Offers made by dealers to the effect of ‘zero down payment required’ for the purchase of cars is against the law, said the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP). This is a sales pitch that is used by dealers of both new and used vehicles, according to a Harian Metro report.

The sales tactic is surely an attractive one for potential customers, allowing them to sidestep having to pay a full 10% down payment up front. But, car buyers should now know that this is strictly against the law.

“There are dealers that have been found to manipulate a vehicle’s price via the selective naming of its model variant before offering the zero-deposit purchase method to customers. If buyers are required to make a down payment of 10% out of the vehicle’s price, it demonstrates the customer’s ability to service the monthly repayments, while helping to reduce his or her monthly commitments (compared to a zero-down payment scheme),” said Azman Adam, a KPDNHEP Selangor officer.

“Additionally, (the 10% down payment) helps the buyer avoid being blacklisted or declared bankrupt should the monthly repayments become too costly to bear. Companies that do not comply are punishable according to Section 31 (1) of the Hire-Purchase Act 1967,” he said, adding that the ministry has conducted Ops 0% ASB 1967 across Selangor, with checks conducted upon 35 dealers.

These schemes contravene Section 31 (1) in the Hire-Purchase Act 1967, which states that “an owner who enters into a hire-purchase agreement without having first obtained from the proposed hirer thereunder a deposit in cash or in goods, or partly in cash and partly in goods, to a value not less than one-tenth of the cash price of the goods comprised in the agreement, shall be guilty of an offence under this Act.”

For the purposes of a hire-purchase agreement, the owner in this case is the financial institution – usually a bank – and the proposed hirer is the customer who is about to purchase a vehicle under these terms. The financial institution is the owner of the vehicle that is being financed, until the vehicle has been paid for in full.

The operation was conducted following the ministry’s discovery of such offers becoming increasingly widespread, and 11 dealers have since been found to be in breach for not billing the minimum 10% deposit, the report said. “All companies which have broken the rules have been ordered to stop all ‘zero down payment’ promotions and investigations are ongoing,” Azman said.