As you would have observed, many people in Malaysia cannot afford to pay for a car in cash, but there are still way too many cars on the road – yes – car loans. The public transport system has improved in the past years and is still progressively improving, but it seems that the convenient car loan packages which are readily available to almost everyone is a comfort only a minority would shy away from. Let’s just say you don’t have to go through a bumpy road to get a car of your choice. You can even buy a car with 0% down payment sometimes,although it’s 10% down payment usually. Having to pay 0% down payment means that you can buy a car by borrowing the full car price through a lender. That being said, here are some of the points to observe when looking for car loans in Malaysia. You can take a car loan for new and used cars. Car loans make cars appear magically in front of you for your immediate use in exchange for regular repayments over a period of time. Not really, but it’s so easy that it’s almost magical, but the repayments are in fact very real and include the principal payment and interest charges agreed upon between you and the lender.
Take note that interest rates for car loans depend on the car type (national/non-national/new/used), the specific model (Myvi/Viva) and the varying rates charged by the lenders. The interest rates also vary according to the loan amount and financing tenure. Most local banks charge an interest rate of 2.5% p.a. to 3.1% p.a. for a loan amount of RM30,000 that is to be repaid within 5 years.
The eligibility requirements for most car loans in Malaysia are quite standard. Basically, if you are a Malaysian citizen or permanent resident between the age of 18 and 60 years old with a fixed income or a guarantor if you don’t have a fixed income, then you will have no problem applying for the loan.
Some car loans include Takaful coverage, and some do not. However, take note that an insurance or Takaful policy is compulsory for car owners. It is required by Malaysian Law that you keep your car insured until the payment of the car loan is complete. Make sure you remember to inform the bank about the renewal of the Takaful coverage or insurance 14 days before the expiry date of the policy.
Loan repayments are usually made regularly between a period of 5 to 9 years, depending on the lender. Basically, the longer the repayment period or tenure, the lower the repayments, but the total interest charged will be higher. What happens when you don’t pay in time? The bank charges 8% p.a. penalty on the amount in arrears calculated daily. If you don’t pay for more than two months successively, the bank will give you a reminder, and if that reminder is not heeded, then the bank will repossesses your car. On a lighter note, some bank car loans such as Affin Islamic Hire Purchase-i offer special rebates for early loan repayments.
Car loans are offered by most local banks and some car dealerships. For example, Toyota offers 90% financing (meaning that you have to pay 10% down payment) with a flexible repayment scheme and a 9 year tenure. Maybank offers three different types of car loans – Hire Purchase (finances up to 90% for new or used vehicles with a loan period of 9 years); Al-IjarahThumma Al-Bai (AITAB) which is a Sharia compliant car financing with a margin of finance of 90% and a loan period of 9 years as well. Maybank also has a car loan package for first time car owners called the My First Car Plan with repayments starting as low as RM268.
Types of car loans
The best car loan for you will depend a lot on what type of car you want to buy so I’ve summarised some of the best loans for different type of cars here. If Proton is your choice, then you should take up the Proton Commerce Standard Financing Package which is actually a joint venture with CIMB bank. The margin of financing for this car loan is up to 90% with the promise of a fast application and approval process. However, if you are not sure whether to buy a new national or non-national car, then check out the Bank Rakyat Car Financing-iAnnaqlu which has an interest rate of 2.9% p.a. if you’re borrowing RM30,000 and repaying it within 5 years. Bank Muamalat’s Hire Purchase facility is also ideal for buying national cars, and it takes care of everything including Takaful coverage.
Some featured car loans for non-national cars are RHB Hire Purchase, Maybank Hire Purchase, and BMW Credit. RHB Hire Purchase offers one of the lowest rates in the market for the year 2014. However, the main shortcoming is that the applicant’s monthly income has to be at least 3 times the monthly hire purchase instalment. Maybank’s Hire Purchase is not a bad deal either, but does not offer rates as good as RHB bank. If you’re planning on buying a BMW, then go with BMW Credit as it allows you the autonomy to choose the loan amount and tenure.
Car loan for fresh graduates ?
Fresh graduates should look out for the car loans offered by Maybank, Bank Islam and Bank Muamalat as they now offer a graduate scheme which is a car loan specifically designed for fresh graduates aged below 30 who are at least Degree or Diploma holders. Only first time car buyers are eligible for the graduate scheme. However, take note that the interest rate under this scheme is higher than a normal car loan. This is because banks have to deal with the financial risk that fresh graduates carry. So why would fresh graduates apply for this loan although the interest rate is higher? Fresh graduates would apply for the graduate scheme because their starting salaries will probably not meet the minimum requirement for a normal car loan.
In conclusion, if you’re thinking of taking a car loan, now is a good time to take one because Malaysian banks are about to increase the interest rates for car loans. A few years ago, the interest rate increased to 4%. So don’t procrastinate any longer if a car loan is inevitable for you, and get yourself on the road, fast.