Banks more cautious when approving car loans with OPR increased to 2.25% – expect more rejections

Banks more cautious when approving car loans with OPR increased to 2.25% – expect more rejections

Banks are now more cautious when it comes to approving car loans, according to a report by Berita Harian. This is in response to Bank Negara Malaysia’s recent decision to raise the overnight policy rate (OPR) by 0.25% to 2.25% on July 6, 2022.

This is the second time the OPR has been raised this year, with the previous increase announced on May 11, 2022, also by 0.25%, to 2%. Before that, the OPR was kept at a historic low of 1.75% from July 7, 2020 to March 3, 2022 to provide support to the economy as the nation battled the Covid-19 crisis.

The Malaysian central bank also announced on July 6, 2022 that year-to-date, headline inflation has averaged 2.4% – the inflation rate is projected to remain within the 2.2% to 3.2% forecast range for the year.

Based on historical data, RHB Investment Bank analyst Jim Lim Khai Xhiang said when the OPR, which has an impact on a bank’s interest rate for borrowings, was at 2% between February 2009 and February 2010, the average approval rate for car loans was 60%. He added that when the OPR was increased to 3% between May 2011 and June 2014, the percentage dropped further to 51%.

Banks more cautious when approving car loans with OPR increased to 2.25% – expect more rejections

Should the OPR be increased further, Lim said hire purchase rates will likely go up as well, making it more expensive and difficult for customers seeking a car loan. “As such, we believe banks will be more careful when it comes to hire purchase approvals. This could potentially result in lower approval rates for hire purchase loans,” he continued.

He added that rising inflation could further weaken the purchasing power of consumers, which could be made more dire should the government implement measures to reform subsidies. “In our opinion, since purchasing a car is a decision made purely out of discretion, when faced with rising cost of living and higher vehicle prices, users who are more price sensitive may be more inclined to withhold non-essential purchases,” Lim said.

Have you placed a vehicle booking recently? More importantly, did your car loan get approved or rejected, or did you just pay in cash? Share your experience with us in the comments below.

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Gerard Lye

Originating from the corporate world with a background in finance and economics, Gerard’s strong love for cars led him to take the plunge into the automotive media industry. It was only then did he realise that there are more things to a car than just horsepower count.



  • BadCulture on Jul 18, 2022 at 1:47 pm

    Down-payment getting not enough.
    2023 trade in value drop.

    Bank caution is the right move!
    USA is getting into car loan crisis now.

    Previously, we have house loan bubble,
    Now, at the danger of car loan bubble.

    Ppl like pura² pakai branded bully ppl nowadays,
    Bcuz the poor has been pulled by T01 too.

    The kids will learn from the parents. Just like LV shirt kids bully UniQlo RM20 TShirt kids.
    Even supermarket t shirt also rm20+-

    Like or Dislike: Thumb up 11 Thumb down 9
  • Tengku Z Maverick on Jul 18, 2022 at 1:59 pm

    Loan rejections are expected in turbulent financial times.
    What is even more concerning is the financial status of USA.
    They say RECESSION next year.Even Elon Musk has started chopping overheads.
    But here,the frenzy of buying as seen in the bookings of new cars are insane.The ripple effects.even used cars are more costly now.Lets see,how much longer the frenzy can last.

    Like or Dislike: Thumb up 21 Thumb down 5
    • Logical Deduction on Jul 18, 2022 at 5:34 pm

      Well obviously cars are cheap in Malaysia. That is the only logical deduction.

      Like or Dislike: Thumb up 24 Thumb down 2
      • Obvious is obvious. Well said bro

        Like or Dislike: Thumb up 7 Thumb down 1
      • whymenterisostupid on Jul 19, 2022 at 3:07 pm

        Not really so-called cheap enough, just check our DSR/income ratio to living cost compare aussie/nz or any other countries. Our buildings/tower so high but salaries mostly seem sohai. Even some stupid shitty living cukup2 makan dare to buy vellfire as well said biar papa asal bergaya.

        Like or Dislike: Thumb up 6 Thumb down 2
        • Calvin on Jul 20, 2022 at 11:48 am

          Depends on how one slices their own income, while car ownership takes a bigger chunk, we pay less for COL, or home ownership, and other lifestyles the richer countries perceives as ‘normal’. As long as the car gets paid off, it is considered relatively affordable. Per density, KL has more Beemers & Mercs compared to richer regional cities ie Sydney, Singapore, Taipei so that tells you about the level of affordability for cars here.

          Like or Dislike: Thumb up 1 Thumb down 0
  • abenda? on Jul 18, 2022 at 3:20 pm

    inflation 2.3-2.4% je?? but barang naik 10-25%??

    Like or Dislike: Thumb up 2 Thumb down 0
  • Up to you... on Jul 18, 2022 at 3:34 pm

    Easy. Don’t buy. Pakai apa yg ada…

    Bersusah dahulu, bersenang kemudian…

    Like or Dislike: Thumb up 6 Thumb down 0
  • Seekae on Jul 18, 2022 at 5:24 pm

    Just waiting for approval since more than 2 weeks ago. But I think it could be true. Have not called up the bank nor the car dealer yet to ask for updates!

    Like or Dislike: Thumb up 2 Thumb down 0
  • Menteri Kewangan on Jul 18, 2022 at 6:44 pm

    Jangan susah hati. Nanti EPF bagi i-kereta.

    Like or Dislike: Thumb up 6 Thumb down 0
  • @Snakebabu on Jul 19, 2022 at 11:05 am

    Recession or not, spend your money wisely.
    Always ask this question before making any purchases;
    Necessary or Accessory ?
    If you can differentiate between the two; life will be simpler for you, UNLESS you’re filthy rich.

    Like or Dislike: Thumb up 12 Thumb down 0
  • extend the car loan to 15 years then can already some MP will say.

    Like or Dislike: Thumb up 1 Thumb down 4

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