Buying a new car in Singapore can be tough unless you have the financial resource to meet the hefty prices or have a means to pay the close to 50 or 60 percent Loan-To-Value (LTV) charge. For most people, it is not within their financial reach to be able to purchase a new vehicle. It is a dream for many people to have a car to drive to work, for dropping kids to school, or as a means of showing their lifestyle and status. While the cost of buying a new vehicle may knock away many willing buyers, there is an option–that’s, purchasing second hand cars that can meet individual’s budget and travel needs.
Why consider purchasing a used car
Used cars are cheaper to buy, have lower depreciation than new ones, and are immediately accessible and not like the Certificates of Entitlement (CoE) bidding process unless you are purchasing the vehicle with an open category Certificates of Entitlement.
Financing your used car
While you may want to own a new or used car, one thing that will haunt your mind is how you are going to finance it. Many people who plan to own cars do not even know where they will get the finances. If you have a stable job or business and have worked for a couple of years making substantial savings, you might be lucky to have build yourself a financial kit to purchase a car from a car mart in SG.
However, with the financial challenges affecting many people in Singapore, it is not easy to save money. A drained bank account will not be relied upon for the purchase of a vehicle. In addition, even if you have some cash in the account, you do not want to use it all. You should have a substantial amount that can take you for months should the unexpected happen- whereby you lose your job soon after buying a car.
What should you consider in used car loans?
With the prices of Open Market Values (OMV) and Certificates of Entitlement (COE) growing fast buying used cars in car marts in SG may cost a buyer about 50 percent less that purchasing new ones. If you are going to opt for a loan to finance your car, you need to understand the loan restrictions and how they affect your repayment and amount you can borrow.
A loan intended for buying a used car may have its tenure or repayment period capped at about 5 years. The OMV of the vehicle may also affect the LTV of the purchase price. Monetary Authority of Singapore has put in place measures and restrictions that may affect people who plan to purchase used cars. The effects of Authority have caused banks to raise interest rates to help recoup the losses they are likely to get when the loan tenures are limited to 5 years.
Car buyers shopping for car financing options or loans should make sure they do their homework to find the best interest rates. Banks also use the “Rule of 78” whenever borrowers want to repay loans for their second hand cars. If a car loan borrower does not examine this rule, there is a possibility of overpaying for the loan interest.
In essence, personal savings and car loans can help in financing a used vehicle. A car loan allows you to own a vehicle even when you do not have the cash in hand or enough savings for the car purchase.
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