How to Calculate a Car Loan Payment in Singapore?

With cars in Singapore costing easily six figures, you might be wondering how to fit car ownership into your budget. Here’s how to calculate your car loan payment, how much you can borrow, and tips on lowering your monthly payments.

With cars now costing the same as an HDB BTO flat (more, in some cases), car loans have become one of the largest financial commitments for the average Singaporean. You may be wondering how to fit a six-figure, multi-year expense into your already very tight budget – if so, you’ve come to the right place. 

In this article, we’ll discuss car loan payments in Singapore, including how to calculate them and, more importantly, bring them down. 

Table of contents

• Understanding car loans in Singapore
  • Where to get a car loan?
  • How much can you borrow in your car loan? And how long?
  • What about those zero-down payment offers I see online?
  • Does TDSR apply to car loans?
• How to calculate a car loan payment?
  • Using an online calculator
  • Using good old Mathematics
• Tips on lowering your monthly car payments
  • Buy a cheaper car
  • Pay a bigger down payment
  • Choose a lower interest rate
  • Pick a shorter loan tenure

Understanding car loans in Singapore

Where to get a car loan?

There are a few options when it comes to getting a car loan in Singapore. The two main options are to get a loan from your car dealer or to apply for a car loan from a bank. Let’s talk about the bank loan first. 

A car loan from a bank is just like a personal loan or any other loan. You can choose your loan amount and the loan tenure, and you will be offered an interest rate based on your credit score. You can then accept or reject the loan based on the interest rate offered. 

You will also be able to choose from different types of loan packages, such as for electric vehicles, ICE vehicles, or COE car loans. (COE car loans are for cars older than 10 years and with renewed COEs).

If you choose to go to a car dealer instead, you may be offered a bank loan or an in-house financing package. If it’s the former, you’ll know that the dealer is acting as a sales agent on behalf of the bank and probably earning a commission for closing the deal. Feel free to bargain for a rebate – they may be able to take it out from their commission. 

If it’s an in-house loan, however, you probably won’t have the same leeway. But you can try asking for a lower interest rate in exchange for a longer loan package. 

How much can you borrow in your car loan? And how long?

You will not be able to borrow the whole amount. Instead, under the law, you are required to foot a downpayment of:

• 30% (if the OMV of your vehicle is less than or equal to S$20,000)
• 40% (if the OMV of your vehicle is more than S$20,000)

This means that you will only be able to borrow at most 70% of the purchase price of the car, with the remainder to be paid in cash upfront. 

(OMV stands for the Open Market Value of your car.  It is the price paid or payable when a vehicle is imported into Singapore, as assessed by Singapore Customs. OMV includes purchase price, freight, insurance and all other charges incidental to the sale and delivery of the car to Singapore.)

As for loan tenure, you are only allowed to choose between 1 to 7 years. 

What about those zero-down payment offers I see online?

Technically, zero-down payments are not car loans. Instead, they are a different financing model that comprises 100% of the cost of the vehicle, allowing you to drive away without a downpayment. 

The catch is that you will be paying interest on a higher loan amount, which will almost certainly mean paying more in the end. This is true even if the nominal interest rate appears deceptively small. 

Hence, you should approach such packages with caution and always calculate the total amount you will need to pay by the end. This will help you ascertain how much more you are really paying overtime just to avoid a downpayment.

If you choose to go for such schemes, you should ensure that your cash flow will be sufficient to see you through to the end of the entire payment tenure. If you decide to sell your car halfway, you may have to fork over a large sum to clear the outstanding balance. 

Does TDSR apply to car loans?

Yes, it does. 

Under MAS rules, individual borrowers may not exceed their Total Debt Servicing Ratio (TDSR) when taking on loans; this is currently at 55%. 

This means that the sum total of all your debt payments each month – car loan included – cannot exceed 55% of your gross monthly income. 

If your car loan would cause your TDSR to be exceeded, you will not be allowed to take up the loan and must opt for a smaller loan amount. 

How to calculate a car loan payment?

Using an online calculator

One of the easiest ways to calculate your car loan payment would be to use an online calculator. These are readily found online, at bank websites, on motor dealers’ sales pages, and even hosted by independent financial blogs and websites. 

Perhaps the most user-friendly one we’ve seen is this one by Toyota. You simply choose the model you’re interested in and use the sliders to choose the loan amount and loan tenure. Your monthly payment amount is displayed instantly. 

If you prefer a less restrictive one, try out this car loan calculator by SGCarMart.

Using good old Mathematics

If you prefer to go old school and actually do some calculations, here’s a formula you can use to calculate your car loan payment. 

• Principal amount x Interest rate x Tenure/100 = Total interest 

For example, let’s say you are considering a car loan package for S$100,000, at 2.8% interest, for five years. Here’s how much your total interest will be. 

• S$100,000 x 2.8% x 5/100 = S$14,000

This means that the total for your car loan will be S$100,000 + S$14,000 = S$114,000. Accordingly, your monthly car payment would be S$114,000 divided by 60 months = S$1,900. 

Tips on lowering your monthly car payments

Buy a cheaper car

The most obvious way to reduce your monthly car payments is to buy a cheaper car. Consider a different brand, go for a more basic model, or choose a smaller vehicle. 

Pay a bigger down payment

If you have the means to do so, paying a larger down payment upfront will reduce your monthly car payments. This is simple mathematics – a larger down payment means a smaller loan principal, which means smaller monthly payments. 

Choose a lower interest rate

The interest rate on your loan matters, maybe more than you may think. A difference of 0.2 percentage points may seem small, but over the course of a S$100,000 loan, this could add up to a few thousand dollars. 

Do everything you can to get the lowest interest rate possible. If you’re being offered a higher interest rate because of a not-so-great credit score, try improving it before applying for a car loan again. 

Pick a shorter loan tenure

Keep in mind this rule of thumb: The longer you pay interest, the more interest you end up paying in total. This is true if the interest rate stays the same throughout. 

You can test this out easily using any online car loan calculator. The numbers below are generated using SGCarMart’s online car loan calculator. 

For a S$100,000 loan at 2.98% interest, here’s how much total interest you’ll need to pay when choosing different loan tenures:

Hence, if your budget allows, try to go for a shorter loan rather than a longer one. This can save you significant sums of money, and you’ll feel better paying off your car loan earlier!