Thinking of buying a new car? Before you sign on the dotted line for whatever is on offer from your bank or car dealership, take a few minutes to compare car loans from a range of providers.
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It depends on the Open Market Value (OMV) of the car you intend to buy. If the OMV is $20,000 or below, the Monetary Authority of Singapore (MAS) regulation says that you can borrow up to 70% of the purchase price (including COE and taxes). However, a new car will definitely cost more than $20,000, and in this case you are allowed to borrow up to 60% of the purchase price (including COE and taxes). But if you are operating a company, you may be able to borrow up to 90% of the OMV if you register as a private car hire company.
Not necessarily. Even though the bank may be allowed to lend you 70% of the car’s OMV, it does not mean that they are obliged to do so. If you have a poor credit score you will be unlikely to qualify for the full 70% loan, so it’s a good idea to build up your credit score before applying if you want to qualify for the full percentage.
You also won’t be able to borrow the full 70% if your total loan repayments (this includes your existing debt repayments plus the new loan) amount to more than 60% of your income. This is the Total Debt Servicing Ratio (TDSR) regulation imposed by the Monetary Authority of Singapore (MAS).
The maximum repayment period is seven years, but some lenders may offer only shorter repayment periods. The longer the repayment period, the lower your monthly repayments will be, but the more interest you will pay in total.
If you intend to borrow to buy a home, getting a car loan before you have locked in your home loan is not a good idea. Your home lender will look at your Total Debt Servicing Ratio (TDSR), and if you already have a car loan it will negatively impact your TDSR. Car loan repayments could take up a large part of your monthly income, and since total loan repayments are capped at 60% of your income, there may not be enough room left to accommodate home loan repayments.
Easier, perhaps, but possibly more expensive. The car dealer’s main interest is in selling you the car, not in getting you the best finance deal. And he will certainly be earning a commission on the finance, which is built into your cost. (Finty gets a commission too, but we’re lean and hungry, and competitive forces keep our margins really low.) You could get talked into a deal which is not really suitable for you, and a loan term that is longer than you need and will result in you paying more interest in total. You will normally score a better deal by separating the car purchase and the financing.