The Hire Purchase Act 1967 is the key legislation governing all car loans in Malaysia. It sets out your rights as a borrower including disclosure requirements, repossession rules, and early settlement entitlements. Every car buyer should understand these protections before signing.
Key Provisions of the Hire Purchase Act 1967
Mandatory Disclosure
Under the Act, the hire purchase agreement must clearly state: the cash price, the hire purchase price, the deposit paid, the number and amount of instalments, and the flat rate of interest. Sellers cannot hide the true cost of the loan.
Right to Early Settlement
You have the absolute right to settle your hire purchase loan early at any time. The bank must provide a settlement quotation within a reasonable time (typically 3โ5 working days) and the quotation must be valid for at least 14 days.
Repossession Rules
A hire purchase creditor can repossess a vehicle only after the hirer has defaulted on two or more consecutive instalments. Before repossession, the creditor must issue a Section 16 Notice giving you time to remedy the default.
Right of Hirer to Complete Payments
Even after default, the hirer has the right to reinstate the agreement by paying all arrears plus costs within the notice period. This gives borrowers a second chance before losing their vehicle.
What to Do If Your Car Is Repossessed
The bank must inform you of the repossession within 72 hours and provide an opportunity to recover the vehicle by settling arrears. The bank cannot auction the car without proper notice. Seek help from Bank Negara's BNMTELELINK (1-300-88-5465) if your rights are violated.
Consumer Protection
The Hire Purchase Act is enforced by the Ministry of Domestic Trade and Cost of Living (KPDN). File complaints at KPDN service counters or via their online portal for any dealer or bank violations.
Calculate your hire purchase commitments and understand your total obligation before signing โ use our ๐ Hire Purchase Calculator.
Our editorial team specialises in Malaysian personal finance โ covering loans, taxation, insurance, EPF, and Islamic finance. Every article is fact-checked against Bank Negara Malaysia (BNM), LHDN, and major Malaysian bank publications. We reference our calculators (which use industry-standard formulas) to ensure consistency between our written content and tools. Learn more about our methodology โ