In the world of car buying, the term ‘full vehicle financing’ might sound like a dream come true, but in Malaysia, it’s more of a myth on wheels.
Analysts highlight that customers are always required to pay at least a 10 per cent down payment to secure a loan from any financial institution, reported NST.
The misleading term ‘Full Loan’
Automotive analyst Shamsul Yunos has set the record straight, explaining that Bank Negara Malaysia (BNM) doesn’t officially recognise terms like full financing or ‘full loan’ for car purchases.
“The term ‘full loan’ is just a sales pitch used by some dealers to lure in customers,” he said.
“In the past, some dealers added hidden costs to the car price to cover the customer’s deposit by including several items in the loan application submitted to the bank. This practice has become more difficult with the more transparent e-invoicing system.”
New E-Invoicing system for vehicle sales, this August
To keep the industry on the right track, the government plans to roll out an e-invoicing system for vehicle sales starting in August.
This move is set to park the dubious practice of offering full loans for car purchases and ensure that buyers make the necessary 10 per cent down payment.
Previously, some dealers would load up the invoice with additional packages or accessories to bump up the loan amount, creating the illusion of a full loan.
For example, if Car A’s on-the-road price is RM50,000, the bank would approve a loan of RM45,000 (90 per cent), leaving the buyer to cover the remaining RM5,000 upfront.
Without the deposit, buyers would opt for a ‘full loan,’ with dealers adding extras to make up the total price.
‘Cap the maximum loan limit at 90%’
Automotive analyst Hezeri Samsuri points out that vehicle hire-purchase loan laws in Malaysia cap the maximum loan limit at 90 per cent, not 100 per cent.
“What happens is a lack of control from BNM, and various parties abuse the way invoices are made by including the car price with accessories or additional packages, thereby increasing the ‘selling’ price on paper. “
The vehicles received do not come with the packages or variants included during the loan application,” he said.
Hezeri advises young buyers to steer towards more affordable vehicles.
“Financial discipline is crucial, and the government needs to enforce it. A hire-purchase loan of up to 90 per cent is already high by global standards,” he noted.
Shamsul Yunos has a few tips for young buyers with limited budgets looking to park a new car in their garage:
- Save up for a deposit.
- Opt for car financing schemes with lower down payments.
- Consider extending repayment periods.
“There might be financial assistance programmes for young car buyers, or they could explore the use of fintech to provide better financing access.
Buying a car is a significant financial decision, and young buyers should carefully consider their financial capability before making a purchase,” he advised.
