In May 2023, Malaysia's Inland Revenue Board (LHDN) announced a phased introduction of e-Invoicing starting August 1, 2024. How does this impact you as a car buyer?

An e-Invoice is a digital version of a transaction between buyer and seller, formatted in a way that computers can understand. The Malaysian Inland Revenue Board (LHDN) is introducing two ways to send e-Invoices: through the MyInvois portal or using an application programming interface (API) connected to companies' tax systems. This change aims to automate processes, making invoice delivery and approval faster.

Other than that, another benefit is accuracy, as e-Invoicing reduces mistakes or missing details that can occur with manual invoicing. This is especially important in car transactions because it ensures that invoices exchanged between parties, including the Malaysian Inland Revenue Board (LHDN), are consistent and accurate in their declared amounts.

This change will stop situations where car buyers are offered a "full loan." In these cases, buyers don't have to pay the usual 10% downpayment on a 90% hire purchase loan. To qualify for a "full loan," sales agents inflate the car's price on the invoice sent to the bank for loan approval, ensuring the approved amount covers or exceeds the actual car price.



Why would someone choose a full loan? Maybe they can't afford the 10% downpayment but still want to buy a specific car. One way to increase the invoice amount is by adding extras like tinting or cameras to raise the total price before applying for the loan.

For example, imagine a car priced at RM40,000 on-the-road. This means you can get a loan for up to RM36,000 (which is 90% of the price), and you would need to pay RM4,000 as the 10% downpayment.

If the car buyer can't pay the downpayment and chooses a "full loan," the sales agent increases the invoice by adding extras, making the total price RM45,000. With 90% of RM45,000 amounting to RM40,500, this covers the entire cost of the car, allowing the buyer to get a "full loan."

Afterward, the sales agent could submit an invoice with a different amount to the government – this is the type of mistake that the e-Invoicing system aims to avoid. With e-Invoicing, all invoices must be processed through LHDN, so the sales agent can't simply change an invoice because the numbers on all other invoices must match accurately.



While "full loans" are technically not allowed, some banks openly advertise them through special promotions with carmakers. However, banks set a limit on how much the price can be increased with additional accessories. For instance, they wouldn't allow a RM40,000 car to be marked up by 50% (RM20,000) in accessories just so the customer can gain from the deal.

Sometimes, sales agents may charge much more than the car's actual price, allowing the buyer to keep the extra money. Trying to get "cashback" when buying a car is a bad idea because it increases the loan amount, making monthly payments and insurance premiums higher. This happens often with dealers selling reconditioned or used cars who set their own prices.

Starting in August, e-Invoicing will become mandatory for businesses with annual revenues exceeding RM100 million. From January 2025, this requirement will expand to businesses with annual turnovers between RM25 million and RM100 million. By July of the same year, all businesses engaged in commercial activities must use e-Invoicing, although participation before this date is optional for any business.

The rollout of e-Invoicing will definitely influence car purchases in Malaysia. What do you think about this change? Have you ever opted for a "full loan" before? Share your experiences in the comments below.