Given the fact that prices of cars are quite high in Singapore, you may not be able or willing to pay the full (or any) amount in cash. Fortunately, there are many car financing options and many companies offer car loans
There are several different types of loans, each with their own pro's and con's. There are several things to consider.
The more you borrow, the more the total interest will be (not in percentages, but in dollars). Obviously, 3% over $100.000 is more than 3% over $50.000. If you have money sitting in the bank doing nothing, you may want to consider a partial financing and pay part of the car with your own money. Ultimately, this will save you several thousands of dollars in the end, depending on how much of your own money you put in.
The maximum loan terms are:
A new car: 10 years
A used car younger than 10 years: 10 years minus the age of the car, or 7 years, whichever comes first
A car older than 10 years: 7 years or until the COE expires, whichever comes first
In choosing how long to take to pay back the full loan, you may consider which is more important (and affordable): the total amount of money you end up paying, or the monthly amount your can afford to pay. Obviously, 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 money, you may decide to have a shorter loan term, so the total costs at the end of the loan term are lower.
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, such as ABN Amro, offer different structures, where you pay a % over 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.
The average loan rates for car loans are now around 2.5% - 3.5% annually
Based on a 10-year loan, a $100.000 car will cost you around $1000 on monthly installments. You can drive a new, fully-financed average family car for around $500-700 per month on installments
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