Sambung Bayar Contracts Are Void From The Start. But There Is A Legal Way To Do The Same Thing.

Sambung bayar deals are illegal, and the contract you signed is worthless. Those are two separate problems and both matter.

The offence. Under s.38 of the Hire Purchase Act 1967:

"Every person who, by the disposal or sale of any goods comprised in a hire-purchase agreement, or by the removal of the goods, or by any other means, defrauds or attempts to defraud the owner shall be guilty of an offence."

Penalty: a fine of up to RM30,000, or up to 3 years' imprisonment, or both.

The contract. Under s.24 of the Contracts Act 1950, an agreement whose object or consideration is unlawful is void — what lawyers call void ab initio, invalid from the start. If either party breaches it, no legal action can be taken.

But here is what almost every article on this topic leaves out.

KPDN's own Director-General of Enforcement, Datuk Azman Adam, made the point explicitly: while a sambung bayar contract is not legally valid, this does not mean someone else cannot pay for the vehicle and use it — because an assignment of rights under a hire purchase agreement is permitted under s.12 of the Hire Purchase Act 1967.

So the problem is not the arrangement. It is doing it behind the bank's back.

Why the bank matters

When you buy a car on hire purchase, the bank owns it until the loan is settled. You are the hirer, not the owner. That is why you cannot sell it without the financier's permission — and the hire purchase agreement contains an express condition saying so.

The consequence flows from that ownership. A sambung bayar car sold to a new "owner" remains the property of the original owner in law, no matter what was signed.

The five things that actually go wrong

1. Every summons is yours. Traffic fines are issued against the registered owner, not the driver. If the "buyer" runs a red light, the saman is in your name — and under the 2026 system, unpaid saman means automatic blacklisting after 60 days, which blocks your roadtax and licence renewal. See (Zaman Tunggu Diskaun 80% Dah Tamat. Mulai 1 Januari 2026, Lambat Bayar Bermakna Bayar Penuh.).

2. Every missed payment is yours. The bank holds the original hirer accountable. Missed instalments damage your credit score and legal action from the bank comes to you.

3. The bank can repossess regardless of who is driving. If the loan defaults, the financier has the right to repossess the vehicle whatever the buyer has paid.

4. The buyer has no protection at all. They do not legally own the car after months or years of instalments. If the seller takes it back, there is very little recourse — the contract is void.

5. Criminal exposure runs both ways. If a seller disappears or takes the car back after taking payment, that can fall under s.420 of the Penal Code (cheating). And if the buyer uses the vehicle for criminal activity, the consequences land on the registered owner.

Also note s.46 of the Hire Purchase Act 1967 — a general penalty of up to RM3,000 or 6 months for contraventions of the Act.

Enforcement is real

The Home Ministry confirmed in a written reply to the Dewan Rakyat that action can be taken against owners who pawn their vehicles or sambung bayar to third parties without the bank's knowledge and approval, and that enforcement sits with KPDN.

What to do instead

If you want out of the loan:

• Talk to your bank first. Settle the loan on sale, or ask about a proper transfer.
• Ask specifically about an assignment of rights under s.12 — this is the lawful mechanism, and KPDN has publicly confirmed it exists.
• Sell properly. Yes, it means clearing the loan or arranging redemption. That is the cost of a transaction that actually holds.

If you are tempted to buy one:

• You will not own the car. You cannot register it. You cannot insure it in your own name properly. You cannot sell it.
• If the seller stops paying or the bank repossesses, you lose the deposit and the car.
• Listings on marketplaces and WhatsApp groups highlight low monthly payments and minimal upfront cost. They rarely mention that the agreement is unenforceable.

If you are already in one:

• Get advice. Approaching the bank about a s.12 assignment may be possible depending on the financier and your standing.
• Do not simply keep going quietly. The registered owner is accumulating summonses, credit risk and potential criminal exposure the whole time.