PETALING JAYA: The one percentage point increase in car financing rates may only have minimal impact on vehicle sales in the longer term, but will likely boost sales of national cars at the expense of non-national vehicles, car dealers said.

But the hike in car loan rates should not have happened in these challenging times, they said.

Banks informed car dealers last Friday that hire-purchase interest rates would be increased by one percentage point effective Monday.

Car dealers contacted by StarBiz said that they just could not understand the rationale for the increase in interest rates for car loans. They said the current lower interest rates were supposed to stimulate consumer spending, but the increase in car loan rates would be a burden to consumers during these tough times.

“The one percentage point increase in the interest rate will discourage consumers from buying used cars, especially the non-national cars, because they have to pay more to get a second-hand car.

“Thus, it would definitely affect our sales,” said second-hand car dealer Sonny Soh of Sonny Soh Sdn Bhd. He told StarBiz that the previous interest rates of 3.5% to 5% were already one to two percentage points higher than the rates for new cars.

Currently, the company is selling only used non-national cars. “Is this a government plan to discourage people from buying non-national cars and boost sales of national cars?” Soh asked.

New and reconditioned, or recond, car dealer Zulkifli Ahmad agrees that the hike should not have happened, but sees little impact on car sales in the longer term.

He said his company was informed by its bankers last Friday that the new interest rates for its recond cars now had increased to between 3.3% and 3.5%, compared with 2.3% to 2.5% previously.

The company is selling reconditioned or refurbished cars imported directly from Japan and Britain as well as new non-national cars.

“Higher interest rates may cause less demand in the immediate term but sales might pick up again once consumers are used to the new interest rate as people are still buying cars,” Zulkifli said.

Yap Chow Bin, the owner of used car dealer Motor Exchange, also sees little impact from the move.

Motor Exchange sells both used national and non-national cars at prices ranging from RM10,000 to RM80,000.

“Instead there may be a rise in demand for second-hand cars as there is a possible fall in demand for new cars due to the higher interest rates for new non-national cars,” he told StarBiz. Yap said the most popular used cars he sold ranged between RM20,000 and RM30,000.

“The one percentage point increase may be just a little difference for consumers because they normally do not get big sum of loans for used cars,” he said.

The interest rates for Motor Exchange’s used national and non-national cars have increased to between 4.25% and 7%, compared with 3.1% to 6% previously. Interest rates for used cars normally depends on the age of the vehicle, hiring period, margin of financing and even the loan borrowers’ net income, Yap explained.

Used car dealer Destiny Auto Sdn Bhd owner Mohd Khadhir Hassan said he had actually received offers of lower interest rates for its used national cars.

“Our new interest rates now are between 3.5% and 4.5%, which is lower than 4.25% to 6% previously.

“We expect an increase in sales for used national cars with the lower interest rates,” he said, adding that he reckoned the hike in car loan rates was the Government’s plan to promote national cars.

Meanwhile, hire purchase rates have been increased across the board for both new non-national cars and used cars effective Monday, banking sources said.

Banks would not make an official public announcement on that but would inform their respective car dealers, one source said.

Interest rates for popular used cars for both national and non-national cars aged up to 10 years old, have increased to between 3.75% and 4%, according to the source.