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.
If you are thinking of opting for a car loan to purchase a vehicle, you need to consider the types of car loans that are offered in Malaysia. A car loan is offered for a brand new vehicle as well as to purchase a used car. Taking into consideration what type of car you are purchasing, you need to choose the car loan scheme wisely. Here’s a roundup of the characteristics of new and old car loans and which are the best ones available in Malaysia:
- Types of Car: The loans can be used for the specific type of car. New loans can only be used to purchase new cars whereas used car loans are offered only on used cars.
- Resale Value of The Car: The margin of financing offered is more for new cars since it has a greater resale value as compared to old/used cars.
- Margin of Financing: The margin of financing offered by new car loans is much higher as compared to the margin of financing offered by used car loans. New car loans offer a margin of financing around 90% of the on-road-price of the vehicle with some packages even offering up to 100% margin of financing. Used car loans on the other hand only offer a maximum margin of financing of up to 85%.
- Age Of The Vehicle: This criteria applies only to used cars. The age of the vehicle determines the margin of financing offered. Since used cars have a lower resale value, banks offer a lower margin of financing for older used cars. Once the used car has crossed a particular age limit, no financing will be offered for its purchase.
- Interest/Profit Rate: The rate of interest or profit rate offered on new car loans is comparatively lower than that offered for used cars.
Similarities Between New And Used Car Loans
Even though the new and used car loans have intrinsic differences, they do share some similarities which are as follows:
- Tenure: Both loans offer a tenure going up to 9 years.
- Banking Principle: New and used car loans are offered both in Conventional and Islamic banking formats.
- Make of The Car: Both the loans can be used to purchase national or non-national cars.
3 Best New Car Loans In Malaysia
- BSN Hire Purchase: Margin of financing is provided up to 90% for this type of loan scheme. Where the maximum tenure offered is of 9 Years. The interest rate range from 2.55% p.a. to 3.15% p.a. The new car loan scheme is open for government sector employees, public listed companies and salary holder employees.
- Public Bank Car Loan: The loan is offered with tenures of up to 9 years with 90% of margin of financing (MOF) for new passenger vehicles. The MOF for a commercial vehicle is up to 80% of the price of the vehicle.
- Bank Muamalat Hire Purchase-i: It is a flexible type of loan scheme offered by the bank at more than 57 branches and service centres across the country. The loan is car financing quickly with a shorter approval span to the individuals between 18 and 55 years old.
3 Best Used Car Loans In Malaysia
- Affin Bank Hire Purchase (conventional): The loan is offered at a competitive rates with a margin of financing up to 85% for a used vehicle. The loan tenure offered for a used car purchase is up to 9 years.
- AmBank AUTOMate: Both local and foreign used cars can be purchased through this loan scheme with a margin of finance of up to 90%. Also, you are entitled for statutory rebate on the unexpired rental period on this type of loan scheme.
- Hong Leong Auto Loan: With up to 9 years of tenures available for a customer, the loan scheme offers competitive interest rate to a customer. The current flat rate is 10% p.a. and the floating rate financing is calculated with formula: (BLR + Spread) % p.a. at a minimum of 7% p.a.
Regardless of which car loan you opt for, always make sure you thoroughly compare various loan options to ensure you get the lowest profit/interest rate and always go in for a loan amount that you can afford and easily repay.