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Alternatives To Financing Your Car In Singapore

When life throws you a curveball like a permanent lay-off, demotion, divorce or any drastic downturn in your financial situation, these difficult circumstances may force you to downgrade or sell your car to make ends meet. But what if you have an alternative to help with financing your car?

To put things into perspective, most Singaporean car buyers, whether a first-time car buyer or an existing car owner, obtain car loans to fund their vehicle purchase. To make a sound financing decision, we must first understand a few car lingo before embarking on a car loan.

1. Open Market Value (OMV)

Assessed by the Singapore Customs, the OMV is the price payable for the vehicle imported to Singapore. It includes the sale and freight delivery charges for the car. You can find out more about your car’s OMV on OneMotoring.

2. Certificate Of Entitlement (COE)

Image Source: AA Highway

COE, the legal document issued for you to utilise your vehicle for 10 years, is successfully obtained through COE bidding exercises which grants a limited number of quota per month. The COE makes up a big part of the cost incurred in owning a car, with its price dependent on the demand.

3. Additional Registration Fee (ARF)

Upon registering your car, you will be taxed the ARF which is based on a percentage of the OMV.

4. Preferential Additional Registration Fee (PARF)

If you are planning to de-register your car before your COE expires (i.e. Before your car hits the 10 year mark), you will be able to enjoy the PARF rebate. The amount of rebate is dependent on your remaining OMV at deregistration.

5. Excise Duty

Like taxes on tobacco and alcohol, this additional tax required to pay is 20% of the OMV.

6. Goods & Services Tax (GST)

A final tax we pay for all goods and services, the GST, is applicable for cars as well. The GST taxed is on the combined value of OMV and excise duty. It currently stands at the 7% but will rise to 9% between 2022 and 2025.

Knowing the breakdown of costs involved in your car purchase is vital as the OMV determines how much you can borrow in financing your car.

Knowing Your Car Financing Options

Image Source: Atoz Finance Info

Car loans are an amount of money borrowed from either financial institutions or car dealers. The loan amount is dependent on the purchase price of the car, with a maximum of 7 years loan tenure including accrued interests, according to the Monetary Authority of Singapore (MAS).

There are 3 options to finance your car:

  1. Dealer’s financing package
  2. Bank loan via dealer
  3. Direct loan from financial institution

Car dealers have in-house financing packages that offer you various down payment options, while bank loans that they offer will be done officially through the banks. To entice you to sign on with them, freebies and attractive deals would definitely be included. 

The last option of taking a direct loan from financial institutions will require you to do additional homework as you search for your car loan and negotiate with the bank-teller. The car loan interest rates also depend on which institution is engaged and rates are generally competitive. On the bright side, you may be able to obtain an interest rate which is more favourable to you.

To ensure that you are eligible for the car loan, the general guideline is for you to be above 21 years of age, with a stable employment and income, and a clean credit status.

Buying a car and financing it requires you to be well-prepared and fully aware of your financial capability which can be stressful. 

This guide is brought to you by Teck Wei Credit. To find out more about Teck Wei Credit, visit their Facebook at @teckweicredit or book an appointment on their website.

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