Guide on Car Loan in Singapore


Though public transportation in Singapore is amazingly efficient, you may feel the necessity of buying a car at some point in your life. A car of your own will allow you to travel faster and offer some flexibility that you won’t get in any public transport.

But not all of us have enough savings to buy a vehicle without any financial aid. So, how do you choose the best car loan?

Don’t worry; in this guide on car loan in Singapore, we’ve got you covered! Here we will discuss everything you need to know about this process to make the correct decision with confidence.

We know you are eager to find out more. So, let’s get started, shall we?


Car Loan Rates in Singapore: How Does It Work?

A car loan is a contract between you and the lender. When your loan application gets approved, you will get money to purchase an automobile of your choice. In exchange, you have to pay a monthly installment to repay your borrowed amount, including interests.

The car loan comes with long-term tenure in Singapore, from three to seven years. However, if you borrow money and plan to pay it off in seven years, you will need to pay more than a 5-year loan’s interest.

In addition, no matter which financial institute you choose, you will never get the total amount of your vehicle’s open market value (OMV). Yes, you will only get 70% or 60% money, and you will have to gather the down payment of your car by yourself.

Therefore, before getting a loan, having some savings pays out.


How Much Can I Borrow As a Car Loan?

As we’ve revealed before, you won’t get the full amount of your vehicle’s OMV. Here is the maximum amount you can get according to the regulations.

Open Market ValueMaximum Loan Amount

So, you can see, if you are buying a vehicle within S$20,000, you will receive 70% of the total price. And when your car costs more than S$20,000, you will get 60% of the total OMV.

As a result, you will need to gather the rest of 30% or 40% cash before you think about getting a loan. Please select a vehicle you like and save money according to its open market value.


Car Loan Interest in Singapore – How Much Do I Have to Pay?

A loan contract consists of the actual amount of borrowed money and the interest. And the total interest amount will depend on the length of your loan repayment period.

If you go for a long-term loan and decide to pay it off in 50-72 months, you will have to pay more interest than a 36-month loan. Let us explain the whole scenario.

Suppose you borrowed S$20,000 to buy your car and agreed at a 3.75% interest rate. So here is the amount you will have to pay over the years.

Loan AmountInterest RateLoan TermMonthly InstallmentTotal Interest

Well, if you decide to pay your loan in 60 months instead of 36 months, you will have to pay $788 more, and that’s a lot!

Therefore, before applying for a loan, make sure you can pay off the total amount in the shortest amount of time. Otherwise, you may have more interest than the actual amount you borrowed!


Car Financing in Singapore: What Are the Options We Have?

When you are thinking about getting a car loan in Singapore, you have two options; a bank loan and car dealer’s financing. Now let’s talk about these options in detail.


Bank Loan for Cars

In Singapore, you can borrow money from financial institutes to buy your desired vehicle. However, many conditions will be applied if you take this loan.

When you select a bank or other official lenders for taking up a loan, you will have an optimal experience. If you choose this option, you can compare many deals side by side and pick the best one for yourself.


Car Dealer’s Financing

Many car dealers in Singapore work with banks, and they will help your loan get approved. The dealer usually handles most of the paperwork, so you won’t have to worry about any hassle at all.

However, you won’t have the liberty to pick a fair deal after making some comparisons when you choose this option. You will have to accept the dealer’s offer. Moreover, you may need to spend some extra money as commission.

So, if you want to avoid these issues, going for a direct bank loan will be the wisest idea.


What Types of Car Loans Are Available in Singapore?

Both financial institutes and banks give car loans, providing secure loans for vehicles. Your car itself is collateral, and if you fail to pay your installments on time, you will be penalized.

As it is a secure loan, it will get easily approved, which is good news. However, the borrowers must meet all the requirements and have a great credit score. Otherwise, things can get a bit tough.

You can take up different types of loans, for a new car or a used one, whichever you prefer. Well, here are the choices you will get once you decide to borrow money to buy your favorite vehicle.


New Car Loan

If you want to purchase a brand new car, this loan is the perfect option. Almost every bank and financial institutes offer citizens loans to buy new cars from the showrooms of brand or any authorized dealer.

The repayment period will be from one year to 7 years in this loan. You can choose your tenure period according to your affordability. As long as you meet all the criteria and have a good credit score, you will get your money pretty easily.


Used Car Loan

Used car loan options are for those who don’t have much money but still need a vehicle to run around. And the criteria for this loan will differ depending on the car’s condition.


Commercial Car Loan

Are you thinking about starting a business with your vehicles? If so, you can go for this type of car loan without any hesitation.

You can only take this loan if you intend to use the vehicles for commercial purposes. These cars can be used for grabs or as taxicabs; there is no restriction.


Car Loan Refinancing

The borrowers, who already have a car loan, can switch from one bank to the other with the help of car loan financing. When you go to a new bank and transfer the loan, the bank will repay the entire borrowed amount. And then you can refinance the car on recently agreed terms.


What Is the Correct Way to Compare Car Loans?

Before committing to a car loan, you need to compare multiple deals to choose the best offer. But the thing is, how do you know that which one will be the most excellent deal? Well, it is time to talk about that.

To select the most amazing loan for yourself, you need to consider some factors. Let’s look at those things that make a loan more lucrative than the other ones.


The Interest Rate

If you want to repay your loan successfully, you should go for the most affordable interest rate. And every financial institution has its terms when it comes to this rate.

Therefore, go through different institutes and research their interest rates on their car loans. This way, you will know which bank gives you more flexibility to enjoy a breezy experience.


The Actual Loan Term

When you take a car loan from the banks, your loan will be fully repaid over the years. But some lenders, especially the car dealership finance providers, offer a loan with a balloon payment. It means that you will have to pay an extra amount even when your loan is paid off.

Therefore, before borrowing money, make sure that your monthly installments are enough to cover your whole amount at the end of your tenure period. Otherwise, you won’t be happy when you have that extra amount leaving your pocket.


How Your Repayments Will Work

Before taking up a loan, you should learn how your repayments will work out. For instance, it is better to know if you will have to pay any penalty for your late payments or not. And how you can make payments; about the methods and everything.

In this way, you will be prepared while paying your installments, and you will make no mistake whatsoever.


Additional Fees

Every procedure comes with additional charges, such as processing fees from car loans to home loans. Hence, before signing the agreement, learn about all the extra money you need to pay.


Cost of Owning a Car in Singapore

You’re confident about buying a car, and you are determined to take a loan for that. But that’s just the beginning! A vehicle comes with tons of additional costs that you will have to bear besides paying the monthly installments.

If you neglect your car’s maintenance to pay the installments, your vehicle becomes faulty. And when you spend money on your car and forget to pay the installments, you will end up losing everything!

Therefore, before you decide to get a car, you should acknowledge all the costs that come with your automobile. Let us inform you about the expenditure you will face once you start using your ride.


Certificate of Entitlement (COE)

The COE in Singapore is a certification that provides you the legal right to register, use and own a vehicle for 10 years. COE prices vary from vehicle to vehicle and depend on the country’s car supply situation.


Open Market Value

The OMV is the price of your car that includes freight, buying price, insurance, and all the other charges required to import a car to Singapore.


Excise Duty and Registration Fees

When a car is imported into Singapore, 20% tax will be applied to your vehicle’s OMV. And you will also have to pay the registration fee, which is around S$220, but it varies from time to time.


Vehicle Emission Scheme (VES)

This scheme was introduced in 2018 to reduce carbon emissions. Depending on the brand and model of your car, either you will get returns or will have to pay some extra dollars. Therefore, you should choose your vehicles carefully to avoid this fee.


Goods and Services Tax

You will have to pay 7% GST on the total OMV and excise duty when purchasing a car.

On top of everything, you will have to pay for fuel, maintenance, repairs, and everything else as long as the vehicle is in your possession. Therefore, you should only get a car when you can bear all the expenses without any issues.


How to Get a Lower Interest Rate on a Car Loan?

While taking a loan, you need to make sure that the interest rate is reasonable so you can repay the whole amount without any issue. But how do you get the lowest possible interest rate?

Don’t worry; all you have to do is follow the list below. Keep these things in mind while borrowing money, and you will get the best interest rate that’s guaranteed!


Be Aware of the Interest Rates

Even if you have eyes on only one bank or financial institute, you should go to multiple lenders to get a solid idea about the interest rate. And it goes the same for your car dealers; you should evaluate several offers and take time while doing that.

In this way, you will have a better idea about the interest rates in the market now, and it will help you negotiate the loan terms with your lender. And the institute or dealer will know that you are a well-aware person so that you won’t end up with a bad deal.


Go for a Loan through the Dealer

The car dealers often get loan offers at a discounted interest rate. Therefore, you can negotiate with your car’s seller to see if they can manage a loan with the lowest interest rate. But make sure your loan will be repaid during your tenure period, and there is no hidden charge.


Look Out for a Package Deal

Some banks may offer you a lower interest rate on your car loan if you use their other banking products. Hence, you can go through many institutes to figure out if there’s any package deal available or not. It will help you save plenty of money pretty effortlessly.

Most borrowers consider themselves lucky when they see an opportunity with the lowest interest. But borrowed money often comes with tons of additional fees and penalties so that it might get costly at the then of your tenure period.

Therefore, you should look at every aspect to learn all the detail about the loaning system. In this way, you will surely get the best deal!


Tips for Reducing Your Monthly Payments

It’s best to go for a loan when you can afford the installments without any trouble. Otherwise, you will fail to repay your loan amount and lose your vehicle in the process, and you don’t want that.

But when you want a vehicle and don’t have much money to pay hefty installments, follow these tips below for an optimal experience.


Borrow a Less Amount of Money

Well, if you want to pay small installments, you should borrow less money, which is quite obvious, to be honest! Thus, before taking a car loan, you can save some money, so you don’t have to depend entirely on the bank.

Moreover, a small loan means less interest rate. Hence, you can easily repay the whole amount without any struggle.


Go for a Long-Term Loan

You can pay a small installment amount when you go for an extended tenure period. But it’s best if you don’t choose this option unless you can afford to pay bigger installments.

If your loan repayment period is long, you will pay small amounts for sure. However, you will end up paying more interest in the long run, which is a bit disappointing.


How to Apply for a Car Loan

Now that you know everything about taking up a car loan, it’s time for you to learn how to apply for a car loan in Singapore. The whole process is done in three steps:

  • Things you need to apply
  • Meet the car loan eligibility
  • Go through the loan approval process


Things You Will Need to Apply

When applying for a car loan, you need documents to prove your identity and stuff. Here is the documentation required for a car loan application.

  1. NRIC (front and back) OR Passport Work permit (for non-resident or foreigner)
  2. Duplicate of most recent Income Tax Notice of Assessment (2 years for Self-employed)
  3. Employment information and company’s contact details
  4. Duplicate of newest 6 to 12-month CPF Contribution Statement
  5. Utility bill to be used as evidence of address (for non-resident or foreigner)
  6. Information of properties or significant assets
  7. Duplicate of the bank statements dating back at least 6 to 12 months
  8. Copy of 1 to 3 months of computerized payslip from present employer
  9. Your constant everyday expenditure
  10. The vehicle’s details
  11. Vehicle registration card
  12. Sale and acquisition contracts
  13. Details of current financial commitments such as housing loans, personal loans, credit cards
  14. Application for Hire Purchase


Requirements for Taking Car Loans in Singapore

Though the car loans in Singapore are secured, you need to meet some requirements to get your application approved. The requirements are:

  • You have to be a citizen of Singapore or a permanent resident
  • The borrower must be a minimum of 21 years old
  • You should have an excellent credit score
  • Should have an annual income of S$20,000 (Depends on institute’s rules)

Some banks or lenders offer car loans for foreigners who have valid work permit with at least 1-year validity. A good credit score is the real game-changer; you should keep that in mind.


The Car Loan Approval Process

Your loan application for buying a vehicle will be made in many steps. Let us walk you through the whole procedure.

  • Step One – Get the Process Started

First, you need to fill up the loan application to start the process. You can do this by visiting the institutes, car dealership showroom, or online applications, whichever you prefer.

Once the lender accepts your applications, the officers will evaluate your situation. If everything is in your favor, you will receive the conditional approval within 1-5 days.

  • Step Two – Submit Your Documents

After getting the conditional approval, the lender will ask you to prove your details on the application. So now you have to submit all your papers, personal identification, income details, and everything else.

When your papers get approved, you will finally receive your loan documents.

  • Final Step – Seal the Deal

Once your application gets approved, you will receive your loan documents and sign them. After signing the papers, your car dealer will do their job and keep you updated about the process. And when your car is ready for collection, the dealer will notify you.

After receiving your car, you will have to repay your loans in installments. And that’s all you need to do!


The Bottom Line

Car financing in Singapore is a secured loan. Therefore, you should think twice before going for this and get the best affordable deals. Otherwise, you will end up losing your vehicle, and you don’t want that.

Purchasing cars comes with tons of complications, hidden charges, and if you make any mistakes, you will be stuck with a vehicle that will feel like a liability. But after reading this guide on car loan in Singapore, you will never have any trouble regarding this matter, that’s a promise!