Useful Tips and Mistakes to Avoid When Financing a Vehicle in Hong Kong

A car loan is a popular way of buying a vehicle in Hong Kong. Although a private car is not a necessity in this region, there are people who find convenience in having their own car.

One thing should be made clear: a car is not an investment. It is not like a real estate property that will appreciate in value. This is why you are encouraged but proceed with caution before you buy a vehicle – especially if you plan on using a loan to finance the purchase.

Cars depreciate in value and paying interest on it makes borrowing a car loan less desirable. However, if you lack the cash to pay for a car and it is proving to be a necessity, then you can borrow an auto loan – as long as you make sure you will be smart about it.

How To Be Smart When Borrowing A Car Loan in Hong Kong

Tips to be smart when buying a car with a loan

Here are various ways that you can be smart with your car loan:

Know your loan options.

Start by knowing your options. Knowledge is always the best defence against making a mistake. If you have all the facts, like for instance, your loan options, you can make a smart decision about the car loan that you will borrow.

There are usually two ways to finance your car buying dreams. One is through an actual car loan that is specifically created for this type of transaction. This is considered a secured loan because the vehicle you bought will act as the collateral for the loan.

The other option is to get a personal loan. This is an unsecured loan that you can use on just about anything. If you got approved for an HK$200,000 personal loan and the car costs HK$150,000, you have HK$50,000 left to spend however you wish.

Apart from these differences, a car loan will cost less in terms of interest because it is a secured loan. Consider your financial situation when you are deciding what loan to borrow.


Have a good credit score.

Regardless of the type of loan, you will borrow, it is important to have a good credit score before you apply. This will help you get a low-interest rate on your car loan because you will be perceived to be a low-risk borrower. A good credit score is an indication that you are a good credit holder and that you can pay your dues even with minimal collection efforts.


Compare loans across lenders and dealers.

Another way to be smart when borrowing a car loan is to compare loans from different lenders and dealers. This is the best way for you to choose the loan that offers the best rate and terms.

For instance, an auto loan from Hong Leong Bank can offer up to 90% of the car’s value and a 108-month term. United Overseas Bank offers as low as 6.1% rates for new cars and 7.2% for used cars. Look at the interest rate, terms, and even the customer service when choosing the lender or dealer that will help you finance your car loan.


Choose a short-term loan.

Since a car depreciates in value, it is advised that you get a loan that will cost you the least when it comes to the interest. Most people will look at the interest rate. Of course, the first thing you will do is to choose the one with the lowest interest rate.

However, that is not the only way you can lower the interest. If you choose a shorter term, the interest will not cost you as much. Not only will the rate be lower, the accrued interest amount will also be smaller.

You will make higher monthly payments, but it will end up with a lower interest amount.


Be ready for a 20% deposit.

The more deposit you have, the less amount you have to loan. If you want to be smart with your car loan, save as much deposit as you can. The ideal deposit is 20%. If you can make it bigger, you do not have to borrow a lot of money. You can fully own your car in a short time.


Pay cash for extra expenses.

Finally, you have to be ready to pay cash for the extra expenses associated with buying a car. For instance, a First Registration Tax will be charged for the first registration of new cars. There are other taxes and fees to be paid before you can register your vehicle.

You should also pay for a motor insurance. Make sure you have the cash for this instead of paying for them through a loan. That will bloat the amount you will spend on the car purchase.


Mistakes you should avoid when buying a car in Hong Kong

There are three important mistakes that you should avoid when you are buying a car in Hong Kong – especially if you want to use a car loan to pay for it.


Not doing due diligence.

Make sure the car owner or dealer is legitimate. There are some who will tamper with the mileage of the car so they can charge more for it. While your search can start online, do not believe everything that you read. Do your research on the company and read about reviews. Some scammers will give you a low price for the car while hiding the defects. Be careful of these people. If a price seems too good to be true, it probably is. If you know someone who just bought a car, ask where they got it. You can start your car search there.


Failing to inspect the car.

According to the article published in the South China Morning Post, there are a lot of new cars getting complaints because of malfunctions. You want to make sure that you will not have the same problem.

If you do not have the skill to check the car, you can get help from a mechanic that you trust. You can also get one from the Hong Kong Automobile Association.


Not paying the registration fees, etc.

Finally, you have to make sure you will pay all the registration fees as mandated by the government. Some people are too excited to use their cars that they fail to complete the necessary registrations. For new cars, this is easy. But those who buy second-hand cars sometimes do not prioritize transferring the registration under their name. If you want to know more about the registration, visit for more information.


Recommend0 recommendationsPublished in Car, Hong Kong
Previous articleFiguring Life Out After Devastating Failures & Detours
Next article5 Common Credit Card Mistakes for Hong Kong Card Holders
The New Savvy Contributors: Posts are by our contributors. Views, thoughts, and opinions expressed in the articles are written and contributed by the contributors. They belong to the contributor or organisation that have so kindly written it. They do not belong to The New Savvy. --- Due to a technical misstep on our part, some articles have been wrongly attributed to the wrong contributors. We sincerely apologize for this. We would like to request your assistance to resolve this matter. If you contributed articles to us in the past, can you write to with your name and articles? We would then work as swiftly as possible to reattribute the articles to the rightful owners.   ----- The New Savvy makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses injuries, or damages arising from its display or use. All information is provided on an as-is basis. It is the reader’s responsibility to verify their own facts. The facts and numbers are made to be as accurate as possible, especially at the time of publication. Please note that these are always subject to change, revision, and rethinking at any time. Please do not hold The New Savvy responsible for any updates or changes. The authors and The New Savvy are not to be held responsible for the misuse, reuse, recycled and cited and/or uncited copies of content within this blog by others.