We don’t have to tell you that living in Singapore can cost you an arm and a leg, and in some instances, quite literally. Only in this country will a car can cost you almost as much as a HDB flat. A brand new BMW 740LI with COE, costs about $450,000, more than the cost of a brand new four-room flat. Because of the high cost of car ownership, most car owners have to take on car loans and the procedure is really rather simple on the surface:

Step 1 – Agree on the vehicle price and other details

Step 2 – Provide a photocopied version of your

  • IC/Passport
  • Last two pay stubs
  • Statement of Employment
  • Credit History

Step 3 – Wait for a call from the bank/financial institution/car dealer – You may be called in for an

Step 4 – Sign the loan agreement, the car registration, and ownership should be transferred to you

That is the general procedure for getting a car loan, but how do you know if you’re getting the most out of your car loan?

Read below for some tips on how to understand a bit more about car loans in Singapore.

  • Tight loan restrictions

As of 2013 new loan restrictions were imposed by MAS to cool a red hot car market. The three major changes were:

  • Car loans were capped at a maximum tenure of five years
  • For motor vehicles with OMVs that do not exceed $20,000 the maximum loan to value (LTV) is 60%
  • For motor vehicles with OMVs that exceed $20,000 the maximum loan to value (LTV) is 50%

What does this mean for you?

If you were trying to buy that BMW 740LI, which we spoke about earlier for example, which costs about $450,000, you’d have to fork over more than $225,000 in cash, with the remaining $225,000+ payable over five years.

Using a less expensive car as an example, a new Toyota Corolla Altis costs about $113,888. So you’d have to pay about $57,000 in cash upfront with the remainder paid over 5 years.

  • You don’t have to take it from your dealer

Most car dealers will allow you to get your car along with your car loan from the same company. Most car owners choose to do so, after all, it’s convenient right? Always remember that you have a choice. Buying a car from a specific dealer does not necessarily mean that you have to take a loan through them; though there are some advantages to doing so.

Most dealers have an arrangement with specific banks or finance companies, so you may not always be getting the most bang for your buck. Don’t be afraid to reject pushy car dealers if you’ve seen or believe that you can get a better deal elsewhere.

  • If you choose to get the loan through your dealer

Most dealers get a commission for arranging financing for your purchase. So if you’re getting your loan through them, make sure that you use it to your best advantage. Getting a loan through them can be used as leverage to negotiate a slightly better price, in fact if you choose to pay cash for a car most dealers will be much less willing to negotiate a price with you.

For more information on owning a car, explore these car articles.

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