Everyone knows how expensive it is to own a car in Singapore. It doesn’t help that car-related things aren’t the simplest or easiest to figure out. Really, there are a thousand and one things to think about from how you are going to finance the car, road tax, auto insurance, to the various things that make up the cost of buying the car.
When it comes to financing a new car, consumers have options. They can get a car loan from the bank in the traditional way or go to finance companies. There are of course advantages and disadvantages to each.
Intrigued by the idea of ââdriving a new car without having to fork out any cash up front? Read on to find out why a $ 0 down car is bigger than it looks … even if it sounds really good in theory.
How much can you borrow with a car loan?
Banks are required to follow regulations set by the Monetary Authority of Singapore. For auto loans to consumers, the maximum loan term is seven years.
The loan amount that you might be eligible to borrow depends on the free market value (MOV) of your vehicle. For the uninitiated, the Loan-to-Value (LTV) ratio is the loan amount expressed as a percentage of the purchase price of the car (including taxes and COE).
- Motor vehicle with OMV â¤ $ 20,000: Maximum LTV is 70 percent
- Motor vehicle with OMV> $ 20,000: maximum LTV is 60 percent
However, it is up to the bank to decide whether or not to extend the maximum LTV to you. The bank will take all of your other debts into consideration before determining how much of the car loan you can actually claim. Your car loan must follow the rules of the total debt service ratio.
As you can imagine, a car loan will require you to shell out some cash on your end. While you may have to shell out more money up front with the larger down payment required to close the deal, be aware that interest rates are lower. This results in a lower amount borrowed.
Is a $ 0 car in Singapore still possible?
Cars with $ 0 down payment are possible through finance companies that partner directly with car dealerships. They offer potential car buyers an attractive $ 0 down payment and $ 0 car ride packages in the name of making things affordable and accessible to everyone.
As a car buyer, you technically borrow 100% from the finance company that takes the risk of lending you the full amount. This is how you can buy a new car without having to pay a down payment.
Implications of the $ 0 down payment route
While it certainly sounds like a dream to drive away with a new car without paying anything up front, the reality is far from it. These finance companies are not charities – they make money by charging very high interest rates, already carefully built into the total price offered to potential clients.
Your new car will be more expensive in every way, although it is arguably the easiest way for you to own a car, especially if you don’t have the funds to do so at the time. Expect higher monthly repayments and a higher overall bill for your new car.
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If you are not able to repay the loan halfway, you will lose even more at the end of the day when you have no choice but to sell the car. Those in such a precarious situation often have to shell out a ton of money due to their outstanding loan from the finance company and very high interest charges.
Here’s a quick illustration to help you better understand why things are the way they are:
Suppose you take out a loan of 3.5% per annum for 10 years, pay $ 0 down payment for your $ 100,000 car which has a PARF value of S $ 3,500.
|Interest incurred||$ 100,000 x 3.5% pa x 10 years = $ 35,000|
|Total cost||$ 100,000 + $ 35,000 = $ 135,000|
|Annual cost of the loan||S $ 135,000 / 10 years = $ 13,500|
|Monthly deposit||S $ 135,000 / 120 months = $ 1,125|
You then sell your car after only three years. Suppose your car has an annual depreciation of $ 7,000.
|Selling a car: things to consider||Calculations|
|Trade-in price||($ 7,000 x 7 years remaining) + $ 3,500 of PARF value + $ 5,000 of dealer token = $ 57,500|
|Loan in progress (before the rule of 78)||$ 13,500 x 7 = $ 94,500|
|Amount you will have to pay to cancel the loan||$ 94,500 – $ 57,500 = $ 37,000|
Who could be those who are willing to accept the high cost and commitment associated with $ 0 cars? Those who are in desperate need of a car, such as people with young children, the elderly and / or less physically mobile family members.
To consider: legal alternative with low initial costs
If you need a car but can’t quite afford it yet, car leasing may be an option if you aren’t interested in taking rideshare services all the time and don’t have to. not enough savings to pay the car down payment.
There are many car rental companies (eg VINCAR, Dickson Auto Solution, Bolt Car Leasing, Dream Car Leasing, Carro) that offer this option whether you are looking to rent a new or used car. However, be sure to calculate the numbers – the monthly costs of renting a car could actually be higher than if you had to buy a car! Determined to own a car?
ALSO READ: Is it finally worth buying an electric car in Singapore?
Among the list of things to wash, auto insurance is not negotiable. It is mandatory if you want to drive a car in Singapore. Learn about the different comprehensive auto insurance plans offered by different auto insurance providers in Singapore and compare them to find the one that best suits your needs and budget.