PETALING JAYA: The increase in interest rates on hire purchase (HP) loans by some 40 basis points is unlikely to have an impact on vehicle sales, said industry players and observers.
Malaysian Automotive Association president Datuk Aishah Ahmad said the gradual increase in interest rates by local banks since the middle of last month, was “not significant.”
“An increase of between 0.3% and 0.4% in HP rates is quite acceptable to the industry,” she said.
Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor confirmed that HP interest rates had increased between 0.4% and 0.7%.
“The increase is less than 1%, so it’s quite minimal,” he said, adding that the rates currently ranged between 2.7% and 3.1% from 2.1% and 2.4% previously.
“However, you can still get new vehicles at previous interest rates as many car companies offer promotions and incentives to buyers.”
Khor also pointed out that HP interest rates in Malaysia were the second lowest in Asean after Singapore.
“It’s still too early to determine what sort of impact the new rates will have on vehicle sales. But we don’t think it would be much of a factor as it’s (the increase) minimal and we’re one of the lowest in the region.”
Reports indicated that interest rates on hire purchase loans had recently increased by about 40 basis points for most car models, with the actual quantum of hike depending on an individual’s credit profile and history among other factors.
Bank Negara in a statement said it was the individual banks that determined the borrowers’ credit rating and the corresponding interest rate.
A check with several local banks confirmed that the rates had increased over the past two weeks but some have yet to implement it. A local car dealer confirmed that the rates were dependent on the individual’s credit rating.
“If he’s earning a good salary, the interest rate would be low. But if his income is poor, he would be required to put down a higher down payment and the interest rate would remain the same. It’s on a case-to-case basis.”
Khor added that the rates on new vehicles would not be much different compared with used cars.
“The difference is between 0.5% and 1.5%.
“The interest rates for used cars are slightly higher because the older the car, the higher the risk,” he said, adding that rates for cars up to three years old were almost the same as for new ones.