A PRACTICE known as "sambung bayar" has become somewhat common recently. This is where a buyer takes over the monthly loan instalments of a car from its registered owner without going through a formal transfer of ownership.
It is often seen as a convenient shortcut, particularly for those who do not qualify for a bank loan or do not have enough money for a down payment through conventional means.
But is taking over someone else's car loan actually legal?
Verdict:
FALSE
Taking over another person's car loan instalments without the written consent of the bank that finances the loan is illegal under Malaysian law, as reported by MyCheck.my.
The practice is governed by the Hire Purchase Act 1967, which establishes that when a car loan is approved, the bank is the true owner of the vehicle, not the person making the monthly payments.
The registered hirer is legally a tenant of the vehicle, and ownership only transfers once every instalment has been fully settled.
This means the hirer has no legal right to sell, transfer or hand over the vehicle to a third party without the bank's written permission.
Under Section 38 of the Hire Purchase Act 1967, anyone who sells hire purchase goods without the owner's consent commits an offence and may be fined up to RM10,000, imprisoned for up to three years, or both.
Section 46 of the same Act provides for an additional fine of up to RM3,000 or imprisonment of up to six months, or both, for other contraventions of the Act.
The police have clarified on Facebook that any private agreement signed between a seller and a buyer for a sambung bayar arrangement does not make the transaction legal, as the bank is not a party to that agreement.
Lawyer M. Arif Azmi told mStar that any side agreement between a seller and buyer for a sambung bayar arrangement carries no legal weight whatsoever.
"Many people think that once they sign a private agreement between themselves, everything is settled. The truth is, that agreement does not bind the bank because the true owner of the vehicle is still the bank for as long as the loan has not been settled," said Azmi, as reported by mStar.
The Road Transport Department (JPJ) has warned that both the seller and buyer in a sambung bayar arrangement face serious risks.
The original registered owner remains fully legally and financially responsible for the vehicle for as long as the ownership has not been transferred, meaning any summonses, accidents or criminal activity involving the vehicle will be linked to the original owner, not the person actually driving it.
The original owner also bears the financial risk if the new driver stops making loan payments to the bank.
The buyer, meanwhile, has no legal ownership of the vehicle despite making monthly payments, and the original owner retains the right to reclaim the car at any time since the name on the vehicle has not changed.
There is also the risk of repeated resale, where the person who took over the loan sells the vehicle again to a third party without the original owner's knowledge, leaving the original owner with no clear recourse.
JPJ requires that any change of vehicle ownership be reported within seven working days, a requirement that a sambung bayar arrangement by definition cannot fulfil.
The Legal Aid Department advises that before entering any hire purchase agreement, buyers should ensure they understand their obligations as hirers and keep all documents and receipts in a safe place.
Anyone who wishes to buy a second-hand vehicle should ensure the loan has been fully settled and that the bank has transferred ownership to the seller before any transaction takes place.
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