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If you’re shopping around for a new car and need to find a loan to finance it, then you have come to the right place!
While loans can help with large purchases, they can also become a financial burden due to their accumulating interest.
That said, we have put together a simple guide that can help you secure the best car loan interest rate in Malaysia. With almost all major banks offering car loans, hire purchase interest rates can vary greatly.
In this guide, we outline the recent car loan interest rates in Malaysia, explore factors that affect these interest rates, and compare major banks to help you select the lowest interest rate for car loans in Malaysia.
Table of Contents
What Are Car Loan Interest Rates in Malaysia?
According to Motorist.my, most loan interest rates for brand new cars are around 2.5% to 3.5% yearly. This figure is usually different for used cars, around 3.5% to 4.5% per year.
In Malaysia, car loans or hire purchase loans work on a flat rate system. What does that mean?
When you buy a car through a hire purchase loan, the interest for the loan is calculated against the full principal amount.
A clear example of how to calculate car loan interest in Malaysia will be provided below.
On the other hand, a reducing balance system will recalculate the interest for each year based on the unpaid principal amount.
While some might offer loans using the reducing balance system, it is important to note that most major banks in Malaysia offer hire purchase loans using the flat rate system.
Another important thing to remember is that many hire purchase loans in Malaysia provide different car loan interest rates, considering factors like whether the car is a national or a foreign-made car and whether it is used or brand new.
Current Car Loan Interest Rates by Bank in 2025 (Comparison)
Let’s take a look at the car loan interest rates that major banks offer.
| Bank | New Car Loan Rate | Used Car Loan Rate |
| Maybank | 3.40% p.a. | 4.25% p.a. |
| CIMB | 3.75% p.a. | 4.45% p.a. |
| Bank Islam (Islamic) | 2.35% p.a. | – (new cars only) |
| RHB | 3.18% p.a. | – (new cars only) |
| Hong Leong Bank | 3.24% p.a | 3.78% p.a |
| Public Bank | 3.31% p.a. | 4.10% p.a. |
Note: The interest rates published above are based on the most current data available and may change accordingly.
The comparison table shows the car loan interest rate for major banks in Malaysia. These rates reflect a 9-year tenure. However, interest rates offered may vary based on shorter tenure or bank promotions.
From this table, Bank Islam has the lowest interest rate for car loans in Malaysia. However, they do not offer any rates for used cars. In that case, Hong Leong Bank offers Malaysia the lowest interest rate for used car loans.
As of 2025, the lowest advertised rate is around 2.35% and the highest about 3.75%, giving borrowers a clear range to benchmark.
How Car Loan Interest is Calculated in Malaysia
As mentioned above, the hire purchase interest rate in Malaysia is typically flat, which means it is calculated based on the principal amount for the duration of the loan.
To easily calculate the interest rates, you can use this formula :
Interest = (Principal × interest rate × years)
The formula above will give you the total interest amount you will have to pay for the years you decide to maintain the loan. However, when you repay this interest, along with the principal amount monthly, it will be distributed evenly over the total loan months.
The example below clearly illustrates the interest payment and the monthly loan repayment amount.
For this example, let’s take the on-the-road price of a Perodua Bezza 1.3 X, which will cost RM 43,980, and do a simple flat rate interest calculation:
Car price: RM43,980 Down payment of 10%: RM39,582 (- RM4,398) Loan interest rate: 3.0% per year Total interest for 9 years: RM10, 687.14 (3% x 9 x RM39,582) Total amount to pay : RM50,269.14 (RM39,582 + RM10687.14) Monthly installment to pay : RM465.64 (RM50,269.14/108 months)
Although a flat-rate system might seem attractive, it is important to remember that the ‘true cost’ of flat-rate systems may not be as advertised.
According to Carsome, opting for a longer loan tenure, such as 9 years, can significantly increase the total interest paid over the loan period, even if the monthly installments are lower.
A flat rate does not adjust for repayments. If interests were calculated on a reducing-balance basis, you might be paying a lot less.
Another factor that can significantly alter hire purchase interest rate is the length or tenure of the loan.
Simple calculations will reveal that a 9-year loan can incur almost double the total interest of a 5-year loan at the same rate.
That said, it is crucial to consider your financial means when deciding to get the best car loan in Malaysia. To aid this, many banks, car brands, and economic sites have prepared online calculators that allow you to easily get monthly payment estimates.
One that we frequently use is the RinggitPlus Car Loan Calculator.
Factors That Affect Your Car Loan Interest Rate
Now that we have a clear picture of the hire purchase interest rate, let’s examine some factors affecting your car loan interest rate.
Loan Tenure
Shorter loans mean lower interest rates. The interest you will need to pay is generally reduced by the number of years of repayment. This is an extremely wise choice, especially on a car that is usually deemed a liability, if you have the means.
Car Type (New vs Used)
If you’re getting a new car, interest rates will generally be lower than for used cars. The explanation is simple: used vehicles carry a higher risk for banks due to a depreciating value in the market. New national cars vs new foreign vehicles may also have slightly different interest rates.
Down Payment (Margin of Finance)
Most banks offer a 90% loan structure, which requires you to fork out 10% of the car’s value as a down payment. However, if you manage to put down a higher down payment, banks may consider reducing your hire purchase interest rate.
Credit Score and Income
Credit score is a reflection of your past financial behaviour. If you have been a good paymaster before, you can qualify for the lower end of the interest range. If not, you might need to supplement your loan application with a guarantor.
Bank Promotions/Partner Deals
Keep an eye out for promotions and partner deals between banks, dealerships or even manufacturers. Special offers can mean slightly lower interest rates for a limited time.
Tips to Secure the Lowest Car Loan Interest
We are all on the lookout for the lowest interest rate for a car loan in Malaysia. Here are some valuable tips to ensure that you can get one:
- Improve Your Credit & Financial Profile: Banks will check your credit score, so ensure your credit report is clean. Now is the time to clear off any outstanding bills. With a strong credit score, you may get a better rate from banks.
- Increase down payment: If you can save up to 20-30% of the down payment instead of the usual 10%, you might receive better rates from some banks. This will also reduce your monthly repayments.
- Shorten loan duration: A shorter loan duration means slightly more to pay every month, but you could save up to double the interest amount.
- Shop around for loan offers: You can get loan offers from multiple banks. Use this opportunity to compare what each bank can offer you. Look at our table above for interest rates, but also remember to check if there are any ongoing promotions.
- Time your purchase: Year-end deals and festivals will bring plenty of promotions from banks or dealerships. It is a good idea to time your car purchase to take advantage of these deals.
Car Loan Eligibility and Requirements in Malaysia
If you’re a citizen of Malaysia, the requirements for a loan application are pretty simple. Let’s look at some of the basic requirements you must meet to qualify for a loan.
| Basic Requirements | – Must be at least 18 years old with a stable income
– 10% down payment availability – For locals, prepare documents like IC, a valid driving licence, and 3 months’ payslip/bank statement as proof of income |
| Employment status | – Fully employed or self-employed
– Those who are self-employed require additional supporting documents, like bank statements or tax filings |
| Approval time | – Take into account the approval time of a few days to a week for the loan to be approved |
Take note that these requirements are only applicable to local Malaysians. If you’re a foreigner looking to secure the best car loan in Malaysia, see the section below.
Car Loans for Foreigners in Malaysia
Can foreigners living in Malaysia secure a car loan in Malaysia? The short answer is yes, they can.
It is important to note that the same rules do not apply to non-locals. Most margins of finance offered to non-locals are lower, so they will be required to put down a larger down payment instead of the standard 10%.
They might also be subject to slightly higher interest rates as some banks deem it riskier to offer loans to non-locals.
In terms of documentation, non-locals will need a valid passport, a valid work permit or visa, proof of local employment and income, and often, a local guarantor might be required by some banks.
Although several major banks, such as Maybank, CIMB, and Public Bank, offer car loans to foreigners, they also require guarantors, according to Trusted Malaysia.
If this seems too complex, you can check out other services, like FLUX, which offers subscription-based cars.
Conclusion – Getting the Best Deal on Your Car Loan
Getting the lowest interest rates on car loans in Malaysia may be overwhelming. Still, we believe this guide will provide all the information necessary to select one that fits your lifestyle.
We want to highlight the key takeaway that understanding how hire purchase interest rates work allows you to easily compare the banks offering the lowest interest rates on car loans in Malaysia.
We’ve also touched on all the essential factors you need to consider, like credit history, down payment, and more. You must also compare multiple banks’ offers before you finally sign on a loan.
We hope the insights in this guide will help you find the best car loan in Malaysia.
FAQ about Car Loan Interest Rate in Malaysia
References
- Motorist.my (2025). The Motorist Guide to car loans & interest rates in Malaysia [Updated 2025]. Retrieved from https://www.motorist.my/article/3381/the-motorist-guide-to-car-loans-interest-rates-in-malaysia-updated-2025
- Carsome (2023). A Guide to Car Loans & Interest Rates in Malaysia. Retrieved from https://www.carsome.my/news/item/car-loans-and-interest-rates-malaysia
- Trusted Malaysia. (2024) 5 Banks That Offer the Best Car Loan in Malaysia. Retrieved from https://www.trustedmalaysia.com/best-car-loan-malaysia/
- RinggitPlus (n.d.). Best Car Loans. Retrieved from https://ringgitplus.com/en/car-loan/
