KUALA LUMPUR - MALAYSIAN national car dealers said on Thursday they were dismayed by the small interest rate cut by the central bank earlier this week, fearing their sales may drop as consumers wait in anticipation of lower rates.

In a surprise move on Monday, Bank Negara Malaysia slashed its key overnight policy rate - used by banks to set lending rates - by a quarter point to 3.25 per cent to boost economic growth amid a global downturn. Banks have followed suit in cutting their lending rates.

The Proton Edar Dealers Association said the rate cut was negligible, with economists expecting further reductions over the next few months.

'Unless the interest rate cut is substantial, it may signal more possible interest rate cut in the near future and only trigger a wait-and-see reaction from the public,' Deputy President Armin Baniaz Pahamin said in a statement.

As such, he said they were concerned that Proton car sales may drop instead of increase.

'Bank Negara should study carefully the quantum of reduction and regulate to reduce the effective interest rate once but substantially rather than progressively over a period. This will eliminate the wait-and-see factor and promote immediate spending,' he said.

The association also called for easier approval of hire purchase loans and more flexible financing for Proton car buyers, who face strict requirements for risk profile.

'Unless the risk profile issue is addressed, even with the cut in interest rate, Proton car sales will be quite stagnant if not lower,' Mr Armin said. 'An easier loan approval will promote a healthier car sales rather than a cheaper loan.'

Proton car sales have improved this year following new model launches but purchases have slowed down in October in the overall vehicle industry as the economic slowdown hit spending. -- AP