Car loans in Malaysia: Everything you need to know
Cars are a large commitment, not just because of the price tag. Unless you have cash to spare, you are likely to take out a car loan to help finance your car purchase. To help you understand what a car loan is, how it works and how to choose the best one for you, we came up with a basic guide to aid you.
What is a car loan?
A car loan is a loan given by a lender, usually a bank, to a borrower who wants to buy a car. This loan is formalised through a written agreement where the borrower is required to pay the loan plus interest to the lender over a specified length of time.
Note: Only individuals aged 18 and above can apply for a loan. The borrower must not exceed 60 years of age at the end of the payment period.
Important terminology
Before we dive into all the details of car loans, here’s a list of basic terms you should know:
- Interest rate: The amount charged by the bank. Car loan interest rates depend on the bank’s base rate which can increase or decrease due to economic factors or decisions made by Bank Negara.
- Down payment: The upfront payment for the car which covers part of the cost. The normal amount is 10% for new cars and 20% for used cars.
- Margin of finance: The amount of the car’s cost the bank will be lending you.
- Loan period: The total amount of months or years taken to pay off your loan. The maximum length of a car loan in Malaysia is 9 years.
- Instalment: The minimum monthly payment to clear your loan within the loan period.
- Guarantor: The person legally bound to pay off your loan if you are unable to pay it in full.
- Repossession: When the bank takes the car from a borrower when the car loan instalments have not been paid for two consecutive months.
Car loan requirements
There are a few requirements and documents you need to prepare in order to get a car loan. Do note that some banks may require additional information.
| Government Employees/Civil Servants |
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| Private Sector Employees |
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| Self Employed Individuals |
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| Graduate/Young Professional Scheme |
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Types of car loans in Malaysia
There are two types of car loans in Malaysia:
- Fixed-rate loans: The interest rate and monthly instalments are fixed and do not change.
- Variable-rate loans: The interest rate is derived from the Base Lending Rate determined by the bank.
Both of these loans are still governed by the bank you choose, whether you are getting a new car or a used car and the base rate determined by Bank Negara. If Bank Negara were to change the base rate, variable-rate loans would have an increase in their interest rate and would impact the monthly instalments. Fixed-rate loans are not affected.
How your instalment is calculated
So how do you calculate how much you will need to pay? It depends on three factors: the length of the loan, the loan amount and the interest rate. Once you have all the information, you can use the below formulae to calculate the interest and instalment:
- Your total interest = interest rate/100 x loan amount x loan period
- Your monthly interest = total interest / (loan period x 12)
- Your monthly installment = (loan amount + total interest) / (loan period x 12)
Let’s use an RM40,000 Carro Certified Perodua Bezza with no down payment on a 5-year loan with a 3% interest rate as an example.
- Total Interest: 3% x RM 40,000 x 5 = RM6,000
- Monthly Interest = RM6,000/ (5×12) = RM100
- Monthly Installment = (RM40,000 + RM6,000) / (5×12) = RM767
Repeat this process for 3 and 9-year loans and you get the following:
| Loan Period | 3 Years | 5 Years | 9 Years |
| Total payment | RM43,600 | RM46,000 | RM50,800 |
| Total Interest | RM3,600 | RM6,000 | RM10,800 |
| Instalment | RM1,212 | RM767 | RM471 |
As you can see, the interest payments increase the longer you have to pay, but the monthly instalment decreases. So you need to balance how much you pay in instalments with how much you pay in total.
Note: The minimum salary to buy a car is RM2,000.
Interest rates
The interest rates differ from bank to bank and depend on factors like the car’s make, model, age (new or used), the borrower’s credit score, loan amount and repayment period.
You can use this loan calculator to determine what kind of loan, monthly instalment, interest rate and loan period is best for you and find the bank that matches your needs or provides a better loan.
Here is a list of car loan interest rates in Malaysia for new and used cars from 10 major banks.
| Bank | New Car Loan Interest Rate | Margin of Finance | Used Car Loan Interest Rate | Margin of Finance |
| Affin Bank | 2.92% | Up to 90% | 3.00% | Up to 75% |
| AmBank | 3.05% | Up to 100% | 3.66% | N/A |
| Bank Islam | 2.35% | Up to 100% | N/A | N/A |
| Bank Muamalat | 2.95% | Up to 100% | N/A | N/A |
| BSN | 2.35% | Up to 90% | 3.80% | N/A |
| CIMB Bank | 3.75% | Up to 90% | 4.45% | Up to 90% |
| Hong Leong Bank | 3.24% | Up to 90% | 3.78% | Up to 90% |
| Maybank | 3.40% | Up to 90% | 4.25% | Up to 85% |
| Public Bank | 3.31% | Up to 90% | 4.1% | Up to 90% |
| RHB Bank | 3.18% | Up to 90% | 3.18% | Up to 90% |
Note: Obtained from individual banks’ hire purchase loan information.
Some tips and tricks
Get a pre-approved loan
You read that right. You can get a loan before you get a car. That way you know what you can afford ahead of time. Getting a pre-approved loan can also reveal issues with your credit score.
Read more: 6 tips to buy cars the smart way
Improve your credit score
Your interest rates are determined in part by your credit score. You can improve your credit score and by extension, your loan interest rate by settling all your smaller loans first. This will reduce your financial obligations and make your financial health better in the eyes of the lenders as you will have more cash to pay off the loan.
Read more: Tips to improve your credit score
Lock in period
You must figure out if your loan has a lock-in period and how long it is! This lock-in period is the minimum amount of time before you can fully pay off the loan. If you pay it off within the lock-in period you will have to pay an early payoff penalty or pre-payment penalty. This is important if you want to sell your car before you finish paying off the loan.
Read more: Sell a car with an outstanding loan
In the meantime, you can browse our inventory of Carro Certified cars to find the best one for you. Carro Certified cars are thoroughly inspected and strictly adhere to our 160-point inspection before being rigorously refurbished to be As Good As New!
Once you pick out the best car for you, we will take care of the paperwork and apply for a loan through our panel of banks and Genie Financial Services. Whether you need conventional or Islamic financing, GFS provides car loans at competitive rates with a margin of finance of up to 90% for up to 9 years with fast turnaround time and top-notch service.
Don’t wait! Get yourself your very own Carro Certified car today!
