Looking to buy a car in Malaysia? Make sure you know the answers to these commonly asked questions below so you can get the best car financing in town!
What type of a car loan should I get?
Before you even start thinking about buying a car at all, you’ll need to do some homework. Did you know there are conventional car loans and Islamic car loans (e.g. based on Ijarah Thumma Al-Bai or Murabaha principles) in Malaysia?
But first, visit your nearest banks to get more information and see if you are eligible for a car loan and try to get a clearer understanding which type of loan suits you best. Be it conventional or Islamic, you should always get one that offers you the best interest rates and loan tenure.
Which type of interest rates are there?
Most banks offer car loans with fixed interest rates, but there is also the option of taking a loan which comes with variable interest rates. Fixed interest rates are the common preference in Malaysia as the interest rate will never change and monthly instalments are fixed. Variable interest rates are tied to the bank’s Base Lending Rate (BLR) and could change over your loan tenure, thus ending up with you paying for higher monthly instalments.
How much should I borrow and for how long?
Typically, most banks in Malaysia will offer you a 90% margin of finance when you take out a car loan. However there is also an option of going for a 100% car loan. The tenure of your car loan (repayment period) in Malaysia can be from a minimum of three years up to as long as nine years, which in turn affects the interest rates you will be paying.
Should I buy a new or used car?
If you’re looking to buy a new car, you will have a better chance at getting a higher margin of financing (90% – 100%) from your bank. Used cars on the other hand are less likely to get the same level of financing (typically 80% – 90%) and your loan tenure will also be shorter compared to that of a loan for a new car. Just focus on buying a car that’s within your budget and if you need any more information on whether you should buy a new or used car, you may read this handy guide.
What else do I need to know?
Be wary of ‘festive promotions’ that claim you can enjoy super low interest rates/zero down payment/pay only RM1,XXX per month. Read the fine print very carefully, as those low interest rates and cheaper monthly instalments often expire within a year or two, leaving you stuck with hefty payments and charges over time.
We also recommend that you try to keep the car loan tenure short and pay as much as possible for the down payment if you can afford it. This is because as a car’s value depreciates in time, you might be in for a nasty surprise if you try to sell or trade it in, only to discover its actual value is nowhere near what you paid or the outstanding car loan amount.
So what do you think? Let us know in the comments and best of luck in driving home a great bargain!