Best Car Loans in Malaysia 2026

Hire purchase loans are how most Malaysians buy cars. Instead of paying RM80,000 upfront for a Myvi, banks spread the cost over 7 years at around 3% to 3.5% p.a. through monthly instalments. The car acts as collateral, meaning banks can repossess it if payments stop. Full ownership transfers once the loan is completely paid off.

Typical loan terms run 5 to 9 years with interest rates between 2.35% and 5% p.a. The difference between the best and worst rates on an RM80,000 loan? About RM4,200 in total interest over 7 years. Comparing loan types matters.

Types of Car Loans in Malaysia

Not all car loans work the same way. Here's what Malaysian banks offer and which one fits your situation.

Standard Options (Most Common)

Most Malaysians use conventional or Islamic car loans. Both work the same way which is monthly payments over 5 to 9 years, with banks covering 80% to 90% of the car price. Rates run from 2.35% to 4.25% p.a. based on the bank, car type, and your credit. The total cost is nearly identical to Islamic loans that just follow Shariah rules.

1. Conventional Hire Purchase

The most common car loan in Malaysia. Banks lend money to buy the car, with repayment in fixed monthly instalments plus interest.

How it works: Down payments typically run 10% to 20%, with banks financing the balance. The car gets registered under the buyer's name, but banks hold the ownership grant (geran) until full repayment.

Best for: Salaried employees with steady income

Example: Buy a RM80,000 Perodua Axia with a RM8,000 down payment (10%). Loan amount is RM72,000 at 3.2% p.a. over 7 years. Your monthly payment is RM952.

Available at all banks with competitive interest rates from 2.35% to 4.25% p.a. Watch out for early settlement penalties at some banks and remember that interest is calculated on the full loan amount.

2. Islamic Car Financing (Hire Purchase-i)

Shariah-compliant financing using Murabahah or Ijarah (leasing), with profit margins instead of interest.

How it works: The bank buys the car and sells it at a marked-up price, payable in instalments. Under Ijarah, borrowers lease the car with an option to own it later.

Best for: Muslims who want halal financing, or anyone wanting fixed costs

Example: Same RM80,000 car with a profit rate at 3.3% p.a. Monthly payment is similar to conventional loans, but structured as profit. Total cost is fixed from day one.

Available at Bank Islam, Bank Muamalat, Maybank Islamic, CIMB Islamic, and Public Bank Islamic. Benefits include no riba (interest), fixed profit rates, and possible early settlement rebate (ibra'). Some banks charge higher profit rates, and choices are limited to Islamic banks only.

Standard loans work for most people, but some situations need different approaches. Fresh graduates, freelancers, and eco-conscious buyers have specialised options that better match their circumstances. These loans adjust terms to fit specific needs, whether that's irregular income, limited credit history, or buying green vehicles.

Flexible and Speciality

Banks offer loans for specific needs. Flexi loans let people with irregular income pay extra when they have cash. Graduate schemes help fresh grads with limited credit history and lower salaries. Green car loans give better rates for eco-friendly vehicles. To get the special perks, you have to meet the specific requirements of that loan type.

1. Flexi Car Loan

Allows extra payments anytime without penalty, reducing the loan tenure and total interest.

How it works: Regular monthly payments continue as normal, but borrowers can add lump sums whenever they want. Raya bonuses, year-end windfalls, or extra income go directly toward reducing the principal.

Best for: People with variable income, like commission-based sales, freelancers, and business owners

Example: A RM100,000 loan at 3.5% over 9 years means RM1,104 monthly. An extra RM5,000 payment after 2 years saves about RM3,200 in interest and finishes 8 months earlier.

Available at Hong Leong Bank, Maybank, and CIMB. No penalties for extra payments, and you can reduce interest by paying off faster. The trade-off is a higher base interest rate, and you need discipline to actually pay extra.

2. Graduate Car Loan Schemes

Financing for fresh graduates, typically aged 20 to 35, with higher financing margins and lower income requirements.

How it works: Banks finance up to 100% of the car price, meaning no down payment is needed. Some offer lower interest rates or waive the first 6 months of payments.

Best for: Fresh grads who have just started working. Age under 30 to 35 with a Diploma or Degree, earning at least RM2,000 to RM2,500, and working for less than 3 years.

Example: Bank Islam Vehicle Financing-i GradONE: Get 100% financing for cars under RM100,000 with profit rates from 2.35% p.a. and payment deferment options. Other banks offering this include Bank Muamalat Auto-Grad and Maybank My First Car Loan.

Little to no down payment makes it easier for new graduates to get approved, and some banks offer a first payment deferment for 3 to 6 months. But you'll pay higher total interest since you're borrowing more over a longer tenure, you build less equity initially, and you're limited to specific car models and prices.

3. Green Car Loan

Financing for energy-efficient vehicles (EEVs) and hybrid/electric cars, with government incentives and lower interest rates.

How it works: Same as conventional hire purchase but with preferential rates for eco-friendly cars like Proton X50, Perodua Ativa (EEV), or fully electric models.

Best for: Buyers wanting lower road tax and fuel costs

Eligible vehicles: Energy Efficient Vehicles (EEV) include Perodua Axia, Bezza, Myvi, and Ativa. Hybrid cars include the Honda City Hybrid and the Toyota Corolla Cross Hybrid. Electric vehicles include BYD Atto 3 and Ora Good Cat.

Interest rates run 0.2% to 0.5% lower than standard loans. Additional benefits include lower road tax since EEVs get discounts, fuel savings of 20% to 40%, better efficiency, and cashback at some banks.

Lower interest rates and government incentives on certain models mean long-term fuel savings. But choices are limited to specific car models, and hybrids or EVs have higher upfront car prices.

New car loans cover most purchases, but the car market includes used vehicles and existing loans worth reconsidering. Older cars and refinancing opportunities follow different rules. These options require more homework upfront but can save thousands when the numbers work in your favour.

Special Circumstances

Used car loans require banks to check the vehicle's age and condition. Refinancing moves your existing loan to a bank with better rates. Both need extra work, like inspections for used cars and calculations for refinancing.

1. Used Car Loan

Financing for second-hand vehicles. Higher interest rates and shorter tenure limits than new car loans.

How it works: Same as a new car loan, but banks assess the car's age and condition. Older cars get less favourable terms.

Best for: Budget-conscious buyers and people wanting specific discontinued models

The financing margin is 80% to 90% compared to 90% to 100% for new cars. Interest rates are 0.3% to 1% higher. Maximum tenure depends on car age: cars under 5 years get up to 9 years loan, 5 to 10 years old get up to 7 years, and over 10 years get up to 5 years or outright rejection.

Example: 2019 Honda Civic (RM75,000): Down payment of RM15,000 (20%) means a loan of RM60,000 at 3.8% over 7 years. Your monthly payment is RM832.

Before applying, get a PUSPAKOM B5 inspection report, check blacklist status at JPJ, verify loan settlement from the previous owner, and check for accident history.

Lower car prices give more negotiating room with sellers. But higher interest rates mean stricter approval since car condition matters, and a thorough inspection is needed to avoid problems.

2. Refinancing/Balance Transfer

Switch existing car loans to another bank with better interest rates.

How it works: A new bank pays off the current loan and provides a new loan with lower rates. Payments continue with the new bank.

Best for: People who took loans 2 to 3 years ago when rates were higher, or those whose credit score improved

When the interest rate difference is at least 0.5%, there are 3+ years left on the loan, and there are no early settlement penalties on the current loan.

Example: Refinancing RM60,000 balance: Current loan at 4.2% p.a. costs RM900 per month with 5 years left. Refinancing to 3.2% p.a. means RM867 per month instead. Savings: RM33 every month, which equals RM1,980 over 5 years.

Factor in stamp duty of about RM300 to RM500, legal fees of about RM500 to RM800, and processing fees of RM200 to RM500.

Available at most major banks like Maybank, CIMB, Hong Leong, and Public Bank. Lower monthly payments reduce total interest paid. But upfront refinancing costs add up, it restarts your loan tenure unless you shorten it, and some banks have lock-in periods.

How to calculate a car loan in Malaysia?

Say you are looking to buy a Standard 2WD Proton X70, which is priced at RM109,800 (On The Road Peninsular Malaysia) at a Proton dealership.

Usually, car dealerships will have panel banks that offer competitive interest rates. But you can also choose to submit your car loan application to any bank.

In this example, you select Maybank Hire Purchase to finance your car purchase. For the purchase of a new car, Maybank is offering up to 90% margin of finance, with you covering the remaining 10%. The interest rate is priced at 3.40% annually, and you can extend the repayment period for as long as 9 years.

To illustrate further, see the car loan calculator below to see how much you are borrowing and committing every month when purchasing a new Proton X70:

At 3.40% p.a., the total interest you are paying every year is RM3,359.88, which is equivalent to RM279.99 per month.

So, if you break the monthly installment amount of RM1,194.44 down, the principal loan amount minus the interest is only RM915.

What should I look for when applying for a car loan?

There are four factors that can influence your decision-making when applying for a car loan:

Loan Cost

The cost of a loan can be cheaper when the margin of finance is lower. This is due to the fact that a loan consists of 2 parts: the principal and the interest.

The interest rate will be charged on the total applied amount for the life of the loan, whereas the principal is the total loan amount, including interest that you are committing to.

Most borrowers will go for a higher margin of finance of up to 90% (sometimes 100% for first time buyer) so that they will pay less from their own pocket or savings. While this practice can save up some cash in hand, it attracts a higher interest rate if you choose a longer repayment period.

Interest Rate

This is a common practice by the bank as an exchange for the service offered to the borrowers. Comes in the form of a percentage, an interest rate is calculated on an annual basis.

Most banks will offer a competitive car loan interest rate around 2%-6% p.a, depending on the type of car (new or used, national or foreign). You can save on the interest rate payment by reducing the repayment period or lowering the margin of finance.

Down Payment

This transaction happens at the point of the vehicle purchase and is usually paid by the borrower from his/her own pocket.

The larger the amount of your down payment, the lower the margin of financing you can ask from the bank. Thus, this will also lower the interest rate payment, as well as the monthly installment payments.

Loan Default and Repossession

It is worth noting that a car loan is securitized against the vehicle that is being purchased. In the event of non-payment of or default on the car loan, the bank has the right to take legal action against the borrower by repossessing the asset from them.

Subject to the terms and conditions as stated in the loan document, full ownership of the vehicle will be transferred to you when you have fully paid the car loan within the stipulated timeline.

Car Loan Approval Process

Pretty much the same as any other loan application, the car loan approval process will depend on your income, employment type, current financial commitments, debt service ratio, and some other lifestyle factors. 

To speed up the approval of your car loan application, you can observe these tips before or during your car purchase:

Determine what you can afford

This is the most important aspect of a car buying process: knowing the type of car you need and how much you can afford.

Before getting your hands on the dream car key, you need to calculate your debt service ratio to assess your income versus commitment. You also need to think of the maintenance aspects of car ownership, such as car insurance, petrol, servicing, and other incidental expenses.

Once you have determined your affordability, you can pave your way to the next step, which is checking your credit score.

Check your credit score

For those with a clean credit history (zero loan and credit card payment record), the chances of your car loan being approved by the bank are very low. Therefore, you need to build a credit history for a minimum of 6 months by getting a credit card for starters.

For those with a poor credit history, you need to rectify your repayment habits by paying your loan or credit card on time and in full. As a low credit score will lower your car loan approval rate, it is advisable to maintain a prompt repayment habit for up to 12 months before your next loan application.

Compare car loan interest rates

Since banks will have different rates and terms on their car loans, it is important to shop around for the best interest rate deal before signing any contract.

The easier way to compare interest rates for a car loan is online, such as banks’ website or RinggitPlus. You will be presented with a list of all banks with their rates and terms, plus you can calculate your car loan easily and apply for it online.

Get a guarantor

If your credit score is too low or zero, but you are in desperate need of a car, getting a person to guarantee the loan is your next best alternative.

The guarantor, who is typically a close relative, will assume the same risks as the borrower. In case the borrower is unable to pay the monthly installment, the guarantor’s name and credit will be on the line too if he/she does not step in to mitigate it.

Now that you are aware of the things you should look out for when searching for the right car loan, as well as the steps on how to calculate correctly using the car loan calculator, let's go ahead and choose a car loan that suits your preference with the comparison table below.

Car Loan Interest Rate 2026 Comparison