Car loan / hire-purchase
Car Loan Calculator (Malaysia)
Estimate your monthly car loan instalment and the true cost of financing — and see the difference between the old flat-rate method and the new reducing-balance method that hire-purchase loans are moving to from 1 June 2026.
How it's calculated
Flat rate — total interest = loan amount × annual rate × tenure in years; the monthly instalment is (loan amount + total interest) ÷ months. Interest is charged on the full original amount for the whole tenure, even as you pay the loan down.
Reducing balance — the instalment is solved from M = P × i(1+i)ⁿ ÷ ((1+i)ⁿ − 1), where i is the monthly rate. Interest is charged only on the outstanding balance, so each instalment pays down more principal over time.
Effective rate (EIR) — solved numerically from the instalment cash flow and annualised. For a reducing-balance loan it matches the advertised rate; for a flat-rate loan it is materially higher — a 3% flat rate over 7 years works out to roughly 5.5% effective.
The 2026 reform — the Hire Purchase (Amendment) Act 2026 (gazetted 30 January 2026, in force 1 June 2026, administered by KPDN) abolishes the flat rate and Rule of 78 for new hire-purchase financing and requires reducing-balance interest with EIR disclosure. Banks have a transition window to 31 March 2027, so some new loans may still be quoted on a flat rate during that period — always ask which method applies.
Common questions
What is changing for car loans in 2026?+
The Hire Purchase (Amendment) Act 2026 — gazetted on 30 January 2026 and in force from 1 June 2026, administered by the Ministry of Domestic Trade and Cost of Living (KPDN) — abolishes the flat interest rate and the Rule of 78 for new hire-purchase financing. New loans move to a reducing-balance method with Effective Interest Rate (EIR) disclosure so borrowers can see the true cost. Banks have a transition period until 31 March 2027 to update their systems, so during that window some new financing may still be offered on the old flat-rate basis.
Why is the effective rate higher than the flat rate?+
A flat rate charges interest on the full original loan amount for the entire tenure, even though you are steadily paying the loan down. So in real terms you keep paying interest on money you no longer owe. Converted to an apples-to-apples reducing-balance figure, a 3% flat rate over 7 years is roughly a 5.5% effective rate. Always compare car loans on the effective rate, not the advertised flat rate.
How much cheaper is reducing balance than flat rate?+
At the same advertised rate, reducing balance is significantly cheaper because interest is charged only on the outstanding balance. On a RM100,000 loan over 7 years at 3%, the flat method charges RM21,000 in total interest while reducing balance charges about RM11,000 — close to half. The exact saving depends on the amount, rate, and tenure; the comparison panel shows it for your figures.
Does this calculator handle my existing car loan settlement?+
No — this tool estimates a new loan. If you want to settle an existing flat-rate hire-purchase loan early and your bank still uses a Rule of 78 rebate, use the Loan Early Settlement (Rule of 78) calculator instead. From 1 June 2026, banks also offer goodwill discounts when you settle an existing flat-rate loan early, so ask your bank for a written settlement quotation.
How long can a car loan tenure be in Malaysia?+
Hire-purchase tenures commonly run up to 9 years (108 months). A longer tenure lowers the monthly instalment but increases the total interest you pay — especially under a flat rate, where the longer you stretch it the more the effective cost diverges from the advertised rate.
Authoritative sources
- Association of Banks in Malaysia — changes to hire-purchase financingIndustry statement on the move to reducing balance + EIR and goodwill early-settlement discounts.
- Attorney General’s Chambers — Hire-Purchase Act 1967 [Act 212]Federal legislation portal for the Hire-Purchase Act 1967 and related amendments.
- Paul Tan — Hire Purchase (Amendment) Act 2026 comes into force on 1 JuneSummary of the in-force date, KPDN as administrator, and the abolition of flat rate / Rule of 78.
- The Edge Malaysia — Rule of 78 scrapped, more hire-purchase transparencyCoverage of the hire-purchase reform and effective interest rate (EIR) disclosure.
Instalment and EIR figures are computed from standard hire-purchase maths. Reform details reflect the Hire Purchase (Amendment) Act 2026. The rate and final cost a bank offers depend on your profile and the vehicle. Informational only — not financial or legal advice.