Do you hate squeezing in the trains during rush hour?
You can get your own comfortable transport, and the solution is cars. Cars are big-budget purchases in Singapore – and the word around the grapevine is they’ll only get more expensive. While cars may be cheaper in countries such as Indonesia or Malaysia, it is extremely pricey due to the small land area Singapore has.
Many Singaporeans need vehicles to juggle work, elderly relatives, getting their kids to kindergarten, shopping, and so forth.
Here’s the problem: You want a car and need it, but you don’t have $100,000 just catching dust in your savings account.
Dealers know this too. So, they’ll try to woo you with far-fetched car financing schemes that will dry you up.
To finance your car in Singapore, you can apply for a car loan or work with a financial institution to lower the monthly fees. The solution is simple: spend ten minutes of your time reading this article. In the end, you’ll understand everything about car financing – from the basic concepts to maximum amounts, tenure, options, and best loans.
Keep reading below!
Car Financing Acronyms One-On-One
The acronym you’re probably most familiar with is COE (Certificate of Entitlement) – and you probably hate it too. After all, it’s what makes your car so expensive that your hair stands on its end.
However, a dealer can daze you with tons of other acronyms.
Don’t let that happen.
Learn what everything means so you can be prepared:
1. OMV aka Open Market Value: represents the actual purchase price for your car, without the taxes
2. COE aka Certificate of Entitlement: represents most of the costs associated with purchasing a car in Singapore. You have two COE options: one for five and one for ten years. The COE in September 2021 is $62,600 for a cat B car – up from around $41,000 in September 2020.
3. ARF aka Additional Registration Fee: is the fee you have to pay when registering your car based on the OMV. The minimum ARF in Singapore today is $5,000.
4. PARF aka Preferential Additional Registration Fee: if your car is younger than ten and you decide to deregister before your COE expiration date, you get this PARF deduction
5. Excise Duty: this is another tax payable for certain products, including alcohol, tobacco, and cars, in Singapore. Prepare a fee of 20% of your car’s OMV.
6. GST aka Goods & Services Tax: This tax varies depending on your car’s size and capacity. For example, the GST for a tiny Hyundai X VENUE 1.6 CVT is 4,965% but reaches 28,852% for a BMW M3 COMPETITION LASER HL.
Here’s the thing:
Find out these specific costs for the vehicle you want to purchase because your car financing depends on its open market value. Basically, the maximum amount you can borrow is calculated on the vehicle’s OMV, not its total price.
This point leads us to:
Maximum Car Financing Sum
What does car financing mean?
Car financing refers to taking out a car loan which you will repay over time.
The maximum you can get with a car loan is:
– 70% of the purchase/valuation price: for OMVs up to and equal to $20,000
– 60% of the purchase/valuation price: for OMVs above $20,000
Here’s the first catch:
These are the maximum sums you could be eligible for. The bank you’re working with is allowed legally to grant you a lower loan depending on factors like:
– Your income
– The previous debt you have
– Your credit rating
Warning: In Singapore, your monthly loan installments can’t be more than 60% of your monthly earnings. Consider this number before selecting your car, especially if you have preexisting loans. You can choose to consolidate all your loans together to reduce the interest charged!
The second catch is this:
Certain banks only offer 60-70% of the car’s valuation price. So, if their expert’s valuation gives the bank a lower price than the car’s original OMV, guess what: you’re getting less money.
And of course:
These figures mean you’ll need at least 30-40% of your car’s OMV to put as a down payment. Yikes.
What Is The Maximum Car Loan Tenure?
The maximum car loan tenure is seven years in Singapore.
That’s not always a good thing, though:
Sure, your installments are lower when you’re paying them on a longer tenure, but you’ll accumulate more interest by the end of that term.
There’s an easy solution for that:
Make sure you’re getting the shortest tenure that you can manage comfortably, with accessible installments. Credit 21 offers loans with affordable monthly installments. Have a go at our loan calculator here.
Now, you have to consider another thing before planning your most convenient tenure:
How old is your car?
If you’re planning to purchase an older vehicle, beware. Car loans in Singapore are usually thought out to cover just the initial ten years of your vehicle’s lifespan – you can thank the whole COE arrangement for that.
Here’s what that means:
The maximum loan tenure for used cars is calculated by subtracting your vehicle’s age from ten. So, if the car you want to purchase is 6, your maximum loan tenure will be four years.
What if you’re getting a COE car?
COE cars need you to renew their COE, which you can do for another 5 or 10 years. But being able to prolong a vehicle’s COE isn’t critical for most banks in Singapore.
Only a few, like UOB and Maybank, offer car financing options for COE cars.
Car Financing Options In Singapore
Your car financing options in Singapore are:
1. An in-house car financing loan from a car dealer. This alternative usually gets you the sweetest deal possible. Car dealers have options, including the overtrade trick. Thanks to this catch, you can borrow 70% of your car’s OMV even if that OMV is more than $20,000.
2. A bank loan from a dealer. This option saves you a lot of hassle because you’ll have someone explain to you the best bank car loans on the market. Besides, if you use your car dealer as an intermediate, they may get you some freebies. Of course, that’s not out of the goodness of their hearts; they get a commission for each new customer they bring.
3. A licensed moneylender or bank. Choosing a loan provider by yourself is a time-consuming endeavour, but at least you can shop around for the lowest interest rate.
What Are Car Loan Interest Rates In Singapore?
|Car Loans in Singapore||Interest Rate|
|DBS Used Car Loan||1.99%|
|DBS New Car Loan||2.78%|
|Hitachi Capital New Car Loan||2.78%|
|Hong Leong Finance Used Car Loan||2.78%|
|Hong Leong Finance New Car Loan||2.48%|
|Maybank New Car Loan||2.78%|
|OCBC Used Car Financing||2.28%|
|OCBC New Car Loan||2.28%|
|Sing Investments & Finance||2.78%|
|UOB Used Car Loan||2.98%|
|UOB New Car Loan||2.68%|
Let’s take an example: You want to purchase a $120,000 car with a $20,000 OMV. That means you’re eligible for a 70% car loan, aka $84,000.
Now, let’s say you sign up with a bank with a 2.78% interest/ year.
– 78%/year equals $2,335.2
– $2,335.2 x 7 years equals $16,346.4
– $16,346.4 + $84,000 = $100,346.4 (the total amount you’ll end up reimbursing by the end of your 7-year tenure)
– $100,346.4 /84 (the total number of months in your 7-year tenure) = $1,194.6 (your monthly installment)
What Other Fees Can I Expect?
Other fees you can look forward to including:
– Processing/ admin fee: minimum of $200, but a maximum of 10% of your loan. Usually, financing institutions will waive this fee if you borrow more than $20,000 from them.
– Early settlement fee: wondering if you can payoff your loan early? Banks in Singapore will demand a penalty of at least 1% of your remaining balance if you decide to repay your loan early.
For licensed moneylenders like Credit 21, there is no early repayment fee. Read more about it here.
– Unpaid interest fee: this charge is most likely 20% of the outstanding interest, and you’ll have to pay it if you reimburse your car loan early
Should I Get A New Car Loan Or An Used Car Loan?
There are pros and cons to both options. Let’s start with the new car option:
In this case, the most significant advantage stems from the fact that you’re getting a new car. No one’s ever used it before, so that vehicle is in tip-top shape for years to come.
– The road tax is cheaper.
– The interest rates are lower.
– You have more chances of getting replacement parts.
– Your car has the latest-gen features that allow smooth driving.
However, used cars are usually half the price of new cars. That means:
– Your loan’s monthly installments will be twice as cheap.
– Your loan tenure will probably be shorter, so you’ll be debt-free faster.
– It’s easier to get the needed down payment.
What Documents Do I Need To Obtain Car Financing?
The usual required documents include:
1. Vehicle Sales Agreement
2. Proof of your earnings: payslips, CPF statements, bank statement, or Income Tax Notice Of Assessment
3. Proof of identity: you’ll have to be at least 21 years old to obtain car financing
4. Proof of employment: include details such as your company and how much you’re earning
5. Proof of preexisting loan: if you have any other loans, you’ll need to show your documents here
Once you are ready, you can apply for car financing with a bank or with a reliable and experienced financial institution.
In Conclusion – Best Places To Apply For Car Financing
You have many car financing options in Singapore, and, after reading this article, you’re prepared with the proper knowledge to make an informed decision. Securing a car loan is relatively easy for most Singaporeans because you’ll use your car as collateral.
Thus, the deal is pretty much risk-free for the bank your dealing with.
Conversely, if you don’t have a high credit score or have been rejected by banks, you can reach out to a licensed moneylender in Singapore. Credit 21, for instance, has a long tradition on the island and has helped thousands of people already.
Even if you’re getting your car financing from a bank, we can help you with personal loans to cover your car loan downpayment. That way, you can purchase a better and newer car instead of settling for an older model. We will definitely consider your application even if you have a bad credit score.
Find us here.