{"id":40593,"date":"2026-09-24T15:53:01","date_gmt":"2026-09-24T07:53:01","guid":{"rendered":"https:\/\/www.carsome.my\/news\/?p=40593"},"modified":"2026-09-24T15:53:01","modified_gmt":"2026-09-24T07:53:01","slug":"what-you-need-to-know-about-malaysias-new-hire-purchase-act-in-2026","status":"publish","type":"post","link":"https:\/\/www.carsome.my\/news\/item\/what-you-need-to-know-about-malaysias-new-hire-purchase-act-in-2026","title":{"rendered":"What You Need to Know About Malaysia\u2019s New Hire-Purchase Act in 2026"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Buying a car in Malaysia just got a major update. On 1 June 2026, the new law known as the Hire-Purchase (Amendment) Act 2026 officially took effect. This amendment introduces changes to the calculation structure and car loan procedures across the industry. If you are planning to buy a car or are currently paying off a car loan, here is a summary of the new provisions under the Act.<\/span><\/p>\n<h3><b>The Big Shift: System Transition from Flat Rate to Reducing Balance<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The biggest change is how banks calculate your loan interest. The old system using the flat rate is no longer being applied. Now, banks use the reducing balance method and the Effective Interest Rate (EIR).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To understand why this matters, think of your car loan like a melting block of ice:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Old System (Flat Rate):<\/b><span style=\"font-weight: 400;\"> If you borrowed RM80,000, the bank calculated your interest based on that full RM80,000 every single month. Even if you had already paid back half of the loan, you were still paying interest on the original amount you borrowed on day one.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>New System (Reducing Balance):<\/b><span style=\"font-weight: 400;\"> Now, you only pay interest on the outstanding debt balance. The smaller your car debt, the less interest you have to pay.<\/span><\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td><b>Feature<\/b><\/td>\n<td><b>Old System<\/b><\/td>\n<td><b>New System (2026 Act)<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Interest Calculation<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Charged on the full original loan amount until payment is completed<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Charged only on the remaining principal balance you still owe<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Cost Transparency<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Advertised as a flat rate based on the original loan amount<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Advertised as the Effective Interest Rate (EIR) to show true costs<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Early Settlement<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Small discount because interest was charged earlier at the start (frontloaded)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Interest charges stop as soon as the debt is fully paid<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><b>3 Other Key Highlights You Should Know<\/b><\/h3>\n<ol>\n<li><b> Clearer Upfront Costs with EIR and Loan Schedules<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Banks are now required to show the Effective Interest Rate (EIR) alongside the loan repayment schedule.<\/span><\/p>\n<p><b>What is EIR?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Previously, financial institutions displayed a flat rate (for example 3%) calculated based on the original loan amount. The Effective Interest Rate (EIR) is the annual interest rate calculated based on the borrower&#8217;s current outstanding balance.<\/span><\/p>\n<p><b>Example:<\/b><\/p>\n<ul>\n<li aria-level=\"1\"><b>3% flat rate = 5.5% EIR (for a 9-year financing tenure)<\/b><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\"><b>3% flat rate = 5.64% EIR (for a 5-year financing tenure)<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Using this EIR indicator allows buyers to make direct financing cost comparisons between financial institutions.<\/span><\/p>\n<p><b>What is a Loan Schedule?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">This is your monthly payment schedule. If you pay RM1,000 a month, this schedule shows exactly how much of that money goes to your car debt and how much goes to the bank&#8217;s profit. You can see your actual debt shrinking every month.<\/span><\/p>\n<ol start=\"2\">\n<li><b> Capped Maximum Interest Rates<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">The government has set strict maximum limits on how much interest lenders can charge. While both options now use the reducing balance method, they work differently based on your risk preference:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Fixed Rate Loans: <\/b><span style=\"font-weight: 400;\">The interest rate remains the same from the beginning until the loan is fully paid. The highest limit banks can charge is 17% EIR per year (for loans up to 5 years) and 16% EIR for longer loans. Your monthly payment will be the same every month without any surprises.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Variable Rate Loans:<\/b><span style=\"font-weight: 400;\"> The interest rate for this loan follows the Reference Rate set by Bank Negara Malaysia and can change from time to time throughout your loan tenure. However, this rate will not exceed the maximum limit of 17% EIR per year regardless of the loan tenure. This means your monthly payment can go up or down according to the Reference Rate movements without any guarantee of which direction it will move but it is protected from exceeding the set ceiling.<\/span><\/li>\n<\/ul>\n<ol start=\"3\">\n<li><b> Digital Signatures and Faster Paperwork<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Depending on your chosen financing provider, hire-purchase agreements may now be signed digitally or electronically. For financial institutions that provide this facility along with the option of receiving documents via email, it can reduce the use of physical documents and speed up dealings at the car dealership.<\/span><\/p>\n<p><b>Is It Still Worth Doing an Early Settlement Now?<\/b><\/p>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"alignnone wp-image-40595\" src=\"https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-300x200.jpg\" alt=\"Malaysia RM50 bill\" width=\"704\" height=\"469\" srcset=\"https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-300x200.jpg 300w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-1024x683.jpg 1024w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-768x512.jpg 768w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-1536x1024.jpg 1536w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-2048x1365.jpg 2048w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-150x100.jpg 150w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-696x464.jpg 696w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-1068x712.jpg 1068w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/closeup-shot-malaysian-riggit-bills-1-1920x1280.jpg 1920w\" sizes=\"(max-width: 704px) 100vw, 704px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Under the previous system, the savings from early settlement were quite limited because a large portion of the interest charges had been applied in the earliest years of the loan. Under the new reducing balance system, early settlement can provide much greater financial benefits.<\/span><\/p>\n<p><b>Pros of EIR Compared to Rule 78<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Fairer Interest Rebates:<\/b><span style=\"font-weight: 400;\"> Under the EIR method, interest is calculated according to the actual loan balance. If you settle early, the interest rebate you receive reflects the true balance. This situation is different from Rule 78 which gives a smaller rebate because interest is distributed more heavily at the beginning of the term.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>More Transparent Interest Costs:<\/b><span style=\"font-weight: 400;\"> EIR is a standardized disclosure method that allows you to compare loan offers between banks fairly as opposed to the flat rate under Rule 78 which makes it difficult to determine true costs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>No Formula Penalty Effects:<\/b><span style=\"font-weight: 400;\"> Because the interest is tied directly to the debt balance, you will not be penalized by the calculation structure as happened under Rule 78 if you choose to settle the loan earlier.<\/span><\/li>\n<\/ul>\n<p><b>Cons of EIR Compared to Rule 78<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Rate Numbers Look Higher:<\/b><span style=\"font-weight: 400;\"> The EIR figure is mathematically higher than the previously used flat rate even though the actual monthly payment amount does not change. This can lead to a false impression that the loan has become more expensive.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Need to Understand the New Method:<\/b><span style=\"font-weight: 400;\"> Consumers need to get used to comparing offers using the EIR percentage because they can no longer be directly compared to the flat rate commonly used under Rule 78.<\/span><\/li>\n<\/ul>\n<h3><b>What If You Already Have a Loan?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">If you signed your car loan agreement before 1 June 2026, this new law does not automatically apply to you. Your existing loan will continue under the old flat rate system.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An initiative by major banking associations (ABM, AIBIM and ADFIM) has agreed to offer goodwill discounts to existing borrowers who want to settle their old loans early. This goodwill discount aims to balance your final loan balance so that it is more aligned with the reducing balance system calculation structure. However, the granting of this goodwill discount is subject entirely to the absolute discretion of the financier. You can contact your financing provider for further confirmation and a quotation.<\/span><\/p>\n<p><b>Pro Tips for Car Buyers in 2026<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Ask about the EIR:<\/b><span style=\"font-weight: 400;\"> Do not just ask about the monthly installment. Make sure you ask the car dealer or bank to provide the actual EIR percentage so you are not misled and can compare properly.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Check the System Transition: <\/b><span style=\"font-weight: 400;\">The government set a transition period until 31 March 2027 for financing providers to update their systems. By 1 April 2027, all financing providers including bank and non-bank financial institutions are required to fully use the Effective Interest Rate system for hire-purchase. At this time, the availability of this new system depends on the readiness of the respective financiers. Therefore, you are advised to check whether your chosen provider has made this system transition before signing the agreement.<\/span><\/li>\n<\/ul>\n<h3><b>Why You Should Choose CARSOME For Your Next Car Purchase<\/b><\/h3>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"alignnone wp-image-40596\" src=\"https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-300x200.jpg\" alt=\"Customer Buying Car\" width=\"723\" height=\"482\" srcset=\"https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-300x200.jpg 300w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-1024x683.jpg 1024w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-768x512.jpg 768w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-1536x1024.jpg 1536w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-2048x1366.jpg 2048w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-150x100.jpg 150w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-696x464.jpg 696w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-1068x712.jpg 1068w, https:\/\/www.carsome.my\/news\/wp-content\/uploads\/2026\/09\/SHA07644-1-1920x1280.jpg 1920w\" sizes=\"(max-width: 723px) 100vw, 723px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Understanding the new financing terms is an important step but finding a high-quality used car also requires careful attention. If you are planning to upgrade or find your next car, CARSOME is a trusted platform that offers a more confident car buying experience:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Worry-Free Warranty<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">No Flood or Major Accidents<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Nationwide Service Coverage<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">14-Day Money-Back Guarantee<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In-House Financing Solutions<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Browse over 3,500 cars with confidence at <a href=\"https:\/\/www.carsome.my\/buy-car\">carsome.my <\/a><\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">Terms and Conditions apply.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Buying a car in Malaysia just got a major update. On 1 June 2026, the new law known as the Hire-Purchase (Amendment) Act 2026 officially took effect. This amendment introduces changes to the calculation structure and car loan procedures across the industry. If you are planning to buy a car or are currently paying off [&hellip;]<\/p>\n","protected":false},"author":60,"featured_media":40594,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[150,55,398],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What to Know About Malaysia\u2019s New Hire-Purchase Act in 2026<\/title>\n<meta name=\"description\" content=\"How will the 2026 Hire-Purchase Act affect your vehicle financing? 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