Test Demo Auto Loan

The amount of financing you need or should apply for depends on your personal circumstances. If you take up 70% (depending on the Open Market Value of the car) financing, you will not have to find as much cash in the short term. However, in the long run, you will pay more money for your vehicle than if you had taken a smaller Amount Financed. You also pay more interest the longer the hire period.

The market practice is typically to charge what is known as a “flat” or “applied” interest rate. In calculating the amount of interest payable in fl at interest rate calculations, it is assumed that the Amount Financed is constant throughout the hire period. An example of fl at interest rate calculation:

• Amount Financed = $50,000
• Flat/Applied Interest Rate = 3.5%
• hire period = 5 years (60 months)
• Total Interest = 3.5% x $50,000 x 5 = $8,750
• Rental charges/Monthly instalment = $(50,000 + 8,750) / 60 = $979.17

In reality, the Amount Financed reduces over time. Because this is not taken into account, the “effective” interest rate is in fact higher than the fl at rate. In the above example, the effective interest rate is in fact 6.54%.

Yes, you may complete the purchase of your vehicle before the expiry of the hire period. An early completion fee of 20% of outstanding interest plus 1% of balance payable will be charged.

Here is an example of what would be payable upon early completion of the purchase of your vehicle.

If you decide to exercise your right to complete the purchase of the vehicle (Early Completion) on the 24th month having paid 23 instalments in arrears, balance payable (as defined in the hire purchase agreement) would be calculated with the following formula:

(AF+TI)-(RC+OI+RV)+(OA)

Where
– RV is Recovered Value
– OA is Outstanding Amount

Total of all rental charges paid (RC): $979.17 x 23 = $22,520.91
Number of months remaining in the hire period(n): 60 − 24 = 36

outstanding interest (OI)
= [n (n+1) x TI] / [N (N+1)]
= [36 (37) x $8,750] / [60 (61)]
= $3,184.3

balance payable
= $50,000 + $8,750 − $22,520.91 − $3,184.43
= $33,044.66

early completion fee
= (20% of outstanding interest(OI)) + (1% of balance payable)
= (20% x $3,184.43) + (1% x $33,044.66)
= $967.34

Aggregate amount payable for early completion
= balance payable + early completion fee
= $33,044.66 + $967.34
= $34,012.00

You can start by visiting car dealers and checking out the makes and models available. It is also important to read up motoring magazines and car reviews on the Internet. You should also consider your transportation needs, calculate the additional costs that come with owning a car (such as fuel, parking and ERP charges), and decide on what you are able to afford for your car expenses.

Measure up these considerations against the car’s characteristics such as fuel consumption, luggage space, acceleration, and most importantly of course, the price.

Suggested online resources:

• http://www.onemotoring.com.sg
• https://www.sgcarmart.com
• http://www.mta.org.sg

A few options may be available from your car dealer. You should understand the implications of each option.

• Immediate delivery
  This option offers almost-immediate delivery of your car with COE. This is usually available when the car that you want is in stock. You may or may not be charged a small premium for such benefit. Ask your dealer about the COE price if he already has one in hand so that you can gauge the relative value of this option.
• Guaranteed COE
  If the car that you want is not in stock, a “Guaranteed COE” package will promise delivery of the car with a COE within 1 to 3 months (i.e. 2 to 6 fortnightly rounds of COE bidding). The price is typically fixed upfront. With this option, a minimum COE value is usually stipulated in the sales agreement, which means you get a price rebate if the COE falls below a certain amount. This amount is usually fixed at a very low rate so the rebate is rarely exercised.
• Non-Guaranteed COE
  This may be a cheaper option as it allows your dealer up to several months to deliver the car and bid for a COE within a stipulated price range. However, there is a risk of not being able to obtain a COE should prices continue to rise. You should consider this option only where you do not need a car urgently.