1. Import of Automobiles is very prominent in Malaysia; High imports create business opportunity for Banks and other auto-finance providers
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ASEAN, with a population size of 560 million, provides a vast market potential for the automotive industry. Global automotive manufacturers have been positioning themselves in the region, to take advantage of the full implementation of the ASEAN Free Trade Area (AFTA).
- Global Automobile producers are much more technologically advanced than domestic producers of Malaysia, hence import of both passenger and commercial vehicles including its components is significantly higher than exports leading to trade deficit.
- Majorly Malaysia imports automobile from Japan, China and Germany; and it exports automobile to Thailand, Vietnam and Philippines.
2. Car Prices in Malaysia are among the highest in the world due to high rates of excise duty imposed on Automobile
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Malaysia is known for the country having one of the highest taxes on cars. Sales of new cars and spare parts for motor vehicles are the single largest contributor in import and excise duties collection. Car loans continue to make up a huge proportion of household debts. ASEAN Free Trade Agreement: Malaysia signed the ASEAN Free Trade Agreement (AFTA) in 2004 and agreed to abolish import duties for cars if at least 60% of its value comes from ASEAN-sourced parts. But the government-imposed excise duty on these cars which again makes them expensive. Similarly, there is Free Trade Agreement with Japan, but the government still charges excise duty which is not covered in the agreement thus maintaining prices.
3. Some of the major types of vehicle Loans available in Malaysia apart from traditional auto loans that determines the interest rate of a vehicle are
Foreign Cars are the ones which are imported from different countries like Japan and Thailand. These cars are less expensive than national cars if we ignore the taxes. But government imposes heavy taxes on them which makes them costly.
Passenger Vehicle industry reclassified in January 2007 and includes all passenger carrying vehicles i.e. Passenger Cars, 4WD/SUV, Window Van and MPV models. 93% of the vehicles sold in Malaysia are passenger vehicles only due to huge preference for private vehicles in Malaysia.
Islamic car loans are based on Shariah principles of financing. The ownership of the car is transferred to the individual once the repayment is completed. The Islamic car loans come with a high margin of financing, i.e., up to 90% to 100% of the car’s price
A conventional car loan provides an individual with funds to purchase a car. It covers all new, used and unregistered and reconditioned cars. The margin of financing with a conventional car loan is up to 90% of the vehicles price. A conventional loan comes with a flexible repayment tenure that can be extended to 9 years.
For more insights on the market intelligence, refer to the link below
Auto Finance Providers in Malaysia
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