Choosing the right bank when you’re looking for a car loan in Malaysia can impact the way you live financially for many years to come. With so many options available to you, it’s important to make a decision that is wise both for your budget and also your long term financial future. Here are some tips to help you find the best car loan, and compare the banks to receive the best deal.
Why Choosing the Right Bank Matters for Your Car Loan
While choosing the best bank for car loan in Malaysia involves more than just selecting the bank that offers the lowest car loan monthly repayments, it does involve choosing a loan that has good terms & conditions, competitive interest rates, flexibility to suit your needs, and is a loan you’ll be comfortable living with. It’s a long commitment, and one decision could save you thousands of ringgit in interest repayments!
The Impact of Interest Rates on Your Loan Payments
The interest rate on your car loan essentially determines how much you pay for your car over the duration of your loan - and even apparently small differences make a lot of difference in what you’ll save. A 3.0% interest rate on a 5-year RM50,000 car loan is RM2,700 cheaper than at 4.0%
The interest rates of car loans in Malaysia range from 2.4% for new cars to 4.5% for used cars. Islamic car loans adhere to Shariah principles, which are reflected in their interest rates that fall within the 2.5% to 3.7% range as well. The bottom line is to compare rates across banks to find the most affordable.
Comparing Loan Terms Across Banks
Loan terms vary from bank to bank, and whether you’re buying a new or used car. Most banks offer loan terms between one to nine years. Longer loan terms mean lower monthly payments but more interest paid over time.
The best car loan for you balances low monthly payments against a sensible length of time to pay the loan off. Shorter terms are usually cheaper overall, but if monthly payments are going to stretch your budget, it makes no sense to take a shorter term. You just need to ensure that the monthly payments are affordable.
Top banks in Malaysia for car loans
There are many top banks in Malaysia for car loans. Whether those looking for the best traditional car loans or the ones looking for more flexible financing options, they are here.
RHB Bank Auto Financing
RHB Bank is known for its uncomplicated car loan process and competitive rates. RHB provides car loan packages like a fixed-rate loan, and financing for new and used cars. Rates start from 3.18% per annum, which is affordable for new car loans.
Meanwhile, RHB also has a car loan calculator on their website that allows you to see how much you pay for different loan amounts and repayment tenures at a glance. This flexibility means that RHB is quite popular among Malaysians looking for affordability.
Public Bank Vehicle Financing
Among the biggest and most trusted banks in Malaysia and known for providing some of the best car loan rates in the market, Public Bank has an interest rate of 3.31% per annum. Their car loans options can suit your loan tenure, with a spectrum of financing for new and used vehicles.
One of the key advantages of Public Bank’s car loan offerings is their commitment to customer service, with a fast and efficient loan approval process.
CIMB Bank Hire Purchase
CIMB Bank has one of the lowest car loan rates in Malaysia starting from 2.85% per annum. The bank offers financing options for both new and used vehicles, with flexible loan tenure available. Lower monthly repayment through CIMB’s hire purchase scheme will lighten your financial burden.
CIMB Bank also boasts benefits, which include instant approval for pre-approved loans and great customer service and assistance with loan issues.
How to Choose the Best Car Loan for Your Needs
Choosing the right car loan is simply a matter of understanding your finances and choosing the one that works best for you. Here’s a simple step-by-step process to help you through the search:
- Decide Your Budget: Work out how much you can realistically afford to spend every month. When you calculate your monthly car loan payments, remember to factor in other monthly expenses including insurance, maintenance and fuel.
- Check Your Credit Score: Your level of creditworthiness affects the interest rates available to you. Very often, the better your credit score, the less you will be offered.
- Compare offers: Make sure to run numbers through online loan calculators so you can view different rates at different banks, but be sure to also note the total cost of the loan, not just what you’ll be paying each month. “What will you be paying” is an important consideration, but also ask yourself: “How long will I be paying?”
Considering Loan Amount and Repayment Tenure
How much you decide to borrow and how long you take to pay it back will affect your payments and interest payable each month. In the main, shorter terms mean higher payments and less interest payable. Longer terms mean lower payments and more interest payable.
To figure out the ideal amount to borrow and the optimal length of your loan, look at your budget and your longer-term aims. A bigger down payment will cut down the amount you borrow and therefore cut your monthly payments and the interest you pay overall.
Fixed Rate vs. Variable Rate Loans
With fixed-rate car loans, the interest rate stays consistent throughout the life of the loan, resulting in consistent monthly payments. This is a great option for borrowers who want the predictability of fixed payments and don’t want to deal with fluctuating interest rates.
On the other hand, variable-rate loans fluctuate depending on market interest rates, which can potentially evolve over time. While variable loans usually boast a reduced rate, your rate might soar upwards and lead to escalating monthly payments.
Understanding the Car Loan Application Process
Every bank has a slightly different car loan application process; however, in general you may have to fill out an application form, give them documentation, and wait for them to approve you.
Documents Required of Salaried Applicants
Salaried applicants, in the typical case, are going to need:
- A copy of their MyKad
- A copy of their driving licence
- Latest 1–3 months’ salary slips
- Their bank statements showing the salary being deposited into
- Their income tax statement (Form B/BE), where applicable
Self-employed persons and the loan applications they submit
Self-employed individuals, and business owners in particular, are usually required to submit:
- A copy of your MyKad
- Business registration certificate
- 6 months’ bank statements
- Income tax statement (Form B/BE)
- Financial statements from the previous year
How Your Credit Score Affects Your Car Offer
Another aspect to consider is credit score. The better your score, the more likely you will be given a better car loan offer. In Malaysia, scores are provided by CTOS and Experian, and anything above 650 can be considered above average.
High credit scores can help you qualify for lower interest rates, longer loan terms and larger loan amounts, while low scores can leave you with higher rates and less loan choices.
Tips for Getting a Great Deal on an Auto Loan
- Shop Around: Don’t settle for the first loan offer you come across. Compare terms from at least three or four banks to ensure that you’re getting the best deal available.
- Check Your Credit Score: Your credit score can have a significant impact on your loan’s interest rate. Make sure to know your score before applying so you can ensure you qualify for the best rates.
- Think About a Bigger Down Payment: A larger down payment means you’re borrowing less, which can reduce your monthly payments and the total interest over the life of the loan.
Final Thoughts
When it comes to choosing the best car loan in Malaysia, navigating the complexities can feel daunting. Fortunately, with some research on how the car loan process works, being clear on your budget, choosing the best bank for you, and shopping around, it’s possible to secure a good deal that won’t leave you scrambling to make the repayments. Whether you are interested in the best car loan rates or you are seeking out an instant loan, knowing the ins and outs of car loan financing will help you make a wise and informed decision.
FAQ
Interest rates for car loans in Malaysia
Interest rates generally range from 2.4% to 4.5%, depending on whether you’re buying a new or used car. Islamic car loan rates can range from 2.5% to 3.7%.
How does my credit score affect my car loan terms?
The higher your score the lower the interest rate you will be offered. A score above 650 will get you better offers from banks.
What's the difference between fixed and variable car loan rates?
A fixed car loan rate means that the interest rate stays the same throughout the life of the loan. A variable car loan rate can rise and fall. Fixed rates are probably better suited to people who like to keep payments more stable.
Do I need to make a down payment when getting a car loan?
Yes, you will need to make at least 10% down payment in Malaysia. The more you put down, the smaller the loan amount and the lower your monthly payments will be.
Can I get a car loan with bad credit?
You may find it more difficult, and lenders may offer higher interest rates. You could consider improving your credit history or applying with a guarantor.