Car loan is a financing facility that provides an individual as well as institution a financial help for car purchase. Most of the banks and financial institutions provide customers with a hire purchase facility. Under hire purchase scheme, the bank or institution buys the car for the customer and the ownership gets transferred to the customer only after the full repayment of the loan is completed.
Depending upon classifications of the car loan, there are several types of car loans available in Malaysia. Let’s look at the different types of car loans under different classifications.
Classification Based On The Financing Principle
Based on the financing principle involved, there are the following two types of car loan available in Malaysia:
1. Conventional Car Loan:
The conventional car loan works on the basis of providing customers with financing for car purchase with interest rate charged on the funds. This interest rate can be on fixed as well as floating basis. The floating interest rates are based on the base rate that varies from bank to bank.
Benefits & Features of Conventional Car Loan:
The following are some of the features of a conventional car loan:
- A conventional car loan covers new, used and reconditioned unregistered cars.
- Conventional car loans come with a high margin of financing, i.e. up to a maximum of 90% of the price of the car.
- Conventional car loans come with a flexible range of loan tenures that can be extended to 9 years.
- Conventional car loans generally come with fast approval.
- Conventional car loans come with both fixed and floating rates of interest for customers to choose from.
- The ownership of the car gets transferred to the customer’s name once he/she repays the whole loan amount to the bank.
- The conventional car loans come with a road tax renewal and motor insurance.
Banks Offering Conventional Car Loans in Malaysia:
The following banks in Malaysia offer conventional car loans to customers:
- Affin Bank
- Bank Simpanan Nasional (BSN)
- CIMB Bank
- Hong Leong Bank
- Public Bank
- RHB Bank
Conventional Car Loans Interest/Profit Rates:
The following is the table that contains the range of interest rates associated with conventional car loans:
|Conventional Car Loan Tenure||Interest Rate Range|
|Up to 9 years||2.53% p.a. to 17.00% p.a.|
2. Islamic Car Loan:
Unlike the conventional car loans, the Islamic car loans don’t work on the basis of charging interest on the financing amount. Islamic car loans work on Shariah principles of financing. Islamic car loans come with fixed as well as floating profit rates. Floating profit rate is based on the base financing or base lending rate that is different for all the banks/institutions.
Benefits & Features of Islamic Car Loan:
- Islamic car loans provide financing for all kind of new, used or old and unregistered and reconditioned passenger and commercial vehicles.
- The range of financing provided by an Islamic car loan can be 90% to 100% of the price of the car.
- The repayment tenures associated with an Islamic car loan are extendable to 9 years.
- Customers get a motor takaful coverage and road tax renewal with an Islamic car loan.
- Islamic car loans come with a fixed as well as floating profit rate range.
- Customers get the ownership of the car once they fully pay the amount of financing to the bank/institution.
Banks Offering Islamic Car Loans in Malaysia:
The following is the list of banks and financial institutions that provide customers with Islamic car loans:
- Affin Bank
- Al-Rajhi Bank
- Bank Islam
- Bank Muamalat
- Bank Rakyat
- BSN (Bank Simpanan Nasional)
- CIMB Islamic
- Hong Leong Bank
- Kuwait Finance House
- Maybank Islamic
- Public Islamic Bank
Islamic Car Loans Interest/Profit Rates:
The range profit rates associated with Islamic car loans is mentioned in the following table:
|Financing Tenure||Profit Rate Range|
|Up to 9 years||2.00% p.a. to 15.00% p.a.|
Classification Based On The Type Of Car
Based on the type of car, there are two types of car loans available:
- Passenger Car Loan: The passenger car loan covers all new as well as used national and non-national passenger cars. The margin of financing depends directly upon the age and type of passenger car.
- Commercial Car Loan: The commercial car loan includes national and non-national commercial vehicles. This covers both new and used commercial vehicles. The margin of financing and financing tenure depends upon the weight of the commercial vehicle.
Classification Based On The Age Of The Car
Based on the age of the car, a car loan can be of following three types:
- New Car Loan: The car loan for a new car generally provides customers with a higher range of financing than other car loans. This includes passenger as well as commercial vehicles. The financing margin for a new car can be as high as up to 90% to 100% of the car’s price.
- Old or Used Car Loan: Most of the banks in Malaysia provide customers with a vehicle financing or auto hire purchase plans for the purchase of a used or old car. The margin of financing with this type of car loan is not as high as that of a new car loan. The margin of financing also depends upon the age of the vehicle. The older the car is, the lower will be the margin of financing. Financing margin for a used car starts from 75% of the price of the car.
- Reconditioned or Unregistered Car Loan: Another type of car loan is the loan for any unregistered or reconditioned car. This includes imported cars too. The financing margin available for the purchase of a reconditioned or unregistered car depends upon the age of the car.