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Singapore is a notoriously expensive country to buy a car. Due to taxes imposed on car such as the Additional Registration Fee (ARF) and the need to registrate each car with a Certificate of Entitlement (COE).
Moreover, there are stringent regulations on the maximum amount one can borrow for car financing. Car owners must comply with the Total Debt Servicing Ratio (TDSR) rule, which limits the total amount of loan repayments a person can make each month. This limit encompasses car loans and other liabilities, such as mortgages and personal loans. Therefore, it is crucial for would-be car owners to be clear about their affordability when planning to purchase a car in Singapore.
In this article, we share 4 financial decisions every potential car buyer should consider before making a purchase in Singapore.
#1 Determine Your Affordability Using the Car Budget Calculator
The first and most important financial consideration is to know how much you can afford to spend on a car. Typically, there are three factors that would determine affordability.
The first is monthly income.
The second factor is your monthly financial commitments, particularly any existing loans that you already have. The higher these monthly financial commitments, the lesser the amount you can afford to allocate to a new car loan.
The third factor is the cash downpayment you need to make. For cars with an open market value (OMV) that is less than or equal to $20,000, the maximum loan-to-value (LTV) is 70%. This means a downpayment of at least 30% would be required. For cars with an OMV of more than $20,000, the maximum LTV is 60%. This means you would need to make a downpayment of at least 40%.
To help determine the maximum affordability, you can use a car budget calculator, such as the one available on DBS Car Marketplace.
Assuming a monthly income of $10,000 with existing financial commitments of $5,000 and an interest rate of 2.78% p.a. (EIR of 5.19% over a 7-year loan period), the car budget calculator shows a maximum affordability of $117,193, of which a minimum downpayment of $46,877 would be required.
You can adjust the cash downpayment, monthly instalment and loan period to get new estimates.
#2 Take A Car Loan With A Competitive Interest Rate
Since most people will not be paying for a car in full, the car loan you choose becomes a significant factor in the total cost of the car. A lower interest rate results in lower monthly instalments.
Car owners can benefit from preferential rates on their DBS car loan when they apply online. Currently, an online promotion offers a 2.78% p.a. interest rate. For a $60,000 car loan over a 7-year term, the total interest paid would be $11,676. This represents a savings of $1,680 compared to a traditional car loan with a 3.18% p.a. interest rate. This makes online loan options an attractive choice for prospective car buyers looking to minimise their total expenditure.
Those looking to buy an environmentally-friendly car such as an electric vehicle (EV) can also consider applying for a DBS Green Car Loan. The DBS Green Car loan provides a lower interest rate to incentivise car owners to switch to cleaner modes of transportation.
Currently, interest rate is 2.48% (EIR of 4.65% based on 7-year tenure). On top of that, you can also get a cash rebate of $288 for hybrid cars and $588 for full electric cars when you take up a green loan with DBS.
#3 Choose A Suitable Car Insurance Policy
Part of the recurring cost of owning a car is having to buy motor insurance. In Singapore, it’s compulsory for all vehicles to have motor insurance coverage. In fact, you must ensure your vehicle is insured for the entire duration of your road tax renewal period before the Land Transport Authority (LTA) permits renewal of your road tax.
While third-party insurance is the minimum requirement in Singapore, it only covers death or injury to others and damage to third-party properties, not damages to your car. This poses a financial risk, as it means you can’t claim against your own policy for damages to your car. Therefore, opting for comprehensive insurance coverage is a wise decision.
DBS offers DriveShield Car Insurance, a policy underwritten by Singapore Life Ltd offering comprehensive coverage across Basic and Enhanced plan types. Benefits include coverage for car repairs, windscreen replacements and even accidental loss, fire or theft damage.
Under the Enhanced plan, Gap Cover and Loan Protector Benefits cover your outstanding car loan in the event of total loss of your car and death of the policyholder respectively.
You can further tailor the policy to suit your needs, including optional add-on benefits such as extending repairs at your preferred workshop, loss of use, and waiver of young and/or inexperienced driver excess.
You can buy your policy up to 90 days in advance. Learn more about ongoing promotions here to enjoy more savings.
Disclaimers
T&Cs apply. Protected up to specified limits by SDIC. DriveShield car insurance policy is underwritten by Singapore Life Ltd.
#4 Ongoing Servicing & Maintenance
After purchasing a car, it is crucial to regularly service and maintain it to ensure it remains in optimal driving condition.
Regular car servicing is essential to identify and fix potential issues that could lead to accidents. It also enhances the vehicle’s performance and reliability, ensuring it runs smoothly and efficiently. This routine maintenance can significantly extend the lifespan of your car, as it prevents excessive wear and tear. Additionally, catching problems early during regular servicing can save money in the long run as it helps avoid more costly repairs.
DBS Car Marketplace offers a comprehensive range of car services to choose from. These services include general maintenance, tyre services, air conditioning maintenance, part replacements, and car grooming.
DBS cardmembers are entitled to enjoy special prices and promotions on these car-related services, adding value and convenience to your car ownership experience. For example, POSB Everyday Cardholders who pay using the card can enjoy a 2% cashback on all services with a 30-day warranty on all new parts changed at Speedy Care, a one-stop automotive service centre operated by SPC. For existing car owners who are not POSB Everyday Cardholders yet, you can enjoy a $388 cashback when you sign up for the POSB Everyday card from now till 31 May 2024.
Find Your Dream Car On DBS Car Marketplace
In addition to providing financial services such as car loan and insurance, DBS Car Marketplace also connect car buyers to car sellers through its comprehensive car listing platform.
For those searching for a vehicle, the platform offers a variety of filters to help you narrow down choices that fit your budget and specific requirements.
Conversely, if you plan to sell your car, listing it on the DBS Car Marketplace is a convenient and effective way to reach potential buyers. You can list your car on popular car platforms sgCarMart and Carro through DBS Car Marketplace and also get a free car valuation within 24 hours.
This comprehensive platform streamlines the process of buying and selling cars, making it a one-stop destination for all your automotive needs.
And if you want the convenience of having a car without buying one, DBS Car Marketplace also allows us to explore car leasing or car sharing. Similarly, DBS customers can enjoy special promotions on these car-related services.
Given the high cost of car ownership in Singapore, buying a car is a significant financial commitment that goes beyond just the car’s sticker price. You must consider the upfront down payment required, monthly instalment, annual insurance premium and ongoing servicing and maintenance costs you may incur.
As a one-stop platform for your car-related needs, DBS Car Marketplace can help determine your budget with its Car Budget Calculator. You can also use this one-stop platform to apply for a car loan with a competitive interest rate, purchase a suitable car insurance policy and enjoy ongoing services and maintenance at a discounted price.
And if you are on the hunt for a car, you can also find your dream car on DBS Car Marketplace. For existing car owners thinking of selling, renting or sharing a car, DBS Car Marketplace can also be a go-to platform that helps us with the car-related solutions we are looking for.
The post 4 Financial Decisions To Consider When Buying A Car In Singapore appeared first on DollarsAndSense.sg.
