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Rate hike likely to impact car loans in Malaysia

Publication Date : 21-07-2014

 

The recent overnight policy rate (OPR) hike by the Central Bank could have an impact on submissions for car loans, especially for national makes such as Proton and Perodua.

Proton Edar Dealers Association Malaysia president Armin Baniaz said many car buyers were opting for alternative financing from cooperative and Islamic banks for cheaper loans.

“The OPR hike will not affect car loan approval rates but it will impact submissions for loans,” he told StarBiz.

The central bank raised the OPR by 25 basis points, or 0.25 percentage point, to 3.25 per cent earlier this month, as part of the measures to curb rising household debts.

According to Armin, the loan approval rates for Proton car buyers currently stand at around 20 per cent.

Dealers in central and east Malaysia are reporting approval rates of only 10 per cent.

In other words, out of 10 submissions for car loan approvals, only one or two are approved and in many instances, the loans are approved at a higher interest rate – with high risks being cited.”

Last week, Perusahaan Otomobil Kedua (Perodua) president and chief executive officer Aminar Rashid Salleh said loan approval rates had its biggest impact on the company’s cheapest model, the Viva, with rejection rates ranging between 40 per cent and 45 per cent.

To accommodate this, Perodua reduced the price of its Viva range to make it easier for potential customers to qualify for their loans.

Perodua has revised downwards its sales target for this year to 193,000 units from 197,000 units previously, with Aminar citing the gradual tightening of the country’s financing guidelines as one of the main reasons.

Meanwhile, Malaysian Automotive Association president Aishah Ahmad believes that it is still to early to determine the impact of the OPR on vehicle sales.

“Hire purchase interest rates, which are now at around 2.4 per cent, could increase to between 2.6 per cent and 2.8 per cent. However, there has not been any official circular from the banks. So we can’t really say if there will be any impact.

“Perhaps we can have a better gauge after Hari Raya (Eid al-Fitr),” she added.

 

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