What You Need to Know About Car Loans?

It’s 2022, and we all want to be material gworls – with expensive taste but minus the hefty costs. Though, truth be told, it is hard enough living in sunny, pricey Singapore. Do you want to get Starbucks every day? You gotta work. Do you want to buy that branded bag? You gotta work. Do you want to get a car? You gotta work (harder)!

Unless you are rich-rich or made of gold, you would have to apply for a loan when purchasing a car in this expensive city. Take a common car you see on the road for example. A Japanese sedan car could easily cost you $100,000 or more, and we’re not even talking about continental or sports cars yet.

Anyone who has ever taken a loan would tell you that the important considerations are typically the interest rates, the benefits and the loan tenure. Don’t underestimate the power of a 0.3% difference in interest rates, because it can equate to a thousand dollars or two deviations of price points for the same car. There are many questions you might have now, and to help you, we will address a few common queries that many first-time car-buyers usually ask. They are:

Which car loan should you choose?

There is never a best car loan or a sure-win loan, simply because everyone’s needs and budgets are different. It’s not a bad thing to have plenty of choices to choose from; you just got to know what your priorities are when selecting a loan. For starters, are you in the market for a new or used car? What kind of car do you want, petrol or electric vehicle (EV)? Are you planning to renew the COE soon and thus, looking for optimal interest rates and benefits?

Every car loan service will offer various rewards, such as free COE renewal consultation, or loan tenures up to seven years. Therefore, it would be good to know what are your top considerations for a car loan, in order to properly select the ‘best’ option for you and your wallet.

What’s the minimum and maximum amount you can loan?

Sometimes, you just want to borrow a small sum of money to finance your purchase – that’s fine, you just have to google and see which loan service(s) can provide the lowest starting cost. UOB Car Loan has a minimum amount of $10,000, and a loan quantum of up to 70% of the purchase price or the bank’s valuation, whichever is lower.

In Singapore, the maximum amount you can loan is either 60% or 70% of the car’s open market value (OMV).

• Motor vehicle with OMV ≤ S$20,000: maximum LTV is 70%
• Motor vehicle with OMV > S$20,000: maximum LTV is 60%

Do note that it is not a full guarantee that you will receive the maximum Loan-to-Value (LTV). If you’re asking why it’s because your loan application also takes into account all your other debt obligations. Plus, for the loan to be approved, it has to fully comply with the Total Debt Servicing Ratio (TDSR) set by the Monetary Authority of Singapore (MAS). Click here to read about the TDSR thresholds and calculations.

What loan should you get for a green car?

By green, we do not mean literally – but hey, if you’re considering getting an EV, good for you! Many drivers are making the switch to go green, and it’s no wonder why: Check out our article on the amazing incentives of owning an EV in Singapore.

OCBC Eco-Car Loan is a sustainable option for electric cars, and for those who dislike long waiting periods, you will be happy to know that one of the key benefits of this eco-car loan is a quick 60-second approval for online application. Other savings include up to one-year free charging and a 1.68% per annum interest rate.

Which is better: a bank loan or an in-house loan?

As we mentioned, there is no one best or better option than the other. While it is no secret that the car loan interest rates from banks tend to be more competitive and slightly lower than that of car dealerships, it can be harder to get a bank car loan approval. Banks have stricter criteria and compliances than car dealerships and licensed moneylenders.

At the end of the day, whichever loan you decide on, don’t be hasty and be prepared to do some homework to ensure no ragrets. Work wisely and well within your means, and good luck with your loan application. Here’s a piece of advice you might find useful too: ‘3 Useful Tips for Car Buying in Singapore’