The Impact of E-Invoicing on Full Loan Practices in Malaysia

Recently, an article by Paultan.org has garnered significant attention by shedding light on the practice of “full loans” among car buyers, which resonates deeply with many. This issue pertains to the automotive industry, where buyers of brand-new, imported, or reconditioned cars often seek loans that cover the entire purchase price. Traditionally, car salesmen have marked up car prices in invoices before submitting them for loan approval to banks. This practice ensures that the approved loan amount matches or exceeds the actual cost of the car, as banks typically offer a maximum loan amount of 90% of the car’s value, rather than the full 100%.

While technically “full loans” are not permitted, some banks have publicly offered them as part of special promotions with car manufacturers. However, the introduction of E-Invoicing in August 2024 is set to change this practice significantly. With the new system, the E-Invoice, which reflects the actual car price, must be submitted to banks for loan approval. Consequently, car buyers will now need to provide the 10% downpayment that was previously circumvented through invoice mark-ups.

Without full loans, will car sales drop after E-invoice gets implemented in August?

This new requirement has the potential to affect car sales, as buyers will have to reevaluate their financial capabilities and possibly delay their purchases to save up for the downpayment. The automotive industry’s reliance on loans as a means of facilitating purchases means that any disruption to loan practices could have a substantial impact on sales.

In 2023, Malaysia recorded an all-time high number of auto sales at 799,731 units, up 11% y-o-y compared to 2022, according to the Malaysia Automotive Association (MAA). Assuming a moderate 85% of the buyers have opted to expedite their purchase with some form of vehicle loan, there’s no doubt that we’ll see an impact on Malaysians’ car-buying behaviors moving forward, especially the younger generation with limited cash flow. What remains to be seen is by what scale and what new offerings financial institutions may introduce as a result.

SUMMARY OF NEW PASSENGER & COMMERCIAL VEHICLES REGISTERED IN MALAYSIA FOR THE YEAR 2019 TO 2023

Table showcasing summary of new passenger & commercial vehicles registered in Malaysia from 2019-2023

(Source: MAA)

E-invoicing via Myinvois may affect house buyers as well

Interestingly, the automotive industry is not the only sector grappling with this issue. The property market in Malaysia also experiences similar practices. Property agents often assist buyers in inflating property values in loan applications to secure higher loan amounts or even full loans. In Malaysia, banks typically lend up to 90% of a property’s purchase price to first-time homeowners. However, for subsequent properties, the loan amount drops to 70%, requiring buyers to provide a 30% downpayment. This is in addition to other costs such as loan stamping and legal fees.

The introduction of E-Invoicing aims to ensure that loan amounts correspond accurately to the actual purchase prices of cars and properties. However, this transparency could have broader economic implications. In economies where loans play a crucial role in enabling purchases, requiring buyers to provide significant downpayment might slow down sales in both the automotive and property sectors.

A shift in financial strategy

Businesses and consumers alike will need to reassess their financial strategies in light of these changes. At the same time that the practice of E-invoices provides transparency and accuracy, it also challenges long-standing practices that have facilitated higher loan approvals. The question remains whether an alternative solution will emerge to address the financing needs of buyers or if the market will adapt to the new level of financial scrutiny.

In conclusion, while E-Invoicing promises greater accountability in financial transactions, its impact on the availability of full loans could have far-reaching effects on both the automotive and property markets in Malaysia. The shift may lead to more prudent financial planning among buyers but could also slow down sales in industries heavily reliant on loan-based purchases. Only time will tell how businesses and consumers will navigate this new landscape and whether innovative solutions will arise to meet the demand for full financing options.

Are you feeling confused by the e-Invoicing system?

Or overwhelmed by the numerous challenges and difficulties as you implement this new policy?

We understand the complexity of the e-Invoicing system and recognize that implementing it can be particularly challenging for small and medium-sized enterprises (SMEs). To help SMEs fully grasp and adapt to this new policy, we’ve designed a comprehensive 4-hour online course that covers EVERYTHING you need to know to transition to e-invoicing with confidence.

Whether you’re new to e-Invoicing and eager to understand the system, or someone with some foundational knowledge seeking to deepen your understanding, our course offers in-depth and practical insights to help you tackle the challenges of this system.

What you’ll learn in the course:

1. E-Invoicing System Framework

We’ll help you understand the entire framework of the e-Invoicing system, including its operational logic and key implementation points, so you can better adapt your business setup to e-Invoicing.

2. How It Works

We’ll explain the working principles of the e-Invoicing system, covering every step from generation and transmission to receipt, validation, storage, and management of electronic invoices. We’ll also demonstrate how to generate a compliant electronic invoice using accounting software.

3. Impact on Businesses

We’ll discuss the impact of e-Invoicing on businesses, from the responsibilities of business owners to what department managers and employees need to understand. We aim to clarify that implementing e-Invoicing is not solely the responsibility of the business owner but involves everyone in the company.

4. Policy Changes and Response

We’ll keep you updated on all e-Invoicing guidelines changes and provide the latest information and response strategies that you can apply into various scenarios within your business.

5. System Tools and Training

We’ll introduce you to various e-Invoicing systems and accounting software available in the market and provide insights into related training content. You’ll be equipped to decide which e-Invoicing system/software best suits your business needs to reduce costs and improve efficiency.

6. Q&A Session

If you have any questions or concerns that require professional answers, our expert instructors will address them at the end of the course.

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