If you’re planning to buy a car soon… or you already have one — this could save you THOUSANDS of ringgit.
Most people don’t realize this, but the way car loans are calculated in Malaysia is about to change BIG TIME.
And honestly? It’s long overdue.
⚠️ The Old Way (Flat Interest Rate) — Why It’s So Misleading
Let’s say you buy a car for RM50,000.
The bank tells you:
👉 “Interest rate is 3%”
Sounds low, right? 😏
But here’s the trick:
That 3% is calculated on the FULL loan amount for the entire loan period
Even if you’ve already paid most of it!
Example:
3% × RM50,000 = RM1,500/year
Over 9 years = RM13,500 interest
💥 Total you pay = RM63,500
Now here’s the painful part…
After 5 years, you want to sell the car and settle your loan early.
You’d expect your balance to drop a lot, right?
❌ WRONG.
You might still owe around RM40,000 — even after years of payments.
That’s why people have been complaining for years.
🔥 The New Rule (Starting 2026): Fairer & Transparent
With the new Hire Purchase Amendment Act 2026, banks MUST now:
✅ Use Effective Interest Rate (EIR)
✅ Calculate using Reducing Balance
💡 What Does That Mean for YOU?
Instead of paying interest on the full amount…
👉 Interest is calculated daily based on your remaining loan balance
So every month:
Part of your payment reduces your loan
Your interest gets smaller over time
📉 Result: You save more money over time
🧠 Real Scenario (Same RM50,000 Car)
With the new system:
After 5 years, your loan might drop to around RM30,000 (or less)
You can check it anytime via online banking
No more shocking “why still so high?!” moments 😤
💥 BONUS: Extra Savings for Existing Loans
Here’s something most people don’t know 👀
Bank Negara has also pushed banks to:
👉 Give discounts for early settlement
👉 EVEN for old loans using flat rate
📅 Expected around: 1 June 2026
So if you’re planning to settle your loan early…
💡 You might want to wait a bit and save more!
🚀 Why This Matters
This change:
Makes car loans fairer
Easier to compare with housing loans & financing
Helps you plan smarter financially
👉 Bottom line: The system is finally working for you, not against you.
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