Personal Finance

How to Calculate Car Loan Interest in Singapore

October 20, 2022

Whether you are buying a car for personal use or business, it’s important to know how to calculate car loan interest Singapore.

The joy of owning a vehicle is sadly accompanied by the pain of paying for it. This makes it crucial that you understand how to calculate car loan interest Singapore and how to access the best car loan deals.

However, you might be wondering about how to calculate car loan interest, loan tenure, and the amount you can access for a car loan.

In this article, we will take a look at how to calculate car loan interest and all the factors you need to consider when selecting a car loan.

Knowing how to calculate loan interest will allow you to compare budgets and car loan offers more effectively.

How Much Can You Borrow For A Car Loan?

The amount you can borrow is set at 60% or 70% of the open market value (OMV).

If you want to get a car loan to purchase a vehicle with an OMV of $20,000, then you can get up to 70% of its value. If your car has an OMV of more than $20,000, you will receive 60% of its value.

Note that it’s not a guarantee that you will get the maximum amount.

The amount you will get depends on other factors such as your monthly income, other debt obligations, and credit score.

Lenders will have to check the total debt servicing ratio (TDSR), which is capped at 55%. This means your total monthly debt obligations should not exceed 55%.

Those with high obligations will not be able to access 60% or 70% of car loans from the bank. In addition to this, they will also need to raise the deposit of 30% for the car.

What Do COE, OMV, And PARF Mean?

A Certificate of Entitlement (COE) gives the right to own and use a car for 10 years in Singapore.

Before you buy a car, you must bid for a COE based on the category of the car. The price of the COE depends on the number of bids submitted.

Below are the five categories.

Category A: Car with an engine capacity of 1600cc and a maximum power output of 97Kw. Also includes electric cars with a maximum output of 110kw
Category B: Cars with an engine capacity of over 1600cc and a maximum power output of 97Kw. electric cars with a maximum output of above 110 kW
Category C: Goods vehicles and buses
Category D: Motorcycles
Category E: Open, except for motorcycles

Open Market Value

The OMV of a car is the price you will pay for a vehicle imported into Singapore. This price is given by Singapore customs.

It includes the purchase price, freight, insurance, and other car costs incurred during the delivery of the car to Singapore.

When buying a car, you will need to get the vehicle’s OMV so you can be able to calculate the upfront fees and the registration.

PARF

A Preferential Additional Registration Fee (PARF) is a rebate you enjoy when you de-register your car. You can enjoy the rebate if:

The car is not more than 10 years old
You have a non-electric tax that is not more than eight years old
Electric cars registered after 15 Sep 2022 don’t opt in for the 10-year life span and are not more than eight years old
Electric cars registered after 15 Sep 2022 opt in for the 10-year life span and are not more than 10 years old

The younger the car, the more rebates you are likely to get. The PARF rebate depends on the age of the car and its value.

Age of vehicle at de-registration	PARF rebate (COE May 2002 onwards)
Not exceeding 5 years	75% of ARF paid
Above 5 years but not exceeding 6 years	70% of ARF paid
Above 6 years but not exceeding 7 years	65% of ARF paid
Above 7 years but not exceeding 8 years	60% of ARF paid

How Long Should Your Car Loan Tenure Be?

The loan tenure of your car depends on your ability to repay the loan. Lenders offer up to seven years’ duration to clear the loan. However, you should note that the longer the loan tenure, the higher the cost of the loan.

There is no rule on the best tenure for a car loan; rather, it depends on your personal choices. The loan tenure determines the monthly payments.

Pick a loan tenure that is manageable and ensure you don’t default on the loan.

Shorter loan tenures will have a high monthly repayment but are considered better because they reduce the total cost of the loan. So carefully choose a loan tenure that suits you.

In Singapore, an exception to the rule applies when you buy a second-hand car.

Since you bid for a COE for 10 years, a car loan can only have a loan tenure of 10 years. What this means is that if you buy a six-year-old car, the loan tenure will be four years.

How To Use A Car Loan Calculator

It’s crucial to know how to calculate car loan interest as this enables you to make a more informed decision.

The easiest way to calculate the monthly installment is by using a car loan calculator. Before calculating the monthly repayments, you will need the following parameters:

Cost of the car
Loan duration
The loan’s interest rate

The car loan calculator will work out the monthly installments for you. It will give you the following information:

The total amount of interest paid

Interest paid is the total cost of the loan.

Total monthly repayments

This is the amount you will pay when you complete paying the loan.

Using the car loan calculator will help you compare the offers from various lenders, and you can choose the best one.

So be sure to use the car loan calculator in Singapore after you get various quotes from various lenders.

How To Lower Your Car Loan Payment

A high car loan repayment affects your budget and may ruin your cashflow. Lowering your car loan payments will make it easy for you to repay the loan and avoid defaulting.

Here is how to lower your car loan payment.

Negotiate For Lower Interest

The surest way to lower your car loan repayment is to negotiate for lower interest rates or select loans with lower interest rates. This way will ensure you get low loan repayments.

Choose A Car With A Lower Cost

You can get a lower loan repayment by choosing a car whose cost is lower. A lower cost means you will borrow less, and you can lower the loan payments.

Use Cash To Make A Higher Deposit

You can pay more in cash and reduce the amount you would like to borrow. If you opt to pay more in cash, your loan payment will be lower.

Choose A Shorter Loan Tenure

A shorter tenure reduces the interest you will pay. By opting for a shorter loan tenure, your equated monthly payments will be higher, but you will reduce the cost of the loan.

Refinance Your Car Loan

By refinancing, you are likely to get a lower interest rate, which will reduce the amount you pay for the car loan.

Make Extra Payments

If you get lucky and have extra money, pay off the car loan. This reduces the interest you will pay on the loan and, in turn, lowers the cost of the loan.

More on this topic:

What Are Monthly Installment Loans In Singapore?

How To Choose A Licensed Money Lender In Singapore

Borrowing From Licensed Money Lenders – How Much Can I Borrow?

Where To Get A Car Loan

You can get a car loan from financial institutions or licensed lenders. Here are some of the best car loans in Singapore.

Credit Thirty3 Loans

Licensed money lender Credit Thirty3 offers loans at an affordable interest rate. The approval and disbursement processes are simple and quick.

With a loan tenure of up to three years, you can enjoy your drive, and you have enough time to pay the loan.

OCBC Bank

OCBC Bank offers loans for new and used cars. They offer an interest rate of 2.48 % per annum for a new car and 2.88% per annum for an old car.

It offers a minimum of $15,000 and a loan tenure of up to seven years.

Standard Chartered Bank

Standard Chartered auto financing offers loans with a tenure of up to seven years. They will offer you a minimum of $10,000 at an interest rate of 2.28%.

DBS Bank

DBS Bank’s car loan has an interest rate of 2.28 per annum and a loan tenure of up to seven years. It offers a minimum loan of $10,000.

United Overseas Bank

UOB offers car loans at an interest rate of 2.28%. The minimum loan amount they offer is $10,000 for a period of up to seven years.

Learn How To Calculate Car Loan Interest

Before you buy your car, make sure you understand how to calculate car loan interest.

This will help you choose the best car loan deal. Do your research thoroughly and make sure you get a deal that suits your needs. Review your expenses and the cost of each before you select one.

As a substitute for bank loans, licensed lenders offer car loans at low interest.

Their approval and application process are easy, and you get the cash quickly.

If you need a car urgently, visit Credit Thirty3 for a loan. They offer affordable loans fast.