When it comes to buying a car, finance has always been the biggest worry. Needless to say, paying for your car in cash is never ideal in any situation for several reasons. Hence, consumers would usually opt for a hire purchase loan. Well, of course just like everything else, you must know what you’re getting yourself into or else it could very well turn into a financial nightmare.

What are hire purchase loans?

Informally speaking, hire purchase loans are also commonly referred to as car loans in Malaysia. It is when money is being borrowed from the bank to finance the purchase of your car. Of course, interest would be charged on these loans and the rates depend on the respective issuer of said loan. The bank holds authority over your car until the final instalment is made. Naturally, due to principles of the loan, the bank has the right to repossess the vehicle if one fails to pay the instalments accordingly.

Things you should know about hire purchase loans in Malaysia; 

 * Look out for other schemes targeted to first-time buyers offered by authorized dealerships themselves

To paint a clearer picture, below is a table representing the repayments of a loan to be settled within 3, 5 and 9 years given the following conditions:

Period of loan (Years) Interests p.a. Monthly Instalments (RM) Total Repayment of loan (RM) Total amount of Interest paid throughout loan (RM)
3 4% 2800 100800 10800
5 4% 1800 108000 18000
9 4% 1133 122400 32400


Is paying for your car in cash a good idea?

Generally speaking, transactions regarding the purchase of a car are of a relatively large value and this might raise red flags with the Income Tax Department as these transactions are usually said to trigger money laundering concerns.

On top of that, to pay for your car in full would take a large chunk of your paycheck when that money could have been invested elsewhere and possibly given you a larger return in the long run. However, if you do have the additional disposable income and nothing to worry about, paying for your car in cash would be the ideal choice.