Car Loan Interest Rate Malaysia — August 2026
Hire purchase rates from 2.30% p.a., and what a flat rate really costs.
⚖️ Car loans changed on 1 June 2026 — flat rates and the Rule of 78 are gone
The Hire Purchase (Amendment) Act 2026 came into force on 1 June 2026. It abolishes the flat interest rate structure and the Rule of 78 early-settlement formula, moving all hire purchase financing to a reducing balance method with the Effective Interest Rate (EIR) disclosed up front.
Banks have until 31 March 2027 to migrate their systems. During this transition some lenders may still write new financing on the Rule of 78 basis while others already offer reducing balance — so ask which basis your quote is on. It changes what the same headline percentage actually costs you.
If you already have a fixed-rate Rule of 78 loan, banks are offering goodwill early-settlement discountsfrom 1 June 2026. The amount isn't published — you get it when you request a settlement figure, so it's worth asking.
Source: Association of Banks in Malaysia; Bank Negara Malaysia.
Hire purchase calculator — flat vs reducing balance
Estimates only — excludes insurance, road tax and fees, and assumes the loan runs full term. Your actual quote depends on the car, tenure, margin and credit profile.
Car loan rates by bank
Indicative starting rates. Unlike fixed deposits, Malaysian banks don't publish a hire purchase rate card — your rate is quoted per deal at the dealer and varies with the car, tenure, margin and your credit profile. Use these to shortlist, then get a written quote.
| Bank | New national | New non-national | Used car | Max margin |
|---|---|---|---|---|
Maybank Lowest advertised starting rate on our panel | from 2.30% | from 2.40% | from 4.20% | 90% |
Public Bank Large dealer network, fast approval | from 2.35% | from 2.45% | from 4.30% | 90% |
CIMB Bank Islamic option available via CIMB Islamic | from 2.40% | from 2.50% | from 4.40% | 90% |
Hong Leong Bank Strong used-car financing appetite | from 2.45% | from 2.55% | from 4.50% | 90% |
RHB Bank Islamic Hire Purchase-i available | from 2.45% | from 2.55% | from 4.50% | 90% |
AmBankIslamic Shariah-compliant vehicle financing | from 2.50% | from 2.60% | from 4.60% | 90% |
Bank RakyatIslamic Co-op bank, competitive for civil servants | from 2.55% | from 2.65% | — | 90% |
Bank IslamIslamic Full-fledged Islamic bank | from 2.60% | from 2.70% | — | 90% |
Rates are indicative “from” figures, quoted on a flat basis unless your bank states otherwise — confirm the basis and the EIR before signing. Max tenure 9 years.
What to ask before you sign
- “Is this flat or reducing balance?” — the single most important question now. The same 2.40% means roughly 4.4% in real terms on a flat basis.
- “What's the EIR?” — lenders must disclose the Effective Interest Rate. It is the only number that compares fairly across quotes.
- “What do I owe if I settle in year three?” — get it in writing. This is where the Rule of 78 used to hurt.
- Shorten the tenure if you can afford it — nine years lowers the monthly figure but adds years of interest on the full amount under a flat rate.
Car loan FAQ
Advertised starting rates are around 2.30%–2.60% p.a. for new national cars (Perodua, Proton) and roughly 2.40%–2.70% for non-national marques, with used-car financing typically from 4.20% p.a. Malaysian banks do not publish fixed hire purchase rate cards — your actual rate is quoted per deal through the dealer and depends on the car, tenure, margin of finance and your CCRIS/CTOS credit profile. Treat every rate here as a "from" figure and confirm your own quote.
The Hire Purchase (Amendment) Act 2026 came into force on 1 June 2026 and abolished two long-standing features: the flat interest rate structure and the Rule of 78 method for early settlement. All hire purchase financing moves to a reducing balance method with the Effective Interest Rate (EIR) disclosed, so borrowers can see the true cost. Banks have a transition period until 31 March 2027 to upgrade their systems, so during this window some lenders may still write new financing on the old Rule of 78 basis while others already offer reducing balance.
A flat rate charges interest on the full original loan amount for the entire tenure, even as you pay the loan down — so a "2.40% flat" loan actually costs roughly 4.4% p.a. in real terms. A reducing balance rate charges interest only on what you still owe, so the interest portion falls every month. The same headline number means very different money: use the calculator above to see both side by side on your own figures.
The Rule of 78 front-loaded interest into a loan's early instalments, so a borrower settling early still owed a disproportionate share of the total interest. Because most of the interest had already been "earned" by the lender on paper, early settlement saved far less than borrowers expected. It was abolished for new hire purchase agreements from 1 June 2026 as part of a broader push toward reducing balance calculation and mandatory EIR disclosure.
Yes. Under changes announced alongside the Act, banks are offering goodwill early-settlement discounts from 1 June 2026 to eligible customers on fixed-rate hire purchase agreements that use the Rule of 78 — including agreements entered before 1 June 2026 or during the transition period. Accounts more than 90 days in arrears, under legal action, or in a restructuring programme are excluded. The exact discount is not published: banks quote it when you request an early settlement figure, so ask your bank directly.
Banks typically finance up to 90% of the on-the-road price, so the standard down payment is 10%. Some borrowers put down more to reduce the amount financed and the total interest. Margin of finance can be lower for used cars, higher-risk profiles or longer tenures.
Nine years is the maximum for hire purchase financing in Malaysia. A longer tenure lowers the monthly instalment but increases total interest paid — on a flat-rate loan the effect is severe, because interest accrues on the full original amount for every one of those years.