Rights of Hirer Under Hire Purchase in Malaysia - Part 1

Entering a Hire Purchase Agreement

In Malaysia, if you want to buy a car, especially a brand new one, you must have some money as the deposit which is equivalent to at least 10% of the total price of the car. The balance of the car price can be borrowed from Banks or Finance Companies which have provided repayment schemes by way of hire purchase. The schemes must be in the manner as provided in the Malaysian Hire Purchase Act, 1967 and its Regulations, Orders and Guidelines.

It looks a bit easy. But, the actual facts are not. You must be qualified to borrow money. It means that if you are a bankrupt; or have no fixed income; or have been blacklisted by Banks or Finance Companies; or already have too much liabilities such as having unsettled loans; or already have several car loans on schedule; or have been guarantors for loans of other people or companies; or have many unsettled debts; or subject to litigation proceedings in court instituted by Banks or Finance Companies, then you are not eligible to finance a car or to make a loan to buy a car from any bank or financial institutions.

If you are not subject to the above said criteria or eligible to borrow money, then perhaps it is easy for you to finance your car. First, you may have to decide what type or brand of car that you would like to buy. It depends on your financial strength. You can buy local made cars or imported one or good second hand car, or MPV, SUV or a sport car. 

Next, the dealer will ask about your financial background, your occupation, salary or proof of income. Then the dealer will ask the amount of deposit that you will have to pay and the length of the loan period. You may have up to 9 years to repay the loan for a brand new vehicle. After that, the dealer will submit your application to the finance company who will agree to finance the balance of the total purchase price of the unit, less the deposit.

Normally, the finance will approve your application. Next step is to enter into a written agreement with the finance company concerned. The agreement is called the Hire Purchase Agreement, of which the finance company shall be the owner and you shall be the hirer. The agreement specifies the detail particulars about the owner, the hirer, the total price, the deposit plus insurance, road tax, registration fee with JPJ, the amount financed, the interest charged, the total number of repayment and the amount of each of the repayment by way of  monthly installments, the first installment's date, the default interest and the terms and conditions of the agreement.

Although the agreement was a pre printed documents prepared by the owner, the hirer may read the contents of the same or may have a solicitor to advise him before signing the same. But, I think there are very few people who have gone through the agreement before signing it. Most of them are too eager to have a brand new car and will not concern at all about the contents of the agreement. 

In addition to the agreement, some owners require the hirer to provide a guarantor(s) to guarantee the hirer's obligations under the agreement. Until this requirement is fulfilled the owner will not agree to finance the car. This situation normally happens to the hirer who has unconvincing repayment sources, therefore he needs someone with better or equal income to guarantee the punctual repayment of the monthly installments to the owner.

...to be continued.