Experts say hire purchase amendments will improve transparency but unlikely to shift financing trends
PETALING JAYA: The amended framework under the Hire Purchase (Amendment) Bill 2025 may help consumers better understand vehicle loan pricing but major shifts in purchase or financing trends are not anticipated in the near future.
The Association of Banks in Malaysia (ABM) told theSun that the revised payment method is a positive modernisation of consumer credit, but its full implications or assessment on borrower behaviour and vehicle financing demand would take time.
“It is still too early to draw firm conclusions on the potential impact that these amendments will have on consumer demand for vehicle financing, but we expect that the transition to a reducing balance method could encourage greater transparency and clarity in pricing for consumers.
“However, any changes in demand may not be significant as consumer preferences would continue to be shaped by prevailing economic conditions, income levels and available incentives,” ABM said via e-mail.
The association also does not anticipate a major rise in early settlements, despite the new formula making it cheaper for borrowers to pay off loans ahead of schedule.
According to ABM, the industry is evaluating the operational implications for existing accounts; existing contracts would generally remain unchanged. Discussions are ongoing to support a smooth and consistent transition.
Putra Business School economist Assoc Prof Dr Ida Yasin said consumers have been anticipating the change and some have delayed purchasing decisions while waiting for the new law to take effect.
She said banks may adjust interest rates upwards to maintain margins once the new calculation model is rolled out.
Universiti Teknologi Mara financial specialist Dr Mohamad Idham Md Razak said the amendments are a significant improvement for consumers, offering a more equitable and transparent approach to car financing.
“Interest now reduces progressively, allowing early payers to enjoy greater savings. This creates a fairer and more transparent system and encourages responsible financial behaviour,” he said.
