As far as private vehicles go, the main options are either cars or motorcycles. Given the high car prices in Malaysia, motorcycles offer a cheaper alternative to consumers seeking to acquire personal transportation.
Nevertheless, every prudent consumer would ponder the same question:
How should I finance my motorcycle? Motorbike loan or personal loan?
Hire purchase financing
The conventional financing mode for motorcycle purchase is via motorbike loan due to its lease-to-own scheme. Consumers are able to utilise the vehicle while paying installments, although they do not gain ownership until the full amount has been paid. Interest (or profit rates under Islamic banking) and tenures may differ depending on the type of motorcycle purchased.
Below is a typical financing package offered under the AEON Credit Motorbike loan (information accurate at the point of writing)
|Type of Motorcycle||Interest/ profit rate per month, %||Maximum tenure||Margin of finance|
|Moped (< 250 cc)||From 0.83%||Up to 60 months||Up to 90%|
|Superbike (≥ 250 cc)||From 0.40%||Up to 84 months|
Personal financing – another option?
Meanwhile, an alternative financing channel for your motorcycle purchase is through personal loan, whereby, consumers borrow the required funds from financial institutions and pay installments for the personal loan instead.
Advantages of personal loan include:
- Full ownership of the motorcycle (purchased through cash from dealer)
- Longer maximum tenure can be up to 120 months
- Lower monthly installments (loan distributed over a longer period of time)
Nevertheless, a caveat of personal loan financing is its dependency on the consumer’s personal credit history and loan eligibility. Applicants opting for personal financing are subjected to credit checks and stringent requirements, in addition to a potentially longer wait for funds.
For example, Public Islamic Bank offers a personal loan to civil servants at a profit rate of 5.20% per annum (0.43% per month) with a maximum tenure of up to 120 months.
Comparing motorbike loan vs personal loan
Below, we use 2 examples – one to purchase a 250cc bike and another to purchase a 650cc superbike using motorbike financing (from AEON Credit) and personal financing (from Public Islamic Bank) to compare which one is more worth it.
Example 1: Purchasing a 250cc Honda CBR250R motorcycle at RM21,940
|Motorbike Loan||Personal loan|
|Monthly Profit rate||0.83%||0.43%|
|Tenure||60 months||60 months|
|Interest payable (RM)||21,940 x 0.83% x 60 = 10,926||21,940 x 0.43% x 60 = 5,661|
|Interest savings (RM)||10,926 –5,528 = 5,265|
|Total payable (RM)||21,940 + 10,926 = 32,866||21,940 + 5,661 = 27,601|
|Monthly instalment||32,866 / 60 = 548||27,468/ 60 = 460|
Personal loan is cheaper – In this case, consumer saves RM5,265 by financing the purchase of this bike a personal loan, and the monthly instalment is also close to RM90 lower per month by using a personal loan.
Example 2: Purchasing a 650cc Honda CB650F motorcycle at RM44,995
|Motorbike Loan||Personal Loan|
|Monthly Profit rate||0.40%||0.43%|
|Tenure||84 months||84 months|
|Interest payable (RM)||44,995 x 0.40% x 84 = 15,118||44,995 x 0.43% x 84 = 16,252|
|Interest savings (RM)||16,252 – 15,118 = 1,134 (save more with motorbike loan)|
|Total payable (RM)||44,995 + 15,118 = 60,113||44,995 + 16,252 = 61,247|
|Monthly instalment||60,113 / 84 = 715||61,247 / 84 = 729|
Motorbike is cheaper – In this case, consumer saves RM1,134 by financing the purchase of this bike with a motorbike loan, and the monthly instalment is about RM15 lower per month by using a motorbike loan.
Is personal loan a better means of financing your motorcycle purchases? It might be, but it might not. The answer depends on your own credit profile and your access to credit. As a smart consumer, you should assess all possible options before deciding on the channel that suits your financing needs. Try exploring personal financing options. It might be well worth the time.
If you conclude a personal loan is the way to go and you are a civil servant., check your loan eligibility with Direct Lending.