THE HP AGREEMENT
You should receive the HP agreement within 14 days after you have signed it.
The HP agreement must have the following information:
· Description of motor vehicle;
· Computation of the total sum payable;
· Minimum deposit;
· Term charges and annual percentage rate for term charges;
· Late payment charges;
· Date on which hiring commences;
· Number of instalment repayments;
· Amount of each instalment repayment;
· Person to whom repayments are to be made, time and place of repayments;
and
· Address where the motor vehicle is to be kept.
You do not need to engage a lawyer when entering into a HP agreement.
However, do ensure that the particulars in the agreement are similar
to the Second Schedule statement received earlier.
MINIMUM DEPOSIT
The minimum deposit is 10% of the cash price of the motor vehicle.
However, your banking institution may ask for a higher deposit at its discretion.
TERM CHARGES AND LATE PAYMENT CHARGES
The HP Act sets the maximum term charges and late payment charges allowed.
| | Fixed rate financing | Variable rate financing |
Term charges (max) | Not more than 10% flat per
annum. Term charges are
calculated on initial amount
financed over the entire HP
tenure. | Not more than 17% per annum.
Term charges are calculated at
a margin percentage above the
base lending rate (BLR) of the
banking institution. |
Late payment
charges (max.) | Not more than 8% per annum
calculated on a daily basis on
overdue instalments. | A rate of 2% above the
prevailing rate of term charges
imposed. |
GUARANTOR
The need to have a guarantor for HP financing would depend on the banking
institution's credit assessment of your ability to repay the instalments.
If you default on your repayment, the guarantor is liable for the unpaid portion
of the HP financing and the interest due. A person who agrees to be a guarantor
will need to sign a letter of guarantee. He will also be given a copy of the HP
agreement within 14 days after the agreement is signed.
INSURANCE
Your banking institution will arrange for an insurance cover for the motor
vehicle for first year. For subsequent years, you will need to get the insurance
yourself. In practice, most banking institutions would need a comprehensive
insurance policy on the motor vehicle.
VARIABLE RATE FINANCING
Term charges on variable rate financing are calculated on the outstanding
balance at the end of the month.
FIXED OR VARIABLE RATE HP FINANCING?
In variable rate financing, your interest repayments will vary according to the
movements of the BLR. If BLR increases, your term charges will increase,
resulting in a higher monthly instalment. However, if BLR reduces, your
repayments will be lower due to lower term charges. You will have to decide
which mode is more beneficial to you based on your expectation of how the
interest rate will move in the future.
What can you do?
You have three options, all of which must be acted upon before the expiry of the
21 days as stated in the Fifth Schedule notice.
· Pay all outstanding arrears and out of pocket expenses (includes cost
of storage, repair or maintenance, cost of repossession and re-delivery)
incurred by the banking institution to take back possession of the motor vehicle;
or
· Repay in full, the balance due and settle all out of pocket expenses
(includes cost of repossession, storage, repair or maintenance); or · Introduce
a buyer to purchase the motor vehicle at the price indicated on the notice.
Step 4: Notice on disposal of motor vehicle
If the amount due under the Fifth Schedule notice is not paid within 21 days
after the Fifth Schedule notice, your banking institution can sell the motor
vehicle through a public auction by giving you a notice 14 days before the
date of the auction or conduct a private sale to sell the motor vehicle.
Step 5: Selling the motor vehicle
Sale of the motor vehicle can take place after the 14 days given in the notice in
Step 4. As auction prices are based on forced sale value, it will be lower than the
prevailing market value. The auction price may also reduce at each subsequent
auction carried out. If proceeds from the sale of the motor vehicle are
inadequate to pay the outstanding amount due, your banking institution will
recover the shortfall from you. You will also need to bear the auction expenses.
REPOSSESSION PROCEDURES IN SUMMARY
WHO CAN REPOSSESS?
Repossession of motor vehicles are generally carried out by repossessors
who are registered members of the Association of Hire Purchase Companies
Malaysia (AHPCM). All repossessors must comply with the rules set by AHPCM
when carrying out their duties. Among others, the rules required a repossessor to:
· Show hirer the Repossession Order and his authority card issued by the banking
institution before he repossesses the motor vehicle;
· Obtain permission of the resident/hirer before he enters into the premises to
repossess the motor vehicle;
· At all times appear and act in a professional manner;
· Not use strong arm tactics and force when carrying out his duties;
· Give hirer enough time to clear his personal belongings from the motor
vehicle to be repossessed;
· Immediately make a police report after he has repossessed the
motor vehicle and bring it to the place indicated by the banking institution.
ADVICE TO HIRERS
Your rights
· To receive a copy of the HP agreement.
· To obtain any information regarding the account.
· To request a statement of outstanding balance (once every 3 months).
· To settle early the full outstanding amount.
· To terminate the agreement at any time.
YOUR RESPONSIBILITES
· Read all the fine print in the written agreement.
· Check that the purchase price and HP terms in the agreement are as agreed.
Do not sign blank or incomplete agreement/forms.
· Ensure that you can afford the instalment payments for the duration of the
HP financing and pay your instalments on time.
· Know your rights and obligations under the HP contract so that you do
not commit any actions leading to a breach.
· Keep all documents pertaining to the HP financing such as agreement,
receipts, etc. in a safe place.
· Not to remove, sell or dispose off the motor vehicle without the consent
of your banking institution.
· Inform your banking institution of any change of address.
· Insure the motor vehicle after the first year and to update your banking
institution within 14 days before the current policy expires.
RIGHTS OF YOUR BANKING INSTITTUTION
The rights of your banking institution include:
· To repossess the motor vehicle when you default in payment.
· To ask you to insure the motor vehicle.
· To charge you any fees relating to the enforcement of the HP agreement.
RIGHTS OF A GUARANTOR
A guarantor under a HP agreement would have the following rights:
· To receive a copy of the HP agreement.
· To be discharged from liability once the amount due is fully paid.
· To take legal action against the hirer for breach of obligation.
· To be indemnified by the hirer against claims by the banking
institution after he has paid the amount due.
INTRODUCTION
Buying a car under hire purchase is one of the most common ways
to own a car. This pages provides the basics, explains the common
terms used in hire purchase agreement and gives some tips on hire
purchase financing.
WHAT IS HIRE PURCHASE (HP)?
HP is the hiring of goods with the option to buy the goods at the end of
the hire purchase term. If you take on HP financing, you are the hirer and
financier is the owner. As a hirer, you will have to repay the financier based
on the agreed duration while you have possession of the vehicle. When all
the installments are paid up, ownership is then transferred to you.
GOVERNING LEGISLATION - THE HIRE PURCHASE ACT 1967
HP transactions are governed by the Hire Purchase Act 1967 (HP Act).
The HP Act sets out the forms and contents of HP agreements, the legal
rights, duties, obligations of hirers and financiers. The HP Act is administered
by the Ministry of Domestic Trade and Consumer Affairs.
HOW MUCH CAN I AFFORD?
As a guide, your monthly repayment on your housing loan and motor vehicle
financing should not exceed 33% of your monthly household income.
However, you should also budget for other payments associated with owing
a motor vehicle, such as insurance, road tax and expenses for periodical
maintenance.
WHERE TO GET FINANCING?
You can apply for HP financing from a banking institution. You will receive
a financial statement called Second Schedule Part I, which states your
financial obligations under the proposed HP Agreement. If you apply for HP
financing through a motor vehicle dealer (which will submit your application
to a banking institution), you will receive another statement called the
Second Schedule Part II. This statement states the consent of the banking
institution to be a party to the agreement. You need not pay for the cost
of preparing and obtaining the Second Schedule, if you decide not to
sign the HP agreement. The Second Schedule statement is also not
binding on you yet. If you agree to take the HP financing, you will need
to enter into a HP agreement with your banking institution.
FREQUENTLY ASKED QUESTIONS
How much can I borrow from the banking institution?
The margin of financing will depend on your credit standing subject
to a maximum of 90% of purchase price or any other lower margin
of financing fixed by the banking institution.
What is the minimum deposit required?
The minimum deposit is 10% of purchase price. However, a banking
institution may fix a higher amount.
What are the term charges for a HP facility?
The maximum term charges for a HP facility under fixed rate financing is
10% flat per annum while term charges for variable rate financing will
be quoted at a margin above the base lending rate of the lending banking
institution.
Do I require a guarantor for my HP facility?
The need for a guarantor depends on the credit assessment of
the banking institution. The guarantor should be one who is acceptable
to the banking institution.
What should I do if the guarantor or I did not get a copy of the
HP agreement 14 days after entering into the agreement?
You should contact your banking institution to get a copy of the
agreement.
Can my banking institution insist that I insure with an insurance
company on its panel?
You can either insure with an insurance company on the panel
of your banking institution or an insurance company of your choice.
Normally, a banking institution has at least four insurance
companies on its panel for the convenience of its hirers.
Can I keep the motor vehicle registration card to enable me to
renew my road tax upon expiry?
Generally, banking institutions will keep the registration card until
the HP financing has been fully settled in order to prevent any
inconveniences that may arise due to damage, misplacement
or theft of card. As such for the convenience of their hirers,
most banking institutions will provide insurance and road tax
renewal services to their hirers.
Can I modify the monthly repayment amount if I have
financial difficulties?
This is subject to your banking institution's discretion and you
are advised to discuss the matter with your banking institution.
What happens if I settle my fixed rate HP financing earlier
than the date originally agreed upon?
If you settle your outstanding balance earlier, you are entitled
to a rebate on the term charges.
When can my banking institution repossess my motor vehicle?
Under a HP agreement, a banking institution can repossess
a motor vehicle after the hirer had defaulted two successive
instalments or the final instalment.
What is the time limit for banking institutions to repossess
the motor vehicles after serving the Fourth Schedule notice?
Banking institutions can repossess the motor vehicles
anytime after 21 days from the date the Fourth Schedule
notices were served if the overdue instalments are not paid.
How do I determine the identity of the repossessor?
The repossessor will have to show you an authority card,
which has the name and address of the repossessor
and your banking institution, nature of appointment of the
repossessor and the signature of an authorised representative
of your banking institution.
How do I get my motor vehicle back after it was repossessed
by my banking institution?
After the repossession, your banking institution will issue you
a Fifth Schedule notice. This notice gives you a chance to settle
the amount outstanding within 21 days. You can get the motor vehicle
back provided that, before the expiry of 21 days, you:· pay all outstanding
arrears with interest due and the costs incurred by the banking institution
(costs of storage, repair or maintenance, repossession and re-delivery); or
· settle the balance in full including the costs of repossession, storage,
repair or maintenance.
When can the banking institution sell the repossessed motor vehicle?
The banking institution can sell the repossessed motor vehicle when
the hirer does not make any payment after the 21 days stated in the Fifth
Schedule notice.
Can I introduce a prospective buyer to buy the repossessed
motor vehicle?
Yes. Before the expiration of the Fifth Schedule notice, you can
introduce a buyer to buy the repossessed motor vehicle at the price
indicated in the Fifth Schedule notice.
Whom and where can I complain if I am not satisfied with the
manner in which my motor vehicle was repossessed?
You may lodge your complaint with the banking institution.
Alternatively, you may also lodge your complaint with the
Association of Hire Purchase Companies Malaysia at the
address below:
Unit 605 Block C,
Phileo Damansara 1,
No. 9 Jalan 16/11,
Off Jalan Damansara,
46350 Petaling Jaya, Selangor
If I have defaulted on the monthly instalments, can my
banking institution claim from the guarantor?
Yes. Your banking institution can claim the payment from
the guarantor because the guarantor has agreed to undertake
the liability to repay your debt in the event of your default.
What are the rights and responsibilities of a guarantor under
the HP Act?
A guarantor has the following rights under a HP agreement:
· To receive a copy of the HP agreement.
· To receive all notices on payment issued by the banking institution
to thehirer.
· To be discharged from liability once the amount due to the banking
institution is fully paid.
· To take legal action against the hirer for breach of obligation.
· To be indemnified by the hirer against claims by the banking institution
after paying the amount due.
Can my banking institution claim any amount from me after the
repossessed motor vehicle is sold?
Yes. If the proceeds from the sale of the repossessed motor
vehicle are not enough to cover your liabilities, your banking
institution can claim the amount outstanding from you.
Do I still have to pay my monthly instalments if my motor vehicle
is stolen?
Yes. This is because your liability to pay the monthly instalment does
not cease with the loss of your motor vehicle. However, you may claim
from the insurance company, the market value of the insured motor
vehicle or the sum insured, whichever is lower.
What happens to the HP agreement in the event of the death
of the hirer?
If the personal representative has obtained a Letter of Administration or
Grant of Probate, the rights, title and interest will be transferred to the
personal representative who will take over the responsibilities of the hirer.
Otherwise, the banking institution will repossess the motor vehicle after
defaults in four successive monthly instalments.
How can I transfer/sell/part possession of the motor vehicle
to a third party even though the motor vehicle is still financed
under my name?
It is illegal to transfer/sell/part possession of the motor vehicle without
the permission of your banking institution, who is the legal owner.
If you do so, you may incur substantial losses and penalties as you are
still fully responsible for the liability and losses incurred. Ensure that you
have fully settled your HP debt before you sell your motor vehicle. If you
wish to use the proceeds of the sale of your motor vehicle to pay the outstanding
balance of your HP financing, get the consent of your banking institution to
sell the motor vehicle and arrange for the proceeds of the sale to be paid
directly to the banking institution to settle your outstanding balance. If there
is any shortfall, you will be responsible for repaying the balance. If there
is a surplus, it will be refunded to you by the banking institution.
