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.

Which Car Loan Should You Choose?

Fresh graduates should go for graduate car loans with 100% financing and easier approval. If you want the lowest rates, pick conventional hire purchase with a large down payment. Muslims or those preferring halal options should choose Islamic car financing at Bank Islam or Maybank Islamic.

People whose income varies monthly do better with flexi loans, where they can pay extra when they can. Buying a used car under RM50,000 means expecting higher rates and shorter tenure. Buying hybrid or EEV cars qualifies you for green car loans with preferential rates. If you have an existing high-rate loan, refinance only if your savings exceed the costs.

Compare Your Total Cost, Not Just Monthly Payment

Same RM80,000 loan under different scenarios:

90% financing: RM8,000 down payment, 3.4% interest, 9-year tenure means RM759 monthly with RM10,356 total interest paid.

70% financing: RM24,000 down payment, 3.2% interest, 7-year tenure means RM743 monthly with RM6,421 total interest paid.

50% financing: RM40,000 down payment, 3.0% interest, 5-year tenure means RM719 monthly with RM3,140 total interest paid.

A bigger down payment plus a shorter loan equals more savings, even with similar monthly payments.

Notice something important? The 9-year loan has the lowest monthly payment (RM759), but costs RM10,356 in total interest. The 5-year loan has the highest monthly payment (RM719), but only costs RM3,140 in interest. That's a RM7,216 difference for saving just RM40 per month. This is why a longer tenure almost always costs you more, even when monthly payments look affordable.

How To Calculate A Car Loan in Malaysia?

Take the Executive 2WD Proton X70, priced at RM106,800 in January 2026 (On The Road Peninsular Malaysia) at a Proton dealership.

Car dealerships usually have panel banks that offer competitive interest rates, but applications can also go to any bank.

In this example, Maybank Hire Purchase finances the car purchase. For new cars, Maybank offers up to 90% margin of finance, with 10% covered by the buyer. The interest rate is 3.40% annually, with repayment periods extending up to 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 paid every year is RM3,268.08, equivalent to RM272.34 per month. Breaking down the monthly instalment of RM1,162.34: the principal loan amount minus the interest is only RM890.

What Should I Look For When Applying For A Car Loan?

Four factors determine car loan cost: down payment (10% to 100%), interest rate (2.35% to 5% p.a.), loan tenure (5 to 9 years), and the type of financing chosen. Larger down payments reduce both monthly instalments and total interest paid. Shorter tenure means higher monthly payments but massive interest savings.

Watch for early settlement penalties. Some banks charge 3% to 5% of the outstanding balance if loans are paid off before the agreed tenure. This can wipe out any savings from refinancing or paying extra.

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 (DSR) to assess your income versus commitment. DSR is total monthly debt divided by gross monthly income. Example: RM2,000 in monthly commitments (existing loans, credit cards) divided by RM5,000 income = 40% DSR. Most banks reject applications above 60% to 70% DSR, so make sure the car loan won't push over the limit.

Also consider maintenance aspects of car ownership, such as car insurance, petrol, servicing, and other incidental expenses.

Once affordability is determined, the next step is checking the credit score.

Check your credit score

Banks rarely approve car loans for applicants with zero credit history because no payment records mean nothing to assess. Most first-time borrowers either build credit through 6 months of secured credit card usage or apply with a guarantor who has established credit.

Poor credit history requires rehabilitation through consistent on-time payments. Banks typically look for 12 months of clean payment records before reassessing eligibility, though graduate schemes and guarantor options can speed up the process.

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 the credit score is too low or zero, but a car is urgently needed, getting someone to guarantee the loan is the next best alternative.

The guarantor assumes the same risks as the borrower. If the borrower is unable to pay the monthly instalment, the guarantor's name and credit will be on the line too if they don't step in to mitigate it.

Interest Rate Comparison For Car Loan in Malaysia 2026

Now that the key factors are clear, along with calculation steps using the car loan calculator, here's a comparison table to choose a car loan that suits different preferences.

Frequently Asked Questions (FAQ) About Car Loans

Beyond loan types and calculations, most Malaysians have practical questions about approval, defaults, and options when circumstances change. Here are answers to the six questions we hear most often.

Can I refinance my existing car loan?

Yes, if another bank offers at least 0.5% lower interest and there are 3+ years left on the loan. Upfront costs include RM1,000 to RM1,800 in stamp duty, legal fees, and processing fees, so make sure savings exceed these costs.

What happens to my car loan if I lose my job?

The bank still gets paid, and missing payments damages credit score and can lead to repossession. Contact the bank immediately because most banks will offer payment restructuring or 3 to 6 month moratoriums instead of taking the car.

Hire purchase or conventional loan, which one saves more?

They're the same thing. Banks use "hire purchase" as the legal term for car loans in Malaysia. If the question is about Islamic versus conventional car loans, the cost difference is tiny which is about RM168 over 7 years on an RM80,000 loan. Pick based on preference for Shariah compliance.

Can foreigners or non-citizens get car loans in Malaysia?

Yes, but requirements include a work permit with 2+ years validity, a minimum RM5,000 to RM8,000 monthly income, and a Malaysian guarantor. Expect 70% to 80% financing, shorter tenure, and 0.5% to 1% higher interest rates than citizens get.

Do I need takaful if I take Islamic car financing?

Yes, Islamic financing requires takaful instead of conventional insurance. Coverage and costs are nearly identical (RM1,500 to RM3,000 yearly), but takaful works on mutual cooperation principles without riba.

What's the difference between flat rate and reducing balance?

Flat rate charges interest on the original loan amount forever, while reducing balance charges interest only on what's still owed. Malaysian banks quote reducing balance rates from 2.35% to 4.25% p.a., which costs half as much as a flat rate. Always compare the reducing balance when shopping.