Understanding Lorry Repossession in Malaysia
Every logistics business faces cash flow challenges. Seasonal dips, delayed client payments, or unexpected repairs can make it difficult to meet lorry installment commitments. Understanding how repossession works and planning ahead can protect your business assets.
Malaysia Repossession Timeline
- Day 1-30 Payment Missed - Late fee charged (typically 5-10% of installment)
- Day 31-60 Second Missed Payment - Reminder notices sent, penalty increases
- Day 61-90 Third Missed Payment - Default notice issued, repossession proceedings begin
- Day 90+ Legal Action - Court order obtained, lorry seized, auctioned
Smart Installment Planning Strategies
1. Match Installments to Cash Flow Cycles
Logistics businesses have seasonal patterns. Chinese New Year (January-February), Hari Raya (April-May), and year-end holidays (November-December) all impact cash flow differently.
Pro Tip: Seasonal Installment Adjustment
Request seasonal installment restructuring from your financier:
- CNY (Jan-Feb): Lower installments or payment holiday for 2 weeks
- Hari Raya (Apr-May): Reduced payment during Raya month
- Year-End (Nov-Dec): Smaller installment during 11.11/12.12 slowdown
- Catch-Up Periods: Slightly higher payments during peak months
2. Build an Emergency Fund
Set aside 3 months of lorry installment payments in a separate account. This creates a buffer for unexpected delays or emergency repairs.
Emergency Fund Calculation
Example: If your monthly lorry installment is RM 3,000, maintain RM 9,000 (3 months) as emergency reserve. This fund should only be used for installment payments during genuine cash flow crises.
3. Choose the Right Tenure
Longer tenure means lower monthly installments but higher total interest. Shorter tenure saves interest but increases monthly burden. Find the right balance based on your business's average monthly income.
Tenure Comparison (RM 200,000 Lorry @ 3% p.a.)
| Tenure | Monthly | Total Interest |
|---|---|---|
| 5 Years | RM 3,933 | RM 36,000 |
| 7 Years | RM 2,907 | RM 50,400 |
| 9 Years | RM 2,378 | RM 64,800 |
What to Do If You Can't Pay
Step 1: Contact Your Financer Immediately
Don't avoid calls or ignore letters. Financiers prefer working with you to find a solution rather than repossessing. Early communication shows good faith and increases options.
Step 2: Discuss Restructuring Options
- Tenure Extension: Extend loan period to reduce monthly installment
- Payment Holiday: Temporary payment pause (1-3 months) with added tenure
- Partial Payment: Pay what you can afford to show commitment
- Refinancing: New loan with better terms to settle existing loan
Step 3: Generate Quick Cash Flow
Emergency Cash Generation Strategies
- Invoice Factoring: Sell unpaid invoices to get immediate cash (70-90% of invoice value)
- Express Delivery Jobs: Take higher-margin urgent deliveries
- Sub-Contracting: Rent out your lorry to other operators
- Backload Optimization: Fill return trips with cargo (addresses 77% empty backload issue)
- Temporary Downgrade: Switch to shorter routes or lighter cargo temporarily
Restructuring vs. Refinancing: Which Option?
Restructuring
- Modify existing loan terms
- No new loan application
- Lower monthly payments
- Longer tenure (more interest)
- Same financier relationship
Refinancing
- New loan pays off old loan
- New application required
- Potentially better interest rate
- Cash-out option possible
- Switch financiers if needed
Legal Rights: What Financiers Must Do
Malaysia's Hire Purchase Act 1967 protects consumers. Financiers must follow legal procedures before repossessing your lorry:
Required Legal Steps
- 1. Fourth Schedule Notice: Written notice of default sent to registered address
- 2. 14-Day Grace Period: You have 14+ days to settle arrears before repossession
- 3. Possession Notice: If repossessed, notice sent within 21 days
- 4. Auction Notice: Intent to auction must be advertised and notified
- 5. Surplus Return: Any auction surplus after settlement must be returned
Frequently Asked Questions
What happens if I miss my lorry installment payment?
Missing one payment typically incurs a late fee. However, missing 3+ consecutive payments can trigger repossession proceedings. Contact your financier immediately if you foresee payment difficulties to explore restructuring options.
Can I restructure my lorry loan if business is slow?
Yes, most financiers including Ing Heng Credit offer loan restructuring options. You can request tenure extension, temporary payment reduction, or refinance to lower monthly installments. Early communication is key to avoiding repossession.
How long does lorry repossession take in Malaysia?
Legal repossession process typically takes 2-3 months after default notice. However, voluntary surrender or negotiated settlement can expedite the process. Maintaining communication with your financier can delay or prevent repossession.
What should I do if I receive a repossession notice?
Immediately contact your financier to discuss payment options. You may negotiate a payment plan, settle arrears, or voluntary surrender. Ignoring the notice will lead to legal action and asset seizure. Seek professional advice if needed.
Can I get my repossessed lorry back?
Yes, by settling all outstanding arrears, repossession fees, and legal costs before the lorry is auctioned. This must be done within the notice period (typically 14-21 days). After auction, any surplus from sale may be returned to you.