Interest rate rise will not hit car sales

THE higher interest rates will not hurt new car sales as the current levels are still attractive compared to the rates five years ago, said Malayan Banking Bhd (1155) president and chief executive officer Datuk Seri Abdul Wahid Omar.

"Currently, the cost of borrowing is still very low. In the context of car financing, for a seven-year hire purchase financing, you can borrow at an effective rate of 6.5 per cent. That, I think is still affordable and won't be an issue, if you compare this against what we paid for (for hire purchase) five years ago, when most of the car financing were more than 8 per cent," he told the media on the sidelines of the International Financial Crime and Terrorism Financing Conference 2010 in Kuala Lumpur yesterday.

Interest rates for car financing increased following Bank Negara Malaysia's move to increase its overnight policy rate by 25 basis points to 2.75 per cent.

The Malaysian auto industry is expected to see sales of new cars grow by 3.3 per cent to 550,000 units this year.
Abdul Wahid said that the bank is working closely with car manufacturers and distributors to ensure that the cost of financing remains attractive.

"We have great relationships with car manufacturers and distributors. Our business is to lend money, and their business is to sell cars. So, it is very important that we package a deal that is acceptable and attractive to consumers," he said.

Meanwhile, he said Malayan Banking is continuing to invest in anti-money laundering and counter-financial terrorism IT systems and infrastructures, and expects its new systems, which cost RM10 million, to be up and running next year.

The bank has infrastructures that monitor movement of funds, and any unusual movements will be brought to Bank Negara's attention.

"Having a good system is important. For example, if suddenly there are many transfers into one account, and immediately after it goes out to few other accounts again - and this happens day in, day out or week in, week out - the system will pick it up and we will report it to the central bank," he said.

By Goh Thean Eu

Business Times