Car Loan Singapore: In-house Financing vs Bank Loans Pros & Cons

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Car Loan Singapore: In-house Financing vs Bank Loans Pros & Cons

Whether you’re buying your first or second car, paying for a vehicle in Singapore is a big
financial commitment to have. But thanks to diligent saving over the years, you’re finally able to
afford the make and model that you’ve been eyeing. The big question now is, what’s the best
way to pay for it?

Before you splash the cash on your new vehicle, you should know the best ways to finance your
car loan according to your budget. If you’ve had questions about confusing terms like TDSR
(Total Debt Servicing Ratio) and OMV (Open Market Value), as well as the pros and cons of
dealer in-house financing or bank loans, then we’re here to help.


In-house loan for cars pros and cons


There are several advantages and disadvantages to choosing in-house financing from your car
dealer. The benefits you can expect from in-house loans include fixed interest rates, no or lesser
credit checks, and fast and seamless processing thanks to everything being done in-house.
In-house car loans also don’t normally take the TDSR into consideration. TDSR is a framework
setup by the Singapore government to ensure that there is a cap to how much of an individual’s
income goes into servicing a loan.

As in-house car loans won’t count towards it, you’re left with more financial wiggle room for
other big ticket purchases that require a loan, like a more expensive house.

While interest rates typically average around 3.18 percent to 4.28 percent — higher than bank
loans — getting your loan processed through the dealer may come with perks like overtrade
which artificially inflates the car cost so that your down payment is lower.

Though in-house car loans come at greater convenience, you can also expect some steep
administrative costs if you go through car dealers directly for this service.

So, how much can you loan? For in-house car loans, you can take up to the full amount of the
vehicle’s OMV — the cost of the vehicle when it’s imported into Singapore. The OMV takes into
account several factors, such as purchase price, freight, insurance and other miscellaneous
charges. However, the loan amount may decrease in percentage if you’re buying a used
vehicle.


Bank loan for cars pros and cons


One of the biggest upsides of getting a bank loan for your car is the lower interest rates
available. With interest rates of around 1.88 percent to 2.98 percent, your cost of purchase will
be considerably lower compared to in-house loan rates.
In addition, while getting a bank loan for your car means factoring in the TDSR, limiting the loan
amount, banks can also be expected to provide loans for a wider range of vehicles. As such,
individuals with good credit scores can benefit from this.

Taking out a bank loan for cars can also save you money in the long run. While in-house loans
allow you to pay a lower down payment, often, the monthly payments and interest rates add up
to even more than what you would pay if you were to take a bank loan instead.
Some of the downsides of getting a bank loan for your car include the handling of most of the
paperwork yourself. This can take up a large amount of time compared to having a dealer sort
out the administrative side of things for you.

Furthermore, due to the stringent checks and regulations in place, banks will have a much
longer turnaround time when it comes to processing your loan application compared to how
quickly a car dealer can do it.

Banks will also not provide some of the perks and freebies that car dealers may offer to sweeten
your deal, and this may be a deal breaker for some.


Which type of car loan financing should you choose?


While buying a car in Singapore can be expensive and a little complicated, deciding which loan
you want is comparably easy. The loan you decide to apply for boils down to your financial
situation and service you desire.

Whether you prefer to have an in-house loan with lower down payments in exchange for a
number of conveniences and a higher interest rate, or if you would prefer a bank loan with lower
interest rates in exchange for fewer perks, getting the right car loan is as simple as doing a bit of
research or reaching out to a place like CarVault for advice.

With both loan options available, CarVault will point you in the right direction and provide you
with the best option to suit your needs so that you can enjoy the most hassle-free car shopping
experience in Singapore.

Thanks to the guidance of CarVaut’s Client Relationship Managers, you’ll be able to navigate
the confusing world of car loans and be behind the wheel of your new car in no time!

Drop us a call / WhatsApp at 8883 2909 to speak with our experts or book a
no-obligations appointment with us today!

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