Best Car Loans in Singapore
Shelling out a large amount of money to buy a car can put a huge dent in your savings. Getting a car loan will allow you to purchase a car with monthly payments, which will be easier on your bank account. With car loans, you will be able to pay in instalments instead of having to pay for the whole vehicle price at once. This means that you can buy that dream car instantly! Car loans will also help you improve your credit rating, as long as you pay on time. Generally any moderate credit that you take out and pay always on time improves your credit rating. It is no good to not have any credit as banks will not be able to determine your repayment habits. Moreover, you will have the chance to purchase a better car that may have been too costly if you were to pay in full.
Types of Car Loan
There are various types of car loans that you can choose from. The right one, of course, is determined by your preferences and your situation.
New Car Loans vs Used Car Loans
First, there are new car loans (applicable to new vehicles) and used car loans (applicable to used vehicles). Both of these types have their own advantages. For instance, the advantages of getting a
new car and a new car loan are that you will get the opportunity to own a vehicle in its best state; you will also be able to choose a model you like as well as decide on the add-ons; you will get a
manufacturer warranty; and you won’t have to deal with any past maintenance issues.
Meanwhile, the advantages of getting a used car loan include a lower price, though you have to be cautious when choosing a used car to buy. Additionally, used cars have slower depreciation rate.
New cars face around 20% depreciation in value in their first year. Purchasing a used vehicle means that you won’t have to be the one to experience that depreciation hit. A used car loan will also lower your risk of being in a situation where the worth of the vehicle is less than the amount that you owe. Used car loans also typically have shorter terms, which means you will be able to pay your debts back faster.
Under the current MAS rules, the maximum loan tenure will be 7 years, subjected to the remaining Certificate of entitlement (COE). The loan quantum is 70% for a car that has an Open Market Value (OMV) of $20,000 and below and 60% for a car that has an Open Market Value (OMV) of more than $20,000.
Interview: Paul Ho founder of iCompareLoan.com being interviewed by Mediacorp Channel 8 on car loans
Commercial Car Loans
Commercial car loans are ideal for businesses that are looking to purchase vehicles for work-related purposes. They are applicable to both new and used vehicles. Banks, finance companies, credit
unions, and alternative lenders offer this type of loan. It can be likened to the usual auto loan, though it requires more documentation. When choosing a lender for a commercial auto loan, pay
attention to the percentage of the cost that will be covered by the lender. Also check the repayment term, facility administrative fees, and interest rates.
Commercial car loans are can be split into many categories: –
- Passenger cars bought for company use.
- Commercial vehicles bought for company use.
- Private Hire Car schemes – Passenger cars bought for limousine service to transport passengers, bought under company name. The company can be a Limited Liability Partnership (LLP), Private Limited company (Pte Ltd) or a Sole proprietor company.
- Private Hire Car schemes for Ride hailing services limousine service, bought under company name. The company can be a Limited Liability Partnership (LLP), Private Limited company (Pte Ltd) or a Sole proprietor company.
The most common form is Passenger cars bought for company use and Commercial vehicles bought for company use.
With car refinancing, your current loan will be paid off by a different lender and will be replaced with a new loan that has a new agreement. Car refinancing can help you if you want to make a lower monthly payment, have a different loan duration, or reduce the rate of interest. Car Refinancing is not popular at all as most car loans are a structured rather blandly. If a borrower repays the car loan early, these borrowers incurs some interest cost upon breakage before the loan tenure is up. Hence, unless the interest rate is a lot cheaper, it is not worth it to do car refinancing. And banks do not do it.
Financing from Banks vs Auto Dealers
You basically have two options to choose from when it comes to car financing – no matter what type of car loan you want to get. There’s financing from banks and financing from auto dealers. It’s
important to understand them first for you to be able to pick a great deal.
With dealership financing, your credit information will be sent by the dealer to various lenders. Once lenders approve the loan, a quotation will be presented to you. You’ll have to choose from that and perhaps make negotiations. Dealership financing is convenient and easy for you, and you’ll be able to choose from various offers from different lenders. The rates can also be competitive. However, the disadvantages include higher interest markup, higher penalties on late payments, and extended loan period, which could translate to you paying more than the actual price of the vehicle.
Meanwhile, in bank financing, the rates tend to be lower compared to in-house financing by car dealers or credit companies run by car dealers. You may also be able to enjoy discounted interest rates if you have a healthy credit
history. However, banks usually impose stricter eligibility requirements compared to dealers. Additionally, the interest rates offered by dealers are negotiable, subject to credit profile guides set by the in-house financing themselves, but those offered by banks are very firm and fixed.
|BANK||Maybank||OCBC||UOB||Citibank||DBS||Standard Chartered||In-house financing|
|PRINCIPAL LOAN AMT.||$30,000||$30,000||$30,000||$30,000||$30,000||$30,000||$30,000|
|INTEREST RATE (FLAT)||2.78%||2.78%||2.78%||2.78%||2.78%||2.68%||2.98%|
|LOAN TENURE||5 years||5 years||5 years||5 years||5 years||5 years||5 years|
|TOTAL AMT. PAYABLE||$34,170||$34,170||$34,170||$34,170||$34,170||$34,020||$34,470|
|TOTAL INTEREST PAYABLE||$4,170||$4,170||$4,170||$4,170||$$4,170||$4,020||$4,470|
|MIN. LOAN AMT.||$10,000||$15,000||$10,000||$30,000||$10,000||$10,000||$10,000|
|MAX. LOAN TENURE||7 years||7 years||7 years||7 years||7 years||7 years||7 years|
Car Loan Rates as at May 2018. Car loans for ride hailing applications are higher.
NOTE: Car loan interest rates quoted are flat rates. Flat rates are about twice that when converted to effective rates.
Car Loan Tips and Traps
To help you choose the best car loan, here are some tips to follow and traps to avoid.
- Take a look at your credit score. Fix issues before you submit your application for a car loan.
- Compare your car loan options. Choose one that’s most suitable for your lifestyle and budget.
- Choose the loan term based on your financial situation. A long-term loan will require lower monthly payments, but the interest rates are higher. Meanwhile, a short-term loan will have
you shelling out a bigger amount of money, but you’ll pay your debts quicker.
- Read the contract carefully before you sign. Make sure you understand the terms and conditions and ask questions if there is anything ambiguous.
- Avoid borrowing the maximum amount that can be provided by the lender. A bigger loan means you will also have more monthly liability.
- The interest rates are actually higher than they seem. Remember this when you negotiate with a lender.
- Before you choose a car loan, make sure you can afford to make the monthly payments on top of other expenses associated with owning a car.
A Car Loan Calculator could Help You
Comparing different car loans before you purchase a vehicle will help you save money. A car loan calculator can help you find the best deals and lowest rates out there. You will also be able to
estimate monthly payments and get an idea of the car price that you can afford.
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