FW: Hire purchase interest rates for cars rise

Hire purchase interest rates for cars rise
By Francis Fernandez
bt@nstp.com.my
INTEREST rates for hire purchase loans for cars have gone up by as much
as one per cent effective this month, fuelling speculative interest on
the central bank's next move.

Bank Negara Malaysia's monetary policy committee meets on July 25, and
there is heightened expectation that interest rates will be altered for
the first time since April 2006.

"Our economist is of the view that policy tightening would be needed to
anchor inflation expectation. We expect Bank Negara Malaysia to raise
the Overnight Policy Rate (OPR) by 50 basis points to four per cent as
early as July," Sue Lin Lim, an analyst at Singapore's DBS group wrote
in a report last month.

The OPR is the main interest rate which banks use to benchmark their own
lending rate, which is based on supply and demand, while hire purchase
is a commercial practice of buying goods in which the purchaser (hirer)
takes possession of the goods as soon as he has paid the deposit.

A senior official at DRB Hicom Bhd, the country's largest integrated
automotive firm, confirmed the new regime, while Competitive Supreme Sdn
Bhd (CSSB) communication manager Razman Kassim told Business Times that
rates for foreign cars now stood at between 2.7 per cent and 2.8 per
cent from 2.3 per cent and 2.4 per cent before.

Competitive Supreme is the sole distributor of Ssangyong (CBU) vehicles
in Malaysia.

The rates are, however, still much lower than the 3.5 per cent interest
rates on national cars made by Proton and Perodua.

In November last year, HSBC economist Robert Prior-Wandesforde said Bank
Negara would take OPR to four per cent by end-2008, as a reduction in
oil subsidies may increase inflation in Malaysia by one percentage
point.

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