Interest rates on local car loans may be lowered

KUALA LUMPUR: Interest rates on car loans, especially for non-national cars, are expected to go up next month while those for national cars such as Proton and Perodua will be reduced slightly.

Banking and automotive sources said banks are expected to fix the interest rates at 3.5 per cent.

It is understood that Maybank, AmBank, CIMB and Public Bank top officials met last week on the move.

Together, these four banks control 70 per cent of the car hire-purchase segment of the banking business.

Sources said the move was aimed at standardising the interest rates, which were currently in favour of the non-national cars.

Banks are now offering loans with an interest rate of 2.5 per cent for non-national cars and between 3.8 per cent and four per cent for national cars, namely Proton and Perodua models.

Several car distributors and dealers told the New Straits Times that they have heard the news, but had yet to be notified by the banks.

A car dealer handling both national and non-national cars said the interest rates on the national cars, the bulk of which were market-entry level cars affordable among the low-income earners, were higher because "the risk of loan defaulters are higher".

"Banks are basing it on statistics.

"They see that the non-performing loans are higher for loans given for national cars," the source said.

Meanwhile, Association of Finance Companies of Malaysia chairman Tan Sri Tay Ah Lek said the interest rates for car loans depended on a number of factors such as the tenure of the loans, type of car being financed and the customer's risk profile.

He said the prevailing low interest rates for car loans were partly due to the subsidy by car dealers to sell more cars.

In light of the rising long-term rates, banks would need to review their present interest rates for car loans.

Tay said the decision to raise interest rates on car loans, if any, would be made by the individual institutions.

"As of now, the association is not aware of any decision by any financial institutions raising their interest rates on car loans next week."

One non-national car dealer said the higher rates would have an impact on sales, but the effect would be across the board.