Regardless of the cost of cars in Singapore, the price will not stop some of us from wanting to buy them. Though how many of us have a hundred grand just rolling around, waiting to be consumed on a car? Except you’ve been saving up for a vehicle quite seriously, you’ll presumably have to get a car loan.
And your car dealer knows. He’s just finding the right time to sweet talk you into his dealership’s in-house car financing scheme.
Don’t get into his trap, please! Car dealers are like girls from Thai disco; all graduated from the same hypnotism school. Everything began as a chat with no obligation, but 2 hours later, you walked out with empty pockets and no recollection.
Understand what your car financing options are before you tio gong tao.
OMV, COE, PARF… what these acronyms?
Well, of course, everyone knows about COE. That’s what makes cars in Singapore so very expensive. But guess what, COE isn’t the ONLY thing that jacks up car costs like crazy. Check out this list of elements that add up to the price of your car:
Component | Description |
---|---|
OMV (Open Market Value) | The “real” car buying prices, the EXCLUDING of Singapore’s taxes and duties, for example, COE. This is the cost of your car in countries with vehicle ownership that is not taxed back and forth, as it is here. |
COE (Certificate of Entitlement) | The bulk of your costs is purchasing a car here. This legal document lets you drive it in Singapore for either 5 or 10 years. It’s currently shy of $40,000, but the cost fluctuates significantly as it’s dependent on market demand. |
Additional Registration Fee (ARF) | When you register the car, you have to pay a tax. It depends on the OMV and is at least 100% of the OMV. |
PARF (Preferential Additional Registration Fee) | For cars less than ten (10) years old, you can get this PARF rebate if you choose to deregister it before its COE expires at the ten-year mark. This is pegged to the left OMV at the point of deregistration. |
Excise Duty | Excise duty is an extra tax you spend on certain goods (like alcohol & tobacco). For cars, it is 20% of the OMV. |
GST (Goods & Services Tax) | You have to spend GST on the OMV + excise duty. This is currently 7% but will grow to 9% in the coming years. |
How important do you need to know the exact breakdown of the costs?
Because if you need to borrow money to finance your car, the price you can borrow is dependent on the OMV, NOT the total cost of your vehicle. This leads me nicely to the next section.
How much can I borrow for a car loan?
You can borrow the maximum amount from your OMV car, depending on the updated regulations.
Open Market Value (OMV) | Maximum amount you can borrow |
---|---|
Up to $20,000 | 70% of the purchase or valuation price |
More than $20,000 | 60% of the purchase or valuation price |
Though, this only means a MAXIMUM. The actual amount a bank will allow to loan you may be lesser, as the bank will evaluate your monthly income, financial commitments, & credit score.
One (1) official regulation that applies to your car loan is the TDSR or Total Debt Servicing Ratio in Singapore. You can read the associated article for the full story, but in short, it implies that you can’t use more than 60% of your salary to repay loans.
So if most of your income is going to big housing loan installments or if you have substantial outstanding credit card bills to pay, you may not be able to get the complete 70%.
Ensure you’re financially prepared for the downpayment of 30% or more, which you need to pay in cash.
What Are The Differences Between Borrowing From A Bank and An Auto Dealer?
Differences between bank and auto dealer financing

There are a few critical differences between borrowing from a bank & your auto dealer. These include interest rates and the availability of balloon payments.
Interest Rates
Car loan rates in Singapore can seem more expensive than other kinds of loans. This is because they apply a flat rate method. A flat rate is where the interest rate is fixed and based on the original loan amount.
The interest rates offered by car dealers are generally above bank rates from 4 to 4.8% per annum. In addition, the commission of the car seller can also further increase car dealers’ interest rates.
If, however, your car dealer does not give you a car credit, you have the choice of getting the one with the most reasonable rate from the bank. Bank rates can range from 1.88% – 2.7% annually. Some banks may even give an interest rate of 3%, but this is normal for used cars.
Both banks & auto dealers offer loan tenures that range from 1 – 7 years. Both may charge early refund fees if you decide to make a future early reimbursement.
Here’s a table of interest amount between banks & auto dealers:
Bank | Auto dealer | |
---|---|---|
Loan tenure | 7 years | 7 years |
Loan amount | S$84,000 | S$84,000 |
Interest rate | 2.7% | 4.8% |
Interest amount | S$1,189 per month | S$1,336 per month |
Total interest paid | S$15,876 | S$28,224 |
Based on this instance, applying for a car loan from an auto dealer may cost you S$12,348 more at the end of the 7-year loan tenure.
Convenience & Loan Options
You can choose the dealer’s car loan more comfortably, as you can buy the car at the same place and deal with the funding. In addition, funding from the auto dealer can provide you with the possibility to negotiate the sale price.
On the other hand, you will have to apply via the bank’s website or physically to the office if you wish to take out a car loan from the bank.
One advantage of borrowing from a bank is that you have different lenders and credit options to choose from. This allows you to compare your choices to see which bank provides you with the best rates & terms.
Whether you are funding a new or a pre-owned car, both dealers & banks give car loans for both types of vehicles.
Availability Of Balloon Payments
Car dealers also give balloon payment schemes. But do you know what a balloon payment scheme is?
The payment scheme for ballons refers to a type of loan with a significant amount owing at the end of the loan term. For Singapore’s car funding, a balloon payment scheme is a loan scheme where a minimum PARF rebate is not included in the loan for cars. The monthly refunds are lowered.
To understand PARF, you will first have to understand the Additional Registration Fee (ARF). The ARF is based on your vehicle’s Open Market Value (OMV).
The following table shows how your vehicle ARF is calculated.
Vehicle OMV | ARF Rate |
---|---|
First S$20,000 | 100% |
Next S$30,000(i.e. S$20,001 to S$50,000) | 140% |
Above S$50,000 | 180% |
For example, if the car has an OMV of S$75,000:
Vehicle OMV(S$75,000) | ARF Rate | ARF Payable |
---|---|---|
First S$20,000 | 100% | 100% x S$20,000 = S$20,000 |
Next S$30,000 | 140% | 140% x S$30,000 = S$42,000 |
Above S$50,000 | 180% | 180% x S$25,000 = S$45,000 |
Total ARF | S$107,000 |
The total ARF will be $107,000.
The PARF rebate is then counted based on the car’s age when you deregister it. Even if the vehicle was registered locally or overseas, the car’s age depends on its date of registration. The table below shows the rebates turned on the date when who deregistered the vehicle.
Age at Deregistration | PARF Rebate |
---|---|
Not exceeding 5 years | 75% of ARF paid |
Above 5 but not exceeding 6 years | 70% of ARF paid |
Above 6 but not exceeding 7 years | 65% of ARF paid |
Above 7 but not exceeding 8 years | 60% of ARF paid |
Above 8 but not exceeding 9 years | 55% of ARF paid |
Above 9 but not exceeding 10 years | 50% of ARF paid |
Above 10 years | Nil |
Credit History Requirements
It’s good to take a car loan from a car dealer in that you may have a greater chance of getting your loan accepted. Auto dealers are usually more lenient in approving loans & do not focus much on credit history.
On the other hand, banks need a good credit history to get a loan approved. If you have a bad credit record, you may want to think about your car dealer’s borrowing or even a private financial institution.
What To Consider When Getting A Loan Through An Auto Dealer
Before asking for a car loan from your car dealer, here are two (2) things you should take note of.
How long should my car loan tenure be?
Usually, you can borrow the money for up to seven (7) years. But note that the longer the loan tenure, the more interest you are paying. As with personal loans, you should pick the shortest term you can handle. Just make sure the monthly installments are manageable.
The one big exception is if you’re taking a loan for an older used vehicle. Because of how COE is set up in Singapore, car loans are usually only for the first ten years of a car’s life, after which they are marked as “worthless.” Hence, if you’re buying an 8-year-old vehicle, your maximum loan tenure is two years as it has only two years of life left.
If you’re buying a “COE car,” specifically, a car >10 years old that requires COE renewal, it will be challenging to obtain a car loan, although there are some exceptions like the UOB COE Car Loan & Maybank’s car loans.
For more tips on used cars, please read our guide to buying used cars in Singapore here.
OK, got it. So what are my car financing choices?
There are three (3) options for you to choose from:
- Car dealer’s in-house financing package
- Bank loan through a car dealer
- Straight to a bank or financial institution
The path of least resistance is the car dealer’s in-house financing package. As I mentioned, your dealer will probably offer you a deal that’s very difficult to resist. He’s going to provide sweeteners like “overtrade,” which is a trick to let you borrow 70% instead of 60% even if your car’s OMV is more than $20,000. (That indicates your downpayment is only 30% rather than 40%.)
Car dealers also offer bank loans you know & love, like UOB, DBS, and OCBC. Your dealer will also deliver a seamless plus fuss-free experience for you & throw in freebies to boot. But it’s not because you’re entertaining or attractive or intelligent. It’s because banks give them a commission to sign you up.
The third option is to shop around for your car loan and go direct to a bank or financial institution. Certainly, you might not take an ego massage, but you’ll get the option to select a more favorable interest rate, saving you a nice piece of cash in the long run. Here are some famous car loan providers:
Interest rates of Car loan in Singapore (as of Feb 2019)
So, how much can you anticipate paying for a car loan? Currently, most banks give an interest rate of around 2.78% p.a.
Let’s illustrate a hypothetical scenario for some car loan rates. You intend to buy a $100,000 entry-level car with an OMV of $20,000. Estimating your income, financial commitments, and credit score check out means you only need to pay $30,000 upfront as your down payment.
You intend to borrow the remaining $70,000 for seven (7) years. Let’s check out the most affordable car loans you can get.
Car loan | Interest rate | Monthly instalment |
---|---|---|
Standard Chartered car loan | 2.68% p.a. | $990 |
Citibank car loan | 2.78% p.a. | $996 |
Century Tokyo Leasing | 2.78% p.a. | $996 |
DBS car loan | 2.78% p.a. | $996 |
Hitachi Capital car loan | 2.78% p.a. | $996 |
Hong Leong Finance car loan | 2.78% p.a. | $996 |
Maybank car loan | 2.78% p.a. | $996 |
OCBC car loan | 2.78% p.a. | $996 |
Sing Investments & Finance car loan | 2.78% p.a. | $996 |
UOB car loan | 2.78% p.a. | $996 |
Singapura Finance car loan | 2.79% p.a. | $1,008 |
Car loan interest rates vary all the time, and so do promotions, so before you act, be sure to check FR Capital car loan wizard for the latest rates.
What essential things do I need to know about car loans?
Apart from taking the interest rate (some financial institutions do not publish theirs) and working out the monthly installments, you also require to be aware of any extra costs such as:
Type of fee | Amount | Description |
---|---|---|
Processing/admin fee | At least $200 | Usually waived as long as the loan amount is above $20,000 |
Early settlement fee | At least 1% of outstanding loan | A penalty you must pay if you pay off the loan early, pegged to the outstanding loan amount |
Unpaid interest fee | Typically 20% of unpaid interest | Additional penalty for early settlement (on top of early settlement fee) |
You should also ensure that the bank loans your car money. Some banks don’t permit car loans or COE (>10 years old) for China-made vehicles. Before transferring your car ownership to your name, it’s good to get approval in principle.
I’m Good to Go! How do I apply for a car loan?
Having done the study, you can, of course, go back to your car dealer plus please ask them to connect you to your chosen bank. However, be here informed that any online exclusive promo rates may not implement then.
If you want to go to the bank directly, you will require to submit an online application or make an appointment. It helps to have these documents beneficial:
- Vehicle Sales Agreement
- Proof of income, for example, CPF statement, income tax statement, or salary payslip
- Proof of existing financial commitments, for example, personal loan, housing loan
- Employment details, for example, monthly income, employer name
Need a bit more information? You can also submit an inquiry through FR Capital, and our specialists will guide you through the process.
Car loans: going through the bank directly or to your dealer? Tell us why in the comments.
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About FR Capital
FR Capitalis a Singapore consultancy firm that helps SMEs to secure business loans from banks and financial institutions. We concentrate on SME finance, and through our expertise and network, we help clients secure funding with low-interest rates efficiently and hassle-free.