Buying a car in Singapore is very different as compared to other countries because of the regulations here.
Before buying a car in Singapore, you will already be required to pay a lot of money. This includes:
- import tax
- COE
- Registration fees
With all that, it would easily come up to more than SGD50,000. And that needs to be paid before you even think about the price of the car. If you add the price of the car into the equation, it could easily cost double of what the car would cost. In other words, it would be quite a challenge to buy a car in Singapore without a loan.
Options for car loans
There are basically 2 main options for you to choose from when you want to buy a car in Singapore, this includes:
- Apply for a bank loan
- Get a loan from the auto dealer whom you are buying your car from
What sells best in Singapore
Singapore has a very healthy automotive industry where all their cars are imported from other countries. This simply means that you can buy just about any brand of car you choose. In a recent report, it was found that Honda and Toyota cars contributed to more than 40% of the total new vehicles in Singapore. Together with Mercedes-Benz, Nissan and Mazda, they make up the top 5 best selling new vehicles in 2016.
Getting your car financed
To get the best car loan, you must carry out some form of homework or research. You will find that the 2 most important factors that you must consider when applying for a car loan in Singapore is the interest rate and the duration of the loan. In the latest rates published, the current market goes around 2.7% and this could be a loan you can take between 1 and 7 years depending on your needs and requirements. Unlike other types of loans like property, car financing work around a flat rate.
What Should you look out for?
When you are looking for a car loan, it is extremely crucial to look out for certain things especially if you are buying from the auto dealerships. This is where you might not always get a straight answer for your queries. However, you can always try to take note of the following issues:
Low monthly payments
One thing for sure, you will come across some dealers who will entice you to buy a car with low monthly payments. Do not be too gullible with this and check and see if it is really true. As part of the deal, you might end up taking a longer financing which actually comes back to the same amount for the bank. You must always remember that financing institutions make their profit through interest. So the monthly payment might be low, but the final amount will be high.
Early settlement penalty
When you enter a loan, you will want to get out of it as soon as you can. At times, you might have some extra cash where you can pay off the outstanding amount before the term ends. Always read the contract properly for this clause. There might be a high penalty imposed if you want to settle your debt earlier. This might mean additional costs involved.
Your eligibility
Singaporean law stipulates certain things when it comes to car financing. According to the new car loan regulations issued by the Monetary Authority of Singapore, there is a maximum amount you can borrow when you buy a car. This was updated as late as May 2016 and is based largely on the LTV or Loan-to-Value allowed. Below gives you a picture of how this works:
- If the amount is less or equal to SGD20,000, you can borrow up to 70% for a maximum of 7 years
- if it is more than SGD20,000, you can borrow up to 7 years with a maximum of 60%
That means the other part of the amount must be used as a downpayment.
Some Car Loan packages in Singapore
There are various types of car loans that you can apply for in Singapore depending on the car brand you are looking for. Most, if not all banks in Singapore offer this type of loan. Below are some of the major ones.
OCBC Car Refinancing Packages
This financial package is known to be ideal if you are looking to refinance your current car loan. It allows you to refinance up to 100% of your current car financing. The upside of this is that it offers a lower interest rate as well. For instance, if you have a current car loan with another bank which you have been servicing for more than 6 months with an interest rate of 2.4% or more, this loan will give you a new deal at only 2.08% which means you get to save a lot more in the process.
DBS Car Financing
As the name implies, the DBS Car Financing is one of the products offered by one of the largest bank in Singapore. It is known to be a great package if you are applying for a loan to buy a new car. This is one loan that comes with the lowest interest rate in the market. You can get this loan up to 70% of the total car price at a competitive rate of only 1.99%. The term can range between 1 and 7 years. For instance, if you are borrowing SGD 100,000 for 5 years, the interest that will incur will be SGD9,950.
Used Car Financing
This package is good if you are looking for one to buy a used car. You will most likely consider this option only if you have a limited budget and you probably need only a basic or affordable car to get around. However, a note that must be considered here is to ensure you have inspected the vehicle properly before jumping into the sale. Another factor that must be considered is the number of years left in the COE. As used cars are naturally cheaper than new cars, you can apply for a loan to finance the vehicle but banks will surely impose a higher interest rate. While financial rates for new cars go for around 2.5% interest, used cars will have interest rates of above 3%. Below are some of the banks that offer this type of loans:
- Hong Leong Finance – Interest rate at about 2.98% and you can get up to 7 years financing
- OCBC – the Used Car Financing package allows you to get a loan between 1 and 7 years with an interest rate of slightly below 3%
- Standard Chartered Bank – Terms of repayment is between 1 and 7 years and interest rate is at 3%
On the other hand, loans for new cars from the banks in Singapore are as below:
- DBS – Range is 1 to 7 years at 1.99%
- Standard Chartered – 2.7% interest of up to 7 years
- Hong Leong Finance – Interest rate at 2.78% and up to 7 years
- OCBC – 2.78% interest rate for a maximum of 7 years
- UOB – offers the same package as OCBC
- Maybank – higher interest rate of 3.25% and only up to 5 years