Is $0 Down Payment Car Purchase A Good Deal?
July 7, 2022
Some people have decided to get a car to make things more convenient for their work and families. They might need a car because of a faraway work destination, or because of their kids. It’s easier to fetch their children to and fro school in a car.
Buying a car is a considerable investment, and it’s hard to know if you’re getting a good deal.
Most people think they need to put down a lot of money to buy a car. This isn’t always the case.
“How much does it cost to buy a car?”
“Are there really $0 downpayment car deals in Singapore?
For those who have visited car workshops and car exhibitions, you’ll know that car dealerships in Singapore are competing for your business, offering great deals on cars with a $0 down payment.
You can find vehicles from all the major brands, including Ford, Chevrolet, Toyota, and more.
But can you actually wiggle yourself out of a car down payment? Let’s see if this option is viable and how it works.
How Much Can You Receive From Car Loans?
At least 98% of car owners will choose to pay for their car with a loan. They will make fixed repayments for their car, instead of paying off the entire sum immediately.
The sum you can receive from car loans depends on the vehicle’s age and price. And unfortunately, MAS hasn’t provided a 100% car loan in Singapore. The Monetary Authority of Singapore (MAS) has enforced specific limits to discourage the high demand for cars on the island. In a bid to fight ever-increasing traffic and global warming, Singapore has some of the most stringent policies worldwide to promote public transport.
This is why COE prices have been increasing and as of July 2022, it is at $74,989 for CAT A vehicles, $106,001 for CAT B, $53,011 for CAT C, $10,302 for CAT D and $104,400 for CAT E.
But where does that leave you?
- If the car of your dreams costs less than or equal to $20,000, the loan-to-value (LTV) limit is 70% of that vehicle’s price. Therefore, you can only borrow up to 70% of its cost, leaving you with a 30% car down payment.
- If your chosen vehicle costs more than $20,000, the loan-to-value limit is 60%. That means you can only borrow 60% of the car’s price, which brings your down payment car fee to 40%.
If these rates raise the hairs on your arms, remember the not-so-good old days when the car downpayment in Singapore reached 40-50%.
How Long Is A Car Loan Tenure?
The car loan tenure in Singapore is seven years. This term doesn’t depend on the sum you’re borrowing or the car downpayment, for that matter.
This 7-year tenure reveals an important fact: A $0 down payment car would be difficult. Just imagine what your monthly installments would look like if you were trying to reimburse a $100,000 loan in seven years (with interest!).
At 3% per year, your installments are $1,441 per month. But at 36% per year, your installments would climb to $4,191. And few people can afford that for seven years straight.
Is It Possible To Get $0 Down Payment For A Car?
From the legal information we’ve reviewed so far, it would be impossible to obtain a zero down payment car in Singapore. Even for a $1 car (if anything like that exists) on the market, MAS still requires a 30-cent upfront fee.
All is not lost:
You can still apply for a 0 down payment car scheme. Some finance companies have partnered with car sellers in Singapore. These car dealers will take loans themselves to pay for specific vehicles. Then, they let you own the car for a while.
That means the dealers are responsible for repaying the loans, so the financial institutions follow the rules in place. In the meantime, you get to use a car without having to fork out any down payment.
However, you need to understand that:
- You’re not the real car owner, and:
- This isn’t a real zero down payment car in Singapore.
If you take this option, it’ll be like renting an apartment that’s not truly yours. In fact, the zero down payment car scheme resembles more a car lease than a purchase:
- You can only use your vehicle for up to six months. After that period ends, you’ll have to move on to another car.
- The installments depend on usage. The sums you’ll have to pay depend on how much you use the car: increased mileage equals increased payments.
These lease services only grant you usership rights for six months.
Many people take these deals because the car down payment and prices are skyrocketing on our beautiful island.
But nothing is too good to be true. This service isn’t a genuine 0 down payment car option. Therefore, your rates and installments will add up in the long term. Eventually, this sum will be larger than the original car down payment – or even its open market value.
Why?
It’s simple: Finance companies in Singapore have their own business model as well. So, they’ll impose higher rates to make a profit and to ensure themselves against any risks (e.g., people who refuse to pay or accidents). These high rates put you at risk, too, though.
Car dealers work with financial institutions, meaning you get the worst of both worlds:
- Car dealers do their best to sell (or lease) as many cars as possible, imposing high rates.
- Their financial partners conduct thorough background checks, analysing every detail of your financial history. This will likely include your credit score.
That means you can quickly end up with an installment plan you can’t handle and sink into debt without suspecting a thing. The other option is not qualifying at all.
How Does $0 Down Payment Work For A Car?
A $0 car down payment scheme in Singapore is straightforward:
- The car dealer partners with a financial institution.
- They purchase the car by undertaking a loan.
- They grant you usership rights for six months.
But before grabbing the deal, you need to understand how it compares to a regular financing scheme. How much do you need to buy a car?
Let’s say the car you want to purchase costs $100,000.
| Vehicle | Zero down payment car service Singapore | Bank loan (7-year tenure; 3% interest) |
|---|---|---|
| Downpayment | $0 | $40,000 |
| Loan amount | $0 | $60,000 |
| Monthly installment | $2,000 | $865 |
| Subscription/ Terms | Six months | 7 years |
| Perks/ Inclusions | - Insurance - Maintenance - Car servicing - Customer support - Road tax - 24/7 roadside assistance | - Additional Registration Fee - Certificate of Entitlement - Road tax (for six months) - Vehicular Emissions Scheme |
| Total price after term | $12,000 | $72,660 |
| Total price after six months | $12,000 | - $5,190 (without car downpayment) - $45,190 (with car downpayment) |
As you can see, the monthly installment is 2.31 times larger with a zero downpayment scheme in Singapore. That means the total price after six months is more convenient than a traditional car loan.
More importantly, the car you’re paying so much for isn’t yours.The only disadvantage is lacking the original car down payment. However, you can consider saving the money – instead of paying $2,000/month for a 0 down payment car scheme, you can save it. 20 months of savings will get you the required down payment.
Otherwise, you can consider an extra personal loan or purchasing a more affordable vehicle.
Another alternative is getting a zero downpayment car in Singapore that eventually gives you ownership:
| $100,000 car for a 7-year term | Zero downpayment | Regular car terms |
|---|---|---|
| Total amount | $128,016 (4% interest per annum) | $72,660 (3% interest per annum) |
| Downpayment | $0 | $40,000 |
| Loaned amount | $100,000 | $60,000 |
| Monthly installment | $1,524 | $865 |
| Subscription/ Terms | 7 years | 7 years |
| Total interest | $28,016 | $12,660 |
| Price after 6 months | $9,144 | - $5,190 (without down payment) - $45,190 (with down payment) |
The most significant difference you can notice between these two alternatives is the total interest. As such, you’re saving $15,356 just from interest. If you’re not counting the down payment, the final difference between these two options is $55,356.
What if you don’t want a zero down payment scheme?
Don’t despair if you are not interested in such a scheme or your application doesn’t get approved. You still have plenty of options, including:
- Applying for a traditional loan
- Researching other offers from different car dealerships in Singapore
- Contacting a financial institution that offers tailored packages for your needs
- Purchasing a used car from a second-hand dealer
Where Can I Get A Good Car Loan For My Down Payment?
If you’re in the market for a new car, you might be wondering where you can get a good loan for your down payment. After all, a down payment is typically one of the biggest expenses associated with buying a car.
Fortunately, there are a few options to consider.
One option is to take out a personal loan from a bank. This can be a good option if you have good credit and can qualify for a low interest rate.
Alternatively, consider a licensed moneylender. This alternative is best if you have a lower credit score or need the loan more quickly.
GS Credit is one of the best licensed moneylenders in Singapore that can customize a loan plan for you! With fast loan approvals and flexible loans, GS Credit can help you.
Another option is to use a home equity loan or line of credit. This can be a good option if you own your home and have equity in it. However, it’s important to remember that using your home as collateral can be risky.
Finally, you could also ask friends or family members for help with the down payment. This is often an informal arrangement, but it’s worth considering if you’re short on cash.
Whichever option you choose, shop around for the best interest rates and terms before signing any loan documents.
Car Downpayment In Singapore
A zero downpayment car scheme can help you move around faster and easier. This alternative isn’t altogether bad if you don’t have the necessary funds for a down payment. For example, you may need to take your elderly parents to and from dialysis. You may also live in a condo on the outskirts of Singapore, and getting to work or your kids’ schools may take too long.
Or you may simply desire the extra convenience, even if you live nearby an MRT station.
However, you have to assess all the consequences. As you can see, the high interest rates and installments add up quickly, and you can sink into debt if you’re not diligent with your money. At the same time, you’re giving car dealers and their financing partners permission to scrutinise your financial history.
To compare and find out car downpayment loan rates, click here. With this tool, you can determine whether you’re able to handle a car loan or not.
