Govt to revise Hire Purchase Act

SOURCE

 PETALING JAYA: The Government has agreed to revise the recently amended Hire Purchase Act 1967 (HPA) following the brouhaha it created since its implementation barely two months earlier.

Following a meeting with the Domestic Trade, Cooperatives and Consumerism Ministry yesterday, the Malaysian Automotive Association (MAA) said the bulk of the amendments that were made to the HPA would be revised.

“The meeting went well. Most of the MAA’s requests were accommodated,” its president Datuk Aishah Ahmad told StarBiz when contacted yesterday.

“The changes will now make it easier for registrations and will take effect immediately. The Government will issue a circular on the changes next week,” she said.

The MAA earlier this month said local automotive players were not consulted over the amendments to the HPA which took effect on June 15.

Since its implementation, automotive players had been complaining that the Act had created confusion and delayed the car-buying process.

Aishah clarified that the new revision by the Government did not mean that the HPA would revert to its pre-June 15 amendment status.

“Some clauses will be amended while others will remain. Simply put, it makes car registrations easier.”

Among the contended issues when the amended HPA was implemented last month was the 1% maximum booking fee (based on the total selling price) which required car sellers to refund customers 90% of the booking fee if the deal were to fall through.

This meant that car sellers or dealers could not accept booking fees before the car buyer is served with a Second Schedule notice.

The Second Schedule notice can only be completed and served, in practice, on the car buyer usually after the hire-purchase loan application is approved.

The remaining 9% downpayment on the car can only be paid when the hire-purchase agreement has been prepared, with details such as the car’s chassis number included.

This meant the hire-purchase agreement can only be prepared after the actual car unit has been allocated to the dealership.

Auto players unhappy with Hire-Purchase Act

Auto players unhappy with Amended Hire-purchase Act

Auto dealers are doubtful whether the targeted 2.1 per cent increase in total vehicles sales to 618,000 units this year can be achieved, no thanks to the amended Hire-Purchase Act 1967, which although aimed at protecting the rights of consumers, was dampening bookings.

Several auto companies have complained that their daily bookings mainly for cars had declined by an average of 20-30 per cent since the amended Act came into effect on June 15.

Local automotive players, while appreciating the amended Act which upheld the rights and interest of consumers, are already feeling the pinch of flat sales which they expect will continue for the next few months due to new requirements under the Act.

At least three auto industry players Proton, UMW Toyota and Edaran Tan Chong, with a combined market share exceeding 50 per cent of the total industry volume (TIV), said they might revise the company's initial sales targets.

The amended Act, which came into effect a month ago, has resulted in cash flow problems for dealers, as the maximum booking fee of only one per cent of the total selling price of the car imposed on buyers, was too small compared with the previous requirement of 10 per cent.

To make matters worst, if the deal falls through, the buyer gets back 90 per cent of the booking fee, leaving very little for the dealer.

The Executive Director of Edaran Tan Chong Motor Sdn Bhd Datuk Ang Bon Beng said customers can change their mind to purchase a car even at the eleventh hour in view of the low booking fee.

In other words, there was no commitment to the deal, he said, adding that the burden of this uncommitted relationship has to be borne by car dealers or the principals of automotive companies.

Besides, customers only need to sign the purchase agreement when the car is produced and shown to the customer and if the customer opts not to buy the car, dealers again tend to lose out.

If the cars are not sold, then it causes disruptions to the supply chain as orders were already made for the cars.

As a result, car dealers were now recording a 20-30 per cent decline in bookings per day owing to the longer process required to get a car under the amended Act as buyers now have to deal directly with the bank which means increased documentation and processes.

Previously, a dealer would be able to handle the entire documentation and buying process of a vehicle. "We (Tan Chong) used to record about 200 bookings per day, but now it has dwindled to about 100 bookings only," Ang said.

Ismet

Moreover, due to the low booking fee, car dealers could not distinguish between genuine and phantom buyers, as many opted to switch to other cars at the last minute.

Dealers also complained a buyer could place phantom bookings at several different car dealerships without paying booking fees, resulting in a waste of loan application resources and inefficiencies for banks and car dealers.

President of UMW Toyota Motor Sdn Bhd, Ismet Suki, while concurring that the intention of the government to ensure consumers were not cheated and misled was noble and accepted by all industry players, however, felt there were weaknesses.

"The act is flipped, from the automotive perspective, as many segments are disrupted, namely manufacturing, production and the (vehicle) ordering system," he said.

Ismet said the longer documentation and paperwork process between banks, car dealers and customers have actually slowed down the delivery system as the process of finalising a vehicle purchase agreement took an extra 3-4 days.

The manufacturer and marketer of Toyota marques as well as the distributor of Lexus-brand vehicles also said that the main issue now was not selling the cars, but taking the risk of producing cars according to the order bank, without knowing whether the orders were genuine or would be met.

Proton Edar Sdn Bhd General Manager for Marketing Sidik Abdul Hamid said as far as the national car maker was concerned, the reaction to the amended Act from consumers was positive.

However, he said, the company was looking at revising downwards Proton's initial sales target of 173,000 cars as the number one automotive player has registered a 30 per cent drop in bookings since June 15.

Against such problems faced by car sellers, the government had last month promised to resolve their grouses over the implementation of the Act.

 -Bernama 

Related: 

Government open to reviewing act

Ministry to meet car industry reps on HP Act

The Star: Friday, June 24, 2011

SOURCE: 

KUALA LUMPUR: The Domestic Trade, Cooperatives and Consumerism Ministry will be meeting financial institutions and used car industry representatives to discuss issues on vehicle sales, resulting from the recently amended Hire-Purchase Act 1967.

Minister Datuk Seri Ismail Sabri Yaakob said he had instructed the ministry's legal and enforcement departments to do so.

Ismail

Regarding complaints of a slowdown in car sales since the amended Act took effect on June 15, Ismail said, “We will need to look at the causes of the problem.”

He reiterated that the Act was amended to protect the interests of consumers.

“Of course, with the amended Act, the documentation process (by financial institutions and vehicle dealerships) is more troublesome and takes more time,” Ismail said yesterday after officiating at a function concerning the Government's Tukar (transform) initiative, aimed at helping traditional sundry shops stay competitive.

To recap, car marque franchise holders and dealers contacted by StarBiz recently said they were worried about the possibility of trickling cashflow, a rise in booking cancellations and longer lead-time for completion of sales resulting from the amended Act.

Malaysian Automotive Association president Datuk Aishah Ahmad said on Wednesday that the amended Act had definitely impacted car sales and there were “teething” problems in the vehicle retail trade.

The Proton Edar Dealers Association Malaysia and Federation of Motor and Credit Companies Association of Malaysia have urged the Government to defer and review the amendments to the Act.

The Star Business, Wednesday, June 22, 2011


SOURCE:

Wednesday June 22, 2011

Car sales impacted by amended Hire-Purchase Act

By THOMAS HUONG and EUGENE MAHALINGAM
starbiz@thestar.com.my 

PETALING JAYA: Worried about the possibility of trickling cashflow, a rise in booking cancellations and longer leadtime for completion of sales, many stakeholders in the automotive sector say the recent amendments to the Hire-Purchase Act 1967 (HPA) will hurt the car retail trade. Already, there are complaints of a slowdown in sales.

While some car marque franchise holders and dealers said they were supportive of the amendments, which aim to protect vehicle buyers from losing their booking fees and deposits paid to unscrupulous sales advisors and car dealers, among other benefits, many automotive stakeholders have described the amended Act as “confusing” and “troublesome.”

One car dealership's general manager said the situation was “unbelievable” and the amended Act overly protected consumers to the detriment of car retailers.

The Proton Edar Dealers Association Malaysia (PEDA) and Federation of Motor and Credit Companies Association of Malaysia have urged the Government to defer and review the amendments to the Act.

Ready to roll: A new car undergoing inspection before rolling out. The recent amendments to the Hire-Purchase Act may result in car buyers placing ‘phantom bookings.’

 

PEDA president Armin Baniaz Pahamin claimed that Proton car sales had dropped by 50% since last week. Another car dealership's general manager claimed that the sales of a Japanese car marque had also dipped significantly.

“Normally, the Japanese principal allocates between 150 and 200 cars to its dealers each week. In the last few days, the allocation dropped to only 10 cars. This is because until we have firm orders (meaning booking fees), we will not order the cars from the principal,” he claimed.
Under the amendments, effective June 15, all used vehicles for sale will undergo Puspakom's 18-point inspection to ensure their roadworthiness.

Another issue of contention was the 1% maximum booking fee (based on the total selling price) mandated by the amended Act, which requires car sellers to refund customers 90% of the booking fee if the deal falls through.

Armin pointed out that unlike in the past, presently car sellers or dealers could not accept booking fees before the car buyer was served with a Second Schedule notice.

“The Second Schedule notice can only be completed and served, in practise, usually after the hire purchase loan application is approved.,” he said yesterday. The remaining 9% downpayment on the car can only be paid when the hire purchase agreement has been prepared, with details such as the car's chassis number included.

This means the hire purchase agreement can only be prepared after the actual car unit has been allocated to the dealership.

“Now, with the amended Act, a car buyer can place phantom bookings' at several different car dealerships without paying booking fees. This will result in a waste of loan application resources and inefficiencies for banks and car dealers,” said Armin.

He said car buyers would have to pay more visits to car dealers or banks to sign documents.
With the amended Act, car dealers would face cashflow problems as they would lack the booking fees and downpayments as working capital to pay for the cars ordered from their principals.

Armin claimed that the Government did not consult stakeholders before implementing the amended Act.
Meanwhile, car dealers and marque franchise holders have expressed unhappiness over the issue and said the car buying process now involved more paperwork.

“We are studying the implications on our current vehicle-promotion packages,” said an industry source.
One car dealership manager in Alor Setar said the amended Act made it tough for dealers to offer “zero downpayment” or “full loan” packages.

Perusahaan Otomobil Kedua Sdn Bhd managing director Datuk Aminar Rashid Salleh said while the company supported the amended Act, automakers that sold cars in high volumes might see sales impacted.
“We may not be able to efficiently register the vehicles on time for our customers, especially during the month-end rush.

“This is due to the longer process flow that requires detailed paperwork between the banks, Perodua and our customers.”

RELATED ARTICLE:

http://star-motoring.com/News/2011/Amended-Act-expected-to-hurt-car-sales.aspx

ARTICLE: HP Interest rate up again!

Saturday April 24, 2010

Higher loan rates will hit car sales

By YVONNE TAN and EUGENE MAHALINGAM
starbiz@thestar.com.my

PETALING JAYA: Interest rates on car loans have increased by an average of 0.25 percentage point for national cars and 0.7 percentage point for non-national makes since the overnight policy rate — the benchmark interest rate which determines banks’ lending rates — was revised upwards by 25 basis points to 2.25% in early March.

Dealers said they were already feeling the impact.

New car registrations reached 56,139 units last month, 25% higher than the same month last year, as buyers locked in their purchases before the widely-anticipated interest rate hike.
The real impact on car sales figures would probably be seen from April, according to industry players.

“We are expecting an adverse impact on sales from the recent hike,” Proton Edar Dealers Association Malaysia president Armin Baniaz Pahamin told StarBizWeek.
“Already, national cars have higher interest rates than non-national cars before the hike.”
This is traditionally the case because the credit risk in the national car segment is perceived to be higher than in the non-national car segment as the former tends to target the lower to middle-income earners.

OSK Research in its recent report on the sector noted that dealers had fully capitalised on the recent OPR rate hike in making their earlier sales pitches. “This caused a rush as buyers locked in their orders before the OPR was increased in early March,” the research outfit said.
Proton and Perodua car loan rates had been adjusted to 3.75% for loan tenures of five years and below, 3.9% for six to seven years and 4% for eight to nine-year loans, according to major car dealers. Previously, they ranged from 3.5% to 3.75%.

With the new rates, for example, a person looking to purchase a RM40,000 Perodua car with a five-year loan tenure (at the new rate of 3.75% per annum) will have to pay RM791, or RM8 more, per month.

This goes up to about RM20 more a month for a longer-term loans.
As for new non-national makes, a dealer with Kah Motor Co Sdn Bhd which distributes Honda cars, said hire-purchase rates for new non-national cars had been raised to 3.25% for loan tenures of five years and below, 3.4% for six to seven years and 3.5% for eight to nine-year loans.

Before, hire-purchase interest rates were in the range of 2.4% to 2.8%, he said.
“There is some impact on sales so far. We see some individuals holding back purchases,” the dealer added.

Honda’s market share fell last month on weak sales, sliding 5.8% year-to-date as sales halted largely caused by the impending launch of its new CRV towards the end of this month, OSK Research said.