Malaysia’s New Car Loan Rule 2026 — Save Up to 48% in Interest
Malaysia’s Parliament has passed the Hire Purchase Amendment Bill 2025, marking the biggest car loan reform in decades. Expected to take effect by mid or late 2026, the new rule replaces the long-used Flat Rate System with the Reducing Balance Method, allowing car buyers to save significantly on loan interest.
🔄 From “Flat Rate” to “Reducing Balance”
Currently, Malaysian car loans use the Flat Rate system — interest is calculated based on the original loan amount for the full term, even if the borrower repays early.
Under the new Reducing Balance system, interest is charged only on the remaining balance, decreasing as the borrower pays down the principal — a method already standard in global banking.
💰 Major Benefits
1️⃣ Early repayment saves real money — Borrowers who settle loans early will only pay interest up to their actual repayment date.
2️⃣ Lower total cost — Even with the same nominal interest rate, reducing-balance loans cost far less overall.
Example: For a 5-year, 3% car loan, the total interest may drop by up to 48%.
For instance, a Perodua Myvi buyer could see interest fall from about RM10,900+ to RM5,200+.
💡 Key Points
• Car prices remain unchanged, but total financial burden drops.
• Applies only to new car loans once the new law takes effect (mid–end 2026).
• Consumers gain transparency and flexibility, while banks must restructure loan products.
✅ Conclusion
This reform modernizes Malaysia’s auto finance system, making car loans fairer, more transparent, and cost-efficient.
If you’re planning to buy a car soon, waiting until after the 2026 rule takes effect could help you drive the same car for much less.
