To many Singaporeans, a car is a necessity. In most cases, people focus on the type of car to buy and where to buy it, forgetting other important details in the process.
But it’s crucial to think about car financing, how to get a car loan, and the repayment plan. Before we discuss that though, it’s important to know how to calculate car loan interest Singapore.
In this article, we’ll show you how to use a car loan calculator, which lenders offer the best deals, and more.
How Much Can You Borrow For A Car Loan?
The amount you can borrow for a car loan depends on several factors. Ideally, you get a 70% car loan if the vehicle’s open market valuation (OMV) is $20,000 or less.
If the OMV is higher than $20,000, you can get 60% car financing.
Note that you may actually get a lower value than the 70% or 60% financing because banks will also evaluate your credit score.
Banks calculate your credit score based on your monthly income, financial commitments such as personal loans, and your previous loan repayment habits.
The Singapore government uses the Total Debt Servicing Ratio (TDSR) to ensure borrowers do not use more than 55% of their earnings to pay loans.
Your income thus plays a major role in how much car loan you can borrow.
It’s also important to note that you need to have some cash to cater for the downpayment of the car.
The downpayment on a car could be 30% or more – depending on how much financing you get from lenders.
How Long Should Your Car Loan Tenure Be?
According to the Monetary Authority of Singapore (MAS), the maximum loan repayment for a vehicle is seven years.
However, for a used car, the maximum payment period is four years.
As you think about how long you want to take to repay the loan, you should understand that the longer you take, the more interest you’ll pay.
How To Use A Car Loan Calculator
As much as it’s possible to calculate a car loan manually, using a car loan calculator in Singapore saves you time and energy so you can know how to calculate car loan interest Singapore.
Firstly, a car loan calculator helps you determine your monthly loan repayments. When you have an idea of how much you need to pay, you will manage your finances better.
Besides, a car loan calculator will help you compare the best loan offers in the market so that you pick the best for your needs.
To calculate the monthly repayment on your car loan in Singapore, here are the things you need.
Total Cost Of The Vehicle
You need to know the value of the car you want, minus the downpayment you need to pay in cash.
It, therefore, means that the total amount you will pay during the loan tenure will be lower than the total cost you would have to pay if you paid some amount from your pocket.
Interest Rate
You also need to determine the cost of the loan, often known as the interest rate. There is no standard interest rate on car loans in Singapore.
Banks determine the interest rate based on your credit score. It is therefore crucial to try to improve your credit score before you decide to take a car loan.
Once you type in the total cost of the vehicle and the interest rate, you will get results of the total interest you’ll pay at the end of the loan tenure.
The calculator will give you results of your monthly payments. The monthly amount you pay is partly used to clear the principal and the interest.
A car loan calculator in Singapore will also inform you of the principal you will need to pay after the initial downpayment is substracted.
How To Lower Your Car Loan Payment
A car depreciates in value pretty fast, which is why it is often termed as a liability.
As such, it’s advisable to repay your car loan in Singapore as fast as you can. Here are some tips on how to lower your car loan payment.
Determine Penalties For Early Repayment
Banks make profit from the interest you pay on your loan. If you repay your car loan earlier, it means that the bank will make less profit.
In this regard, most lenders charge an early repayment penalty which is often fixed at 20%.
Regardless of that, if you do your calculations right, you may still make some savings by repaying your loan earlier than the stipulated time.
Make Lump Sum Payments
Sometimes you may get tax refunds, bonuses, or salary increments. You can use such funds to repay your car loan while staying on top of your monthly premiums.
This way, you should manage to repay your car loan in less than 64 months.
Consider Car Loan Refinancing
Car loan refinancing is another option to explore if you’re looking to lower your car loan payment in Singapore.
You can consider loan refinancing if you’ve come across a licensed money lender Singapore with better repayment terms, customer service, and support.
If you had a poor credit score at the time of picking a car loan, refinancing helps you approach another lender to help you repay the original loan.
The new lender then calculates the new loan using new terms. After which, you may end up paying lower interest rates, and lower monthly payments.
If you decide to opt for car loan refinancing, you need to consider several things.
Firstly, check the processing fees. If they are high, it may not be an economically viable option.
You also need to ask whether your new lender penalises for early repayments in case you want to clear your loan faster.
It’s also important that you don’t get tempted by extended loan terms whenever you want to switch to another lender.
When you extend the loan tenure, you will end up paying more in interest than you would have.
Other Factors To Consider When Taking A Car Loan In Singapore
Apart from calculating the monthly repayments and interest rates, there are other factors to consider when choosing a car loan in Singapore.
Processing Fee
The processing fee is often about $200 for car loans. However, for loans above $20,000, this processing fee can get waived depending on the money lender you’re working with.
Early Repayment Penalty
You also need to evaluate the economic impact of a possible early loan settlement. The penalty is usually 1% of the outstanding loan.
In most cases, the penalty will still be less than the total amount you would need to pay if you had opted for the full loan tenure.
Unpaid Interest Rate
Banks will also calculate a penalty for unpaid interest. The unpaid interest rate penalty is calculated as a 20% of outstanding interest rate.
Where Your Car Is Made
Investigate whether the lender you want to work with has some restrictions on where cars are manufactured. For instance, some lenders in Singapore do not give loans for purchase of cars made in China.
Age Of The Car
Do not order the car before you’re sure whether the bank will finance it based on its year of manufacture. Most banks do not offer car loans on vehicles that are older than 10 years.
Ensure that your lender has approved your loan principal before transferring ownership of the car.
What COE, OMV And PARF Mean
To properly understand how car loans in Singapore work, here are some terms we need to define.
Open Market Value (OMV)
The OMV refers to the cost of importing your vehicle into Singapore before taxes, registration fees, and dealer’s margins. The cost, however, includes the buying price, cost of freight, insurance, and delivery.
Additional Registration Fees (ARF)
ARF is a form of tax applied on your car upon registration. The OMV of your car determines the ARF. Usually, if your car has an OMV of up to $20,000 the value is equal to ARF. Here is a table on how to calculate ARF.
| Value Of Car | ARF Rate |
|---|---|
| Initial $20,000 | 100% |
| Next $30,000 (value from $20,001 to $50,000) | 140% |
| Above $50,000 (remaining OMV above $50,000) | 180% |
De-registration Value
A car’s de-registration value refers to the addition of COE and PARF rebates. Once you de-register your vehicle, you’re entitled to a rebate from the Land Transport Authority (LTA).
But you only get your rebate if the car has not reached its COE expiration in the 10th year. The amount is also dependent on the last quota premium (QP) you paid.
Cost Of Entitlement (COE)
The cost of entitlement is a fee you pay to LTA for using your car. The COE expires in 10 years, after which you need to renew it.
You can either renew the COE or de-register your car, which entitles you to the PARF rebate. While you don’t get the PARF rebate if you renew the COE, you will get your COE rebate.
Preferential Additional Registration Fee (PARF)
As mentioned above, de-registering your vehicle earns you PARF and COE rebates. But the PARF rebate is only available for cars that meet these eligibility criteria:
- De-registered cars that are less than 10 years old
- Non-electric cars deregistered when less than eight years old
- Electric cars registered from Sep 2022 that are no more than 10 years old at the time of de-registering
- Cars that do not have a history of being laid up
Where To Get A Car Loan in Singapore
Are you ready to take on a car loan but aren’t sure of the options you have? Here are two options.
Through A Dealer
In Singapore, there are many car dealers that have financing options for their customers.
Most dealers will offer you a deal so sweet that you can’t resist.
Often, they will offer you 70% financing so that you don’t have to pay a lot from your pocket.
Some dealers will also connect you to banks for financing. Dealers get into agreements with banks and get a commission if they sign up customers.
Directly Through Your Bank Or Financial Institution
The other option is going directly through your bank.
The good thing about working with a financial institution is that you’ll get better interest rates and more financing. Your bank will however peg your eligibility to your credit score.
Here is a table that shows some of the banks offering car loans in Singapore and their rates.
| Lender | Used Car Interest Rate | New Car Interest Rate |
|---|---|---|
| United Overseas Bank | 2.78% | 2.48% |
| OCBC | 2.48% | 2.48% |
| Maybank | 2.48% | 2.48% |
| DBS | 2.48% | 2.48% |
| Tokyo Century Leasing | 2.68% | 2.68% |
| Hong Leong Finance | 2.48% | 2.48% |
Acquire A Car Loan Fast
Now that you know how to calculate car loan interest Singapore, let’s get down to business. You want to make sure that you borrow a car loan from a reputable licensed money lender in Singapore.
Your best option is Lending Bee, a financial institution that has been in operation since 2018.
With Lending Bee, getting a car loan is as easy as proving that you’re 21 years and above, showing proof of income, and producing the car’s sales agreement.
We have some of the best interest rates in the market and we offer loans to borrowers with imperfect credit scores.
So what are you waiting for? Contact us today or apply for a loan now to get one step closer to owning your dream car.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.
