Calculate your monthly hire purchase instalment using Malaysia's flat rate method. Enter your car price, down payment, interest rate and loan tenure.
Minimum 10% for most Malaysian banks
Hire purchase flat rate (typically 2.5%–3.5%)
Enter your car loan details and tap Calculate Car Loan.
Hire purchase in Malaysia applies interest to the full loan amount throughout the tenure. A 3% flat rate means 3% × original principal × years — regardless of how much you've repaid.
A 3% flat rate is roughly equivalent to 5.5–6% reducing balance. Always compare effective rates when choosing between HP and other financing options.
Under the Hire Purchase Act 1967, early settlement rebates in Malaysia use the Rule-of-78 method — the rebate is proportional to the remaining instalments.
When you buy a car in Malaysia, the financing is structured as hire purchase (HP) — not a conventional mortgage-style loan. Understanding how hire purchase works is essential for making smart car-buying decisions and avoiding surprises when your monthly instalment arrives.
Unlike home loans that use reducing balance, Malaysian car loans use a flat rate interest system. The interest is calculated on the full original loan amount for the entire tenure — it does not reduce as you pay down the principal. This makes flat rate interest more expensive than it appears at first glance.
Hire Purchase Formula:
| Parameter | 5 Years | 7 Years | 9 Years |
|---|---|---|---|
| Car Price | RM 100,000 | RM 100,000 | RM 100,000 |
| Down Payment (10%) | RM 10,000 | RM 10,000 | RM 10,000 |
| Loan Amount | RM 90,000 | RM 90,000 | RM 90,000 |
| Flat Rate | 3.0% | 3.0% | 3.0% |
| Total Interest | RM 13,500 | RM 18,900 | RM 24,300 |
| Monthly Instalment | RM 1,725 | RM 1,320 | RM 1,115 |
A common misconception is that a 3% flat rate is the same as a 3% home loan rate. It is not. A 3% flat rate is approximately equivalent to 5.5–6% reducing balance (effective rate). This is because the flat rate charges interest on the full amount even when you have already repaid half the loan.
| Loan Type | Stated Rate | Effective Rate | Used For |
|---|---|---|---|
| Hire Purchase (Car) | 2.5–3.5% | ~4.5–6.3% | All car loans in MY |
| Home Loan / Mortgage | 3.5–4.5% | 3.5–4.5% | Property purchase |
| Personal Loan (Flat) | 6–12% | ~11–22% | Unsecured personal |