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Are used cars truly the better way to spend less in this economy? Many assume so because of their smaller price tag and lower depreciation!
But what kind of interest rates will you have to pay if you purchase them through a bank loan or hire purchase loan?
According to AKPK, a hire purchase loan involves hiring goods with the option of buying them at the end of the hire purchase term.
This type of loan usually applies when purchasing a vehicle. You become a hirer while the creditor acts as an owner.
You must pay the instalment for an agreed-upon duration while using the car. Once the hire purchase loan is settled, the car’s ownership is transferred to the hirer.
The interest rate charged on this loan is the cost of borrowing money from the bank. Second-hand car loan interest rates in Malaysia are generally higher than those of new cars.
According to the banks’ report, the average Malaysian car loan interest rate ranges between 3.5% and 4.5% per annum. Although this is only an additional 0.5 to 1% higher than a new car loan, it can add to the cost.
So, to explore whether used car loans are worthwhile, this guide will outline all the essential factors you need to consider, alongside some tips on securing the lowest interest on your used car loan. It will also examine which bank offers the best used car loan in Malaysia.
Table of Contents
How Do Used Car Loan Interest Rates Work in Malaysia?
It is very common to see higher interest rates on hire purchase loans for used cars. The explanation for this is simple and justifiable.
Generally, banks are slightly more afraid to provide loans for older cars, ones that depreciate faster, or ones that have lower resale value. This makes used cars slightly riskier as collateral.
They also consider the different types of cars (foreign vs. national) for which you are applying for a loan.
For example, you might get a higher interest rate for a BMW, which comes with a higher maintenance cost, compared to a Perodua Bezza, which is a local car with a cheaper maintenance cost.
Another thing to note is that our hire purchase car loans use a fixed-rate system. A fixed-rate system basically means that the interest on the loan is calculated against the full principal amount.
However, there might also be some banks that will use a variable rate.
Variable rates are usually based on Base Lending Rate (BLR) or sometimes referred to as Standardised Base Rate (SBR) plus a spread for the variable rate.
For example, CIMB Bank’s hire purchase used car interest in Malaysia is a variable rate with a BLR plus a 1.70% spread.
Though variable rates are available for second-hand car loans in Malaysia, this is quite uncommon as most institutions offer a fixed rate.
Current Used Car Loan Interest Rates by Bank (2025)
Every bank releases its own second-hand car loan interest rates in Malaysia. We have collected some of the rates from major banks in Malaysia and collated them as below.
Do note that the length of the loan, also known as loan tenure, your choice of vehicle, and factors like your eligibility can affect the rates that might be provided to you.
| Bank | Used Car Interest Rate | New Car Interest Rate | Maximum Financing % Available for Used Car |
| Maybank | Between 3.2% – 4% p.a | 3.4%p.a | 85% |
| CIMB | Between 3.5% – 4.45% p.a | 3.75%p.a | 90% |
| Bank Rakyat | Between 3.05% – 3.2% p.a | 3.3%p.a | 90% |
| Public Bank | Between 3.3% – 4.1% p.a | 3.31%p.a | 90% |
| Affin Bank | Around 3.0% p.a | 2.92%p.a | 85% |
The table shows that Affin Bank offers the lowest rates for a used car loan in Malaysia. Meanwhile, rates for other banks range between 3.05% and 3.5%.
Best Used Car Loan Rates – Who Offers the Lowest?
Bank Rakyat currently offers one of the best used car loans in Malaysia, with the lowest interest rates.
Do note that their maximum financing available for used car loans is 85%. This means you will have to put down a deposit of 15% as a down payment.
If you have no means to increase your down payment rate, you can consider the next best option, which is Bank Rakyat. Bank Rakyat also offers 90% of financing, so you only need to prepare a 10% down payment on your car.
We recommend that you watch for promotions and seasonal offers that can offer lower interest rates for a limited time.
Factors that Affect Used Car Loan Interest Rates
When you start looking for the best used car loan in Malaysia, you must consider factors that might affect used car loan interest rates. Let’s take a look at some of them below :
- Loan Tenure: Longer loans = higher interest rate. Why? Because the interest you will need to pay is generally increased by the longer years of repayment.
- Car Model: Locally made cars like Proton or Perodua generally have lower rates than foreign-made cars.
- Age of car: Used cars older than 10 years will make securing a loan much harder. This is simply because of their lower value, fast depreciation rate, and higher maintenance cost.
- Personal credit score and income: As with new cars, you are also subject to scrutiny when applying for used car loans. If you have a bad credit history, it will become tougher to secure financing. You are also required to show a consistent income-earning history.
- Margin of finance: Most banks offer up to 90% financing for used car loans. However, some offer lower rates, which means you might have to secure a higher down payment. That said, some banks are also willing to lower their interest rates if you can fork out a higher down payment.
Tips to Secure the Lowest Interest on Your Used Car Loan
Why not take some action to secure the lowest interest on your used car loan?
After all, this will save you some money in the long run!
Let’s look at some of the things you can do to secure lower interest rates on your used car loan.
1. Improve your credit score
The more stable you are, the more likely the bank feels safe to offer you a loan with lower interest. So, it’s time to settle other debts and ensure that you have a stable income that will prove your loan. This can help you qualify for the lowest advertised interest rate.
2. Save for larger down payment amount
Although you are usually required to pay 10% upfront as your car’s down payment, if you can save more, try to increase your down payment amount. This can sometimes win you better interest rates with the bank and also lowers your loan amount which directly reduces the total interest rate you pay.
3. Go for a shorter loan tenure
Sure, if you take a 5-year loan tenure, your monthly payback may seem a lot higher. However, a shorter loan tenure can mean that you pay much less interest.
4. 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.
5. Look for deals and promos
Year-end deals and festivals bring about plenty of promotions with banks or dealerships. It may be a good idea to time your car purchase to take advantage of these deals.
Used Car Loan Eligibility and Requirements
If you’re a Malaysian, the requirements for a loan application are pretty straightforward. 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
- For locals, prepare documents like:
- MyKad (NRIC) for Malaysians, or passport for foreigners
- Income documents: recent payslips, EPF statements, or bank statements
- Proof of residence, such as a utility bill
- The car’s proforma invoice or booking receipt
Buying used cars also means that the car itself must have been inspected by PUSPAKOM and must have undergone a valid ownership transfer. These procedures must be carried out before the loan approval.
Most banks also require that the used car is not older than 12 – 15 years at the end of the tenure, which means you must purchase a car no older than 6 years old for the longest loan tenure (9 years).
Conclusion
Getting a used car loan is not as complicated as it may seem. If you follow this guide, we believe you can easily secure a decent second hand car loan interest rate for your used car.
The key takeaway that we want to highlight is that by understanding how the interest rates work for a used car and factors to consider before you get a loan, you’re already a step closer to making a financially sound decision.
Take time to compare banks and also during festival seasons as that could result in a lower promotional rate.
We hope that this guide will help you secure the best used car loan in Malaysia.
