed at least a moderate level of positive correlations, except for the pairs of variables that were related to ownership. Multiple linear regression analysis showed that most of the hypotheses are supported, that there is a relationship between the independent variables, convenience, cost and flexibility, and the dependent variable that people are willing to rent a vehicle.
Implication of Study
Car leasing providers can factor in the resale value of the vehicle when calculating the price, allowing them to offer at a more affordable price while getting in with private individuals. Most car leasing companies offer their users a new vehicle due to the limited availability of cars. There is another opportunity for the used car dealers as people in the study are concerned about the vehicle lease price and vehicle safety.
Therefore, it is not necessary to guarantee ownership of the vehicle, but this may be an option for the lessee at the end of the rental period, if the lessor has a problem with disposing of the vehicle. From the point of view of comfort in vehicle leasing, people are more concerned about the smooth repair and replacement of the vehicle, which must be included in the vehicle leasing package.
Limitation of Study
69 the option to exchange the vehicle during the rental period, what Malaysians need is a safe vehicle to travel due to the inconvenient public transport infrastructure. Moreover, this segment is underdeveloped in Malaysia and the people have limited knowledge in understanding vehicle rental business model. This may cause some of the important deciding factors not included in the research because Malaysians may have different purchasing power, behavior and preference factors due to the environment and context.
In addition, people who want to maintain the status quo and do not want to change the current method of financing can cause the data collection to contain certain biases, no matter what changes are introduced in vehicle leasing, some people will still refuse to lease a vehicle. The survey was written in English, some respondents may not fully understand certain terms as Malay is more common in Malaysia as it is our national language.
Recommendation for Future Study
Retrieved September 21, 2020, from http://www.businessdictionary.com/definition/full-payout-lease.html Gabbott, M., & Hogg, G. Retrieved September 21, 2020, from https://www.mercedes -benz.com.my/passengercars/buy/financial- services/leasing/leasing-offers.module.html. Retrieved on September 21, 2020, from https://www.mini.my/en_MY/home/fs/about-mini-finance.html#fullcircle Mohd Uzir Mahidin, Dato' Sri, D.
Retrieved September 21, 2020, from https://www.muamalat.com.my/business-banking/corporate-banking/finance/muamalat-leasing-al-ijarah/. Retrieved September 21, 2020, from https://afidavit.com/lease-agreements-types-of-lease-agreements-commercial-lease-and-residential-lease-differences/.
