Work out your monthly car loan (hire purchase) instalment under the new effective-rate rules or the old flat rate, and what the car really costs you each month.
Monthly instalment
RM 1,293.30
over 84 months · RM 108,637.52 total
Monthly instalment: RM 1,293.30
Total payment
RM 108,637.52
RM90k car, 5.5% EIR / 7y
On RM81,000 borrowed (10% down), under the new reducing-balance rules.
≈ RM1,164 / month
Same car, 3% flat / 7y (older method)
Similar instalment, but early settlement saves far less.
≈ RM1,167 / month
How the figures above are worked out — the rules, rates and reasoning behind every line.
The Hire-Purchase (Amendment) Act 2025 came into force on 1 June 2026. New fixed-rate car loans are now priced with an effective interest rate (EIR) on the reducing balance, the same way a home loan works, instead of a flat rate. Banks may keep offering the old flat-rate method until 31 March 2027, so check which one your offer letter uses.
On the reducing balance you only pay interest on what you still owe, so extra payments and early settlement actually save you money. The law also caps the effective rate at 17% a year for loans up to 5 years and 16% for longer ones.
New rules (EIR): a standard reducing-balance instalment, M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly effective rate and n the number of months.
Old flat rate: total interest = loan amount × flat rate × years. Add that to the loan and divide by the months. The calculator also shows the effective rate a flat-rate loan really costs, so you can compare the two offers.
Add your yearly insurance, road tax and servicing to see what the car costs each month on top of the instalment. Use the road tax calculator if you don't know yours.
Not for new fixed-rate hire purchase signed under the amended law. From 1 June 2026 banks must price them as an effective rate on the reducing balance; during the transition to 31 March 2027 some may still offer the old flat-rate method. Loans signed before June 2026 keep their original terms.
A flat rate charges interest on the original amount for the whole loan. An effective rate charges it only on what you still owe. A 3% flat rate over 7 years costs about the same as a 5.5% effective rate.
Yes, under the new reducing-balance method. Each extra ringgit cuts the balance, so the loan ends sooner and you pay less interest. Under the old flat rate and Rule of 78, early settlement saved much less.
Up to 9 years. A longer tenure lowers the monthly instalment but increases the total interest, and the legal rate cap drops from 17% to 16% above 5 years.
Every figure is based on official Malaysian sources. Always confirm against the originals before filing or making financial decisions.
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