Personal Finance

How To Calculate Car Loan Interest In Singapore

November 11, 2022

Thinking of buying a car using a car loan?

It is important that you know how to calculate car loan interest Singapore so that you can compare the offers from various lenders.

If you’re thinking of financing your car with a loan, it’s important to understand how to calculate interest rates, monthly payments, and other factors that affect the total cost of your car ownership over time.

In this guide, we’ll explain everything you need to know about how to calculate car loan interest Singapore so that you can get the best deal possible.

How Much Can You Borrow For A Car Loan?

The amount you can get from the lender will depend on the regulations, and your income, financial commitments, and credit score.

Based on the set regulations, you can get either 60% or 70% of the car’s open market value (OMV).

Open Market Value Maximum Amount You Can Get From Lender
Up to $20,00070% of the purchase or valuation value
More than $20,00060% of the purchase price or valuation value

The 60% or 70% would be the maximum amount you can access from a lender. But the actual loan amount you will receive depends on your total debt servicing ratio (TDSR).

As per regulations, your TDSR should not exceed 55%. This means the portion of your income that goes towards servicing debts should not exceed 55%.

So the amount you can borrow for a car loan depends on your income and debt level. Make sure you can raise the downpayment (up to 30%).

What Do COE, OMV, And PARF Mean?

Before you purchase your car, here are some important terms you should know.

Certificate Of Entitlement (COE)

All vehicles in Singapore must have a COE. It gives you the right to register, own, and drive a vehicle in Singapore for 10 years. To register a vehicle, you must bid to get the COE.

The bidding exercise is done twice per month via ATM or through internet banking. Through the vehicle quota system, vehicles are classified into five categories, as shown below.

CategoryEngine Capacity/Power Output
Category ACars with 1600cc/Maximum power output of 97kW
Category BCars with over 1600cc/Maximum power output of over 97kW
Category CGood vehicle and bus
Category DMotorcycle
Category EOpen except for motorcycle

When the 10-year period ends, you can choose to deregister the vehicle or renew the COE.

Open Market Value (OMV)

The open market value refers to the price of the vehicle, excluding taxes and COE. It’s the value of the car without taxes or duty.

Preferential Additional Registration Fees (PARF)

Before we look at PARF, let’s get the additional registration fee (ARF) out of the way.

The ARF is a tax that is imposed when you register a vehicle in Singapore. It is based on a certain percentage of the vehicle.

If you de-register a car that is less than 10 years old, you are entitled to a PARF rebate. The rebate depends on the age of the car and its ARF value.

Therefore, PARF = ARF x %, based on the age of your car. Here are the PARF rebates you can expect to receive if you choose to de-register your vehicle:

Age Of Vehicle At DeregistrationPARF Rebate
Not exceeding five years75% of ARF paid
Above 5 years not exceeding six years70% of ARF paid
Above 6 years but not exceeding seven years65% of ARF paid
Above 7 years but not exceeding eight years60% of ARF paid
Above 8 years but not exceeding nine years55% of ARF paid
Above 9 years but not exceeding 10 years50% of ARF paid
Above 10 yearsN/A

If you renew your COE, you are not entitled to a PARF rebate when you de-register your vehicle.

How Long Should Your Car Loan Tenure Be?

Most lenders will give you a loan tenure of up to seven years.

It is, however, important to note that the longer the loan tenure, the more interest you will pay. This raises the cost of the loan.

It’s advisable to pick a shorter loan tenure as this minimises the total cost of the loan.

However, a shorter tenure means a higher monthly repayment. Ascertain that you will be able to pay the monthly loan installment on time.

It’s important to note that second-hand vehicles will have a shorter loan tenure. For example, let’s say you buy an eight-year-old car.

This means the maximum loan tenure you can get is two years. This is because the lifespan of a car is considered to be 10 years. After that, the car is considered to have lost its value.

If you buy a car that is more than 10 years old and require a COE, it may be hard to get a car loan.

How To Use A Car Loan Calculator

A car loan calculator gives you the amount you will need to pay each month.

The loan calculator helps you compare the different offers in the market. So simplify your calculations and make them error-free by using the loan calculator.

To use the car loan calculator, you will need the following loan components:

Cost Of The Car

This refers to the value of the car you are getting a loan for. In this case, it will be 60% or 70% of the car’s purchase price or valuation.

Loan Term

This would be the loan duration, or the time you will take to pay off the car loan.

If you choose a longer repayment term, your monthly installment will be lower, but the total amount you pay will be higher.

A shorter loan tenure will have a higher monthly installment but a lower loan cost.

Interest Rate Of The Loan

Interest rates are the cost of borrowing. The higher the rate, the more expensive the loan.

It’s important to make sure you know how to calculate the interest rate of your loan, as it will help you compare different car loans and choose the cheapest one.

After you key in the above components into the car loan calculator, you will get the total interest you will pay, the monthly repayment amount, and the principal amount.

Before you sign the loan agreement, make sure you compare various offers using a car loan calculator

How To Lower Your Car Loan Payment

It’s important to look for ways to lower your car loan repayments. One of the best ways to lower your car loan payment is by negotiating for a lower interest rate.

Apart from a lower interest rate, here are other ideas for lowering your car loan repayments.

Borrow A Lower Amount

You can opt to increase your downpayment. This will lower the loan amount you need to borrow, as well as the monthly repayment amount.

Choose A Shorter Loan Tenure

A shorter loan tenure means you pay a higher monthly installment. This will enable you to lower the overall cost of the loan.

But it’s crucial to assess whether you can manage the higher monthly installments.

Buy A Less Expensive Car

Choosing a less expensive car will lower the loan amount you need. This means you can borrow less to purchase the car.

Make sure you do your research before deciding on a lender. Knowing how to calculate and compare car loan interest rates will help you make better financial decisions.

Other Factors To Consider

When selecting a car loan, you should consider other costs you will incur. After all, there are many fees that come with car ownership.

Administrative Fees

Most lenders will charge an admin fee when processing the loan. Choose a car loan with a lower admin fee.

Early Repayment Penalty

If you decide to pay your loan off early, you may incur a penalty. So before you select a loan, check the amount you will incur if you opt to pay off your loan in a lump sum.

Where To Get A Car Loan

It is expensive to own a car in Singapore. However, with a bit of research, you can get a good deal and save your money. Here are some lenders* that offer car loans.

GS Credit

GS Credit is one of the top licensed money lenders in Singapore with the best loan terms. It offers loans with low interest rates and flexible loan tenures.

Apply now to purchase the car of your dreams and enjoy:

  • Quick approval
  • Fast application
  • Competitive interest rates

OCBC Bank 

OCBC offers car loans at an interest rate of 2.78% (5.27%). It offers a minimum loan of $15,000 and a loan tenure of up to seven years. Here are other features of the car loan:

  • Get up to 70% of the purchase price or valuation
  • A loading fee of $200 applies if the loan is less than $20,000
  • The interest rate is 2.98% (5.64%) for used car loans

DBS Bank

DBS Bank is your best option if you want to buy a used car. Here are the main features of the loan:

  • Interest rate of 2.28% per annum
  • Minimum loan amount of $10,000
  • Loan tenure of up to seven years

Maybank 

Maybank’s car loan offers:

  • Interest rate of 2.28% per annum
  • Minimum loan amount of $10,000
  • Loan tenure of up to seven years

*Information correct at time of publication

Do Your Sums And Research Before Buying A Car

When you take a car loan to buy a car, it goes without saying that you will have to pay interest on your loan.

How much interest you pay is dependent on the term of your loan and the interest rate that the lender gives you. So it’s crucial to know how to calculate car loan interest Singapore so that you can get the best deal possible.

If you need a car loan, visit GS Credit. We offer loans at affordable interest rates. You can get a loan within hours.

Contact us now or and apply for a loan now for on-the-spot disbursement.

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