Guide

The HP Act is the rulebook your car loan cannot override

Written by the Loankira editorial desk — Malaysian finance writers, every figure checked against BNM, LHDN, KWSP or PERKESO · Last reviewed: 22 October 2026

The Hire-Purchase Act 1967 sets the notices, statements, rebates and repossession steps a hirer is entitled to, and a hire-purchase agreement cannot contract out of them.

Hire-purchase is not an ordinary loan: the Act prescribes the notices, the timelines and the rebates. Most borrowers discover them after repossession, not before.

The documents you must receive

On signing you are entitled to a copy of the completed agreement, the schedule of payments, and the notice of rights (the Second Schedule summary). The owner (bank) must also state the cash price, total hire-purchase price and every charge in the agreement itself. If terms appear that were not in the copy you signed, the discrepancy is arguable; keep the signed copy photographed page by page.

Default, and the notice sequence before repossession

After a default the owner must serve a default notice (the 17th Schedule notice) giving you not less than 21 days to remedy: pay the arrears stated to the sen, or return the vehicle. Repossession before that notice period expires is non-compliant, and you can require the vehicle's return. For agreements after the 2017 amendments, a fourth-generation copy chain applies to notices: serve, then repossess, in that order, every time.

After repossession: the auction and the shortfall

Once repossessed, the owner must give written notice of the intended sale and the date; you may recover the vehicle before the auction by paying the arrears plus reasonable repossession expenses. At auction, if proceeds do not cover the balance owing, the remainder (the shortfall) is still your debt, itemised in a statement of accounts. If proceeds exceed the balance, the surplus is refundable on request, and it is worth requesting: it does not arrive by itself.

Early settlement: the rebate formula

The Act entitles you to a rebate of the unearned interest on early settlement, computed by the Rule of 78 method for flat-rate HP agreements, not a discretionary discount. Compare the settlement quotation's rebate against your own Rule-of-78 figure before paying; errors are common and correctable in writing.

Where the Act does not reach

The HP Act governs consumer hire-purchase for goods priced under its threshold, principally vehicles. Bank personal loans, Islamic HP variants (AITAB) structured as sale, and dealer in-house instalment plans may fall under different or additional rules; the practical protections (written notices, shortfall statements) usually still appear in the contract, so read for them and keep everything. For disputes, the bank's complaint channel comes first, then the BNM BNMLINK mediation route; the Tribunal Tuntutan Pengguna handles small claims cheaply. The Act entitles you to a rebate computed on a set formula — check what it should be with the hire purchase settlement calculator before accepting a figure from the financier.

This guide is general information, not financial, tax or legal advice. Bank policies and rules change; confirm with your bank or the relevant agency.