Nowadays it is impossible to buy a car without a loan unless you have saved up since childhood, got an inheritance from a rich relative or won the Toto jackpot prize.
Why do Singaporeans need a car?
Singapore may be a small island-state, but nobody can deny that most of us still prefer to drive a car. While the public transport is better compared to those of the neighboring countries, the convenience of having a car still remains enticing.
If your home is far from any MRT station, then it would be better to have your own ride especially if you have to travel with kids and elderly parents. You can easy fold their walkers or strollers and fit them in the trunk of your car. If you have kids, it would also be embarrassing if they through tantrums right at the middle of the ride.
A car is also best if you are working in the same area where your spouse works too. You can also drop off your children. This saves on your fare and even gives you more time to be together. In case you need to go home late at night, you can avoid astounding midnight surcharges.
What to consider when buying a car with an auto loan?
Getting a car loan is not as simple as browsing the web for a pretty car. You need time to consider certain factors which will help you save up and get your car at ease.
- Car loan restrictions
Car loan restriction has been alleviated in 2016. Most banks and financial institutions can now offer a loan amounting to up to 70% of the car’s purchase price or open market value (OMV). The term can also span up to seven (7) years.
On the other hand, you need to contemplate on how much you will pay as down payment and what term you will get. The higher your down payment, the lower amount you have to borrow. This means you can lessen the amount you have to pay.
Note that before you look for a car, get an in-principle approval. This will help get a car within your means. It is easy to fall for a Porche, but the budget will keep you grounded in reality.
- On-hand cash
As said above, you need to pay a certain downpayment. You will still need to have enough funds to cover the downpayment before you can get your car. So before you apply for a car, make sure you have to save up something in the bank.
- Car insurance
When buying a car, there is no way around the insurance. Though it may seem to be an unnecessary added cost, the law mandates that every car in Singapore has to have it. When getting a car loan, the car insurance is usually included in it. Banks usually require that you choose an insurance affiliated to them, while some don’t.
- Certificate of Entitlement (COE)
COE consists of five (5) categories which are Cat A (Cars 1600CC below & Taxi), B (Cars above 1600CC), C (Goods Vehicle & Bus), D (Motorcycles), and E (Open). You need to place a bid to get a COE. The price of the COE changes and so as the yearly quota.
- Interest Rate
Interest rates vary depending on the bank and other financing institutions. Take your time to compare the interest rates, but do not lose sight of other fees.
ARF is a tax you have to pay based on the car’s Open Market Value (OMV). PARF benefit is given to those who sell their cars through export or scrap before the unit reaches 10 years.
Road Tax must be paid even before you can use your car. You must renew your tax every six months or every year by paying the fee and passing a list of prerequisites such as periodic vehicle inspection and obtain motor insurance coverage.
There are also other fees to pay such as a Registration Fee of S$140, Excise Duty (collected by Singapore Customs) and Special Tax (levied on diesel cars).
So if you think you really need a car, where should you get a car loan? Most individual would think that the banks will be the obvious choice. However, not everyone can have an approval from banks.
Why banks reject your car loan?
- You have too many financial commitments which make you a high-risk borrower. Too many debts and financial responsibilities will eat away your income. Banks usually consider the Total Debt Servicing Ratio (TDSR). You will get declined if the bank feels that you can’t repay the car loan at ease.
- Your income didn’t reach the required amount because banks are strict with income to ensure that you can pay the monthly amortizations. Some banks require their borrowers to have an income at least three times the monthly installments.
- It is no secret that banks are usually into credit scores to evaluate your creditworthiness. Having a bad credit score gives the impression that you are a “default risk” borrower.
Alternative for Bank’s Car Loans
Cash Mart offers a more flexible car loan that will fit your personal needs because cash mart believes that each borrower has a unique predicament. Talk to Cash Mart’s auto loan experts by dropping by the office at 277 Balestier Road, Singapore or give them a call at +65 6397 4111 today. Experience the best car loan you deserve.
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