Picture credit: carmudi.ae
Anyone who owns a car will have come across hire purchase or financing for ownership. But as we put our signature to the agreement, do we really know what we are signing? Do we know our rights under hire purchase laws.
In Malaysia, hire purchase is governed by the Hire Purchase Act 1967 (“HP Act”).
Well, here are some things that everyone should know:
No.1 – You do not own the car until you have made the final payment
In a hire purchase arrangement, you pay the deposit and then the balance by way of monthly installments. You are actually hiring the car until the final payment is made. Only then, will you obtain legal ownership.
No 2 – The dealer of the car cannot stand as guarantor
Under Section 2 of the HP Act, the term “contract of guarantee”, does not include the dealer or a person engaged at the time of giving of the guarantee in the trade or business of selling goods of the same nature
In short, the car dealer cannot stand as guarantor. So, car dealers out there who are guarantors, it’s your lucky day!
No. 3 – Repossession by the bank
The bank can only repossess if you fail to make 2 successive payments. Before repossession they are bound to:
- Issue a notice to you, under the Fourth Schedule of the HP Act, giving you 21 days to settle the outstanding, failing which the vehicle will be repossessed
- A reminder must be sent to you before the actual repossession.
If you have paid for 75% of the car installments, the bank may only repossess with a court order.
No. 4 – You cannot sell your car without first settling the hire purchase arrangement
It is a breach of the hire purchase agreement if you were to sell the vehicle without settling the hiring.
When selling the vehicle, always ensure that you verify with the bank that all amount due under the hiring has been settled by the purchaser and a document confirming it is handed to you. It’s always best to take a day off, go to the bank and collect the said document.
No. 5 – ‘Sambung bayar’ arrangements
Sambung bayar arrangements are a big NO NO! As the seller, if the new ‘purchaser’ does not service the installments, you are still liable.
As the ‘purchaser’, you have no recourse against the bank in the event that there are issues with the vehicle. The bank did not contract with you.
No. 6 – Never sign blank agreements
Section 4B of the HP Act prohibits the signing of blank agreements or documents. It is also an offence under the HP Act.
No. 7 – You may sue the bank if the vehicle is not of merchantable quality
Yup, under the HP Act, namely, Section 7 (2), the owner (the bank) has to ensure that the vehicle is of merchantable quality. This is an implied term. However, it does not apply if:
- You have examined the vehicle
- Vehicle is second-hand (and stated as such in the agreement) and the warranty pertaining to quality etc are expressly waived
So guys … if you are purchasing a new vehicle, DO NOT check the vehicle before you sign the hire purchase agreement.
No. 8 – Booking fee
No booking fee may be collected unless a form under the Second Schedule (summary of financial obligation) is duly completed and handed to the buyer. Failing to do so is an offence under the HP Act.
Okay … so there you have it. Now, know your rights and be careful out there.