Islamic Car Loan Calculator Malaysia

Islamic Car Loan Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

Total Payment:

Total Profit:

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1. What is Islamic Car Financing?

Islamic car financing in Malaysia (like Maybank Al-Ijarah) is Sharia-compliant, using concepts like Ijarah (leasing) or Murabahah (cost-plus sale) instead of interest. The profit rate (typically 2.88-4% p.a.) replaces interest rates in conventional loans.

2. How Does the Calculator Work?

The calculator uses the Islamic financing formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal amount (MYR)
\( r \) — Monthly profit rate (annual rate ÷ 12)
\( n \) — Loan tenure in months
\( PMT \) — Monthly payment amount (MYR)

Explanation: This formula calculates fixed monthly payments while ensuring the bank's profit is transparent and agreed upon upfront.

3. Islamic Financing vs Conventional Loans

Key Differences: Islamic financing avoids riba (interest) by using asset-based contracts. The bank buys the car and leases/sells it to you at a pre-agreed profit rate. Ownership transfers immediately in Murabahah, while Ijarah may have balloon payments.

4. Using the Calculator

Tips: Enter principal (car price minus down payment), annual profit rate (e.g., 3.5 for 3.5%), and loan tenure (1-9 years). Common rates in Malaysia range from 2.88% to 4% p.a. for Islamic financing.

5. Frequently Asked Questions (FAQ)

Q1: Why does Islamic financing use profit rate instead of interest?
A: To comply with Sharia law which prohibits interest-based transactions. The profit comes from legitimate trade or leasing activities.

Q2: What's the typical profit rate for Islamic car loans in Malaysia?
A: Currently ranges from 2.88% to 4% p.a. depending on bank, model, and tenure. Maybank Al-Ijarah starts from 2.88%.

Q3: Is there takaful (insurance) included?
A: Yes, comprehensive takaful coverage is mandatory and included in the financing package.

Q4: Can I settle early with Islamic financing?
A: Yes, but terms vary by bank. Some offer rebates (ibra') on unearned profit for early settlement.

Q5: How does this differ from conventional hire purchase?
A: Islamic financing uses asset-based contracts (like Ijarah or Murabahah) rather than interest-bearing loans, with clearer profit calculations.