Given the fact that the prices of cars in Singapore are very high, you may not be able/ willing to pay the full (or any) amount of cash. Fortunately, there are car financing options, and most banks in Singapore offer car loans.

The Expat Guide – Car Loans

Full Financing VS Down Payment

Since 2013, fully financing your car is no longer possible. You are required to pay at least 40%-50% of the car price on your own. Even so, the higher your loan, the higher the interest as well (Not in percentage, but in dollars), meaning to say that well, 3% of $100,000 is more than 3% in $50,000 if you get the drift. If you can afford to pay at least 50% of your car price on your own, it could possibly be wise to do so than to loan a large amount and pay more than you should over time due to interest.

Loan Term

The maximum loan term in Singapore is 7 years (updated: MAS relaxed car loan repayment period from 5 to 7 years in 2016). In choosing how long you want to take to pay back the loan, you may want to consider which is more important: the total amount of money you end up paying, or the monthly amount you can afford to pay. The longer the loan term, the more interest you pay in the end. At the same time, the lower your monthly installments will be. If you have a limited monthly income, you may decide to take up the maximum loan term, as the monthly costs will be lower. If you earn more, you may decide to have a shorter loan term, so the total costs at the end of the loan term are lower.

Loan Type

Most companies offer a linear loan type. While a flat percentage may seem quite low, you may end up paying as much as 25% of the total loan amount in interest. Some banks offer different structures, where you pay a percentage of the outstanding loan amount, not the full loan amount. Hence, your installments differ per month or per year. At the end of the day, this may prove to be much cheaper. Different banks and financing companies offer different rates and loan pre-requisites, so it is advisable that you do your shopping around. Always make sure you take a loan from a reputable company.

Rates

The average loan rates for car loans are now around 2.5% – 3.5% annually. You can use this tool to easily compare various different car financing rates, and find one that suits your needs!