High COEs and even higher taxes, it’s no news to us that Singapore is one of the most expensive places in the world to own a car.
Despite recent COE pricings climbing, we still see new cars on the road being registered all the time. Does this mean Singapore is full of rich people? (Yes). What does this mean for the average car buyer like you and I? A car might be a necessity due to family circumstance, work, or lifestyle, and it can be daunting deciding.
There are schemes which help make the car more affordable (with trade-offs), and in this article we will share more on them. We will not be going in depth into the mechanics (you can have that conversation with your dealer), but the numbers which will always be a constant, regardless of the scheme.
Please note we are not financial advisors. We merely hope to lift a bit of the veil when it comes to car loans in Singapore, so it helps you to make an informed decision.
Suppose you have a car to Trade-In:
First, we need to figure out your equity on the car. Equity is just the value of your car less any outstanding loan on it. Imagine that you have a 2015 Audi Q3 that is worth about $70,000 on the market, with a $50,000 settlement. This means you have $20,000 equity on the car. You’re looking at purchasing a nice-looking used C-Class at $150,000, we have the following option:
Plain & Simple
This is the most straightforward loan that you would be used to. If this works for you, congratulations on your new car! But what if you have better plans for that spare $40,000 lying around? (GME anybody?)
The cash up front has been reduced to just $10,000 however the trade-off comes in the monthly repayment. Due to the higher loan amount, the repayments will have to go up. Generally, every $10,000 more in a loan equates to $100 more per month.
The most extreme case, $0 downpayment. Not that the monthly has gone up due to 2 reasons, a higher loan amount and a higher interest rate. This scheme may not be suitable for most, but if your circumstance allows for it, why not?
Nothing to Trade-In?
Great! The numbers are even simpler then, just remove the equity portion from the above and you will have something like this:
Following MAS’s guidelines, we assume that the monthly payment should be < 30% of the total household income. Using the C-Class as an example (or any $150,000 car), the household income (yourself + your guarantor) should have about the following monthly income.
One very important point to note is that the value of your car fluctuates according to the market, it goes up and down depending on prevailing COE rates. The loan settlement amount however, is fixed from the very start. The higher the loan, the higher the settlement and the less equity you will have to go onto the next car.
When buying a car, it’s important to find the right balance between the initial payment and the maintenance of the monthly premiums. While 0% DP or $0 driveaway might seem attractive up front, maintaining the car can potentially be tiresome.
Thus choosing the right finance package depends on a few factors like the car, how long you intend to keep it, family size, etc. and the right loan for your friend may not be suitable for you.
Thinking of changing cars but not sure how to go about it?
Contact us below and we will be happy to take care of the numbers for you! There’s no obligations and no consultation fees, let Meyer Motors do all the leg work for you while you sit back and hunt for you next ride.
We hope to hear from you, drop us a comment or contact us directly!