Compare used car loans
Want to snap up a bargain with a second-hand car? Find out what loans can help you pay for your purchase.
A pre-owned vehicle can make a good choice if you need the convenience but are unwilling to take up a longer and larger financial commitment with a brand-new vehicle. With second-hand cars, you may get a good deal and there can also be more room to negotiate if it’s a private sale. If you don’t have the full amount ready to make your purchase, you have a range of auto financing options available for consideration.
Read our used car loans guide below and find out all the options available to you.
Types of loans you can out towards a used car
You have several options when it comes to selecting a loan to purchase a used car. Some of these include:
- Fixed interest rate financing
- In-house financing
- Balloon scheme financing
How does a used car loan work?
A used car loan works the same way as a new car loan, where the car itself is the collateral pledged to the lender who has the right to repossess it if you default the repayments. There are many banks, finance companies and auto dealers in Singapore that provide auto financing to people for the purchase of used cars.
While lenders are required to abide by the MAS car loans regulations, such as a maximum seven years tenure and 60-70% financing depending on the car’s OMV, the interest rates offered differs from bank to bank. Some of the banks offer a separate loan product for used car loans, while some offer the same loan product for both new and used cars. The terms and conditions, as well as flexibility for the loan may also differ. Also, depending on the age and condition of the car, some lenders may not approve the loan if they deem the vehicle a high-risk asset.
When you want to apply for a used car loan, you normally have two options: the first is to contact the dealer directly for auto financing; the second is to apply for the loan from a bank or finance company before purchasing the vehicle from the dealer.
If you are approved for the loan, the lender may prefer to pay the car seller directly or may send the funds to you to pay the seller. Discuss this with your lender before you apply.
How old a car can I finance with a used car loan?
Due to the Monetary Authority of Singapore (MAS) regulations at the time of writing (29 March 2018), car loan tenures are capped at the maximum of seven years. For a used car younger than ten years, lenders can provide financing for ten years minus the age of the car or seven years, whichever comes first. For used cars older than ten years, lenders can loan up to seven years or until the COE expires.
However, depending on the car’s age and its condition, lenders may consider it a high-risk collateral and reject your loan application.
What types of used car loans are available?
All car loans in Singapore are secured loans whereby the car purchased is pledged to the lender, who has the right to repossess if you default on your loan. Your options for used car loans are typically one of these financing schemes:
- Fixed interest rate financing. Car loans in Singapore typically charge “flat” interest rates, meaning that the monthly interest payment is constant over the tenure of a loan. For example, a 2% flat rate for a $50,000 loan over five years will incur an annual interest of $1000. These loans are most commonly offered and sought-after by borrowers looking to purchase a used car in Singapore. Check that the used car will be eligible for the loan. The interest offered largely depends on the age of the car, the loan tenure and purchase price.
- In-house financing. Buyers facing difficulties in getting a car loan approval (either due to bad credit ratings or falling below the income criteria) from traditional banking channels may opt for in-house loans offered by some finance companies or dealership instead. The main drawback of such financing is the significantly higher interest rates.
- Balloon scheme financing. This type of scheme works better for used cars compared to new cars, but is often considered extremely risky. By excluding the minimum PARF rebate portion of your car loan in the instalments, your monthly instalments are much lower compared to a conventional car loan. However, to reap the benefits of this scheme, you must have driven the car until it’s ready to be scrapped so you’d be assured of having the money to pay off the minimum PARF rebate at the end of the loan tenure. Otherwise, you’ll not only face higher penalties for early repayment, and still have to keep paying off the loan’s higher interest rate.
How do I compare used car loans?
Securing the right financing is as important as finding the right car. Car loan terms in Singapore can go up to a maximum of seven years, so it is a long-term financial undertaking. Here’s what to look at to find the right finance:
- Interest rate. The interest rate should be the first thing you should consider when you are comparing used car loans. Compare loans with similar features from other lenders to ensure you get a competitive rate.
- Fees. Lenders can charge a range of fees on used car loans, so check with your lender if there are any other fees that you’d need to be aware of before finalising the loan. Make sure you’re clear of penalties such as early repayment fees. Dealerships may also charge dodgy “administrative fees”, which you should not pay.
- Flexibility. Find out how flexible your loan can be. Can you make additional and lump-sum payments during your loan term? Are you able to repay your loan early without penalty?
FAQs about financing a used car
How do I receive my loan funds?
Lenders differ on how they send you your approved loan funds. Some lenders may prefer to send the funds directly to the car seller while others may transfer the loan funds to your nominated bank account. Check how this will be handled before you apply.
Can I check the safety ratings of a used car?
Yes. STA provides factual evaluations and grading of vehicles, so you can get it checked out before purchasing the vehicle.
How do I inspect a used car?
If you aren’t confident with cars, then it’s best to get the vehicle inspected by an experienced mechanic or STA. If you have a good understanding of cars, then you can do the inspection yourself. Check out our used car inspection checklist to make sure you don’t miss anything.
Is it better to buy a used car from a dealership or through a private seller?
There are benefits and drawbacks to both. A used car dealer will check the quality of vehicles before selling them so you know you there are unlikely to be massive faults or damages with the vehicle.
However, you may find there is less room to negotiate and you may not get as good a deal. With a private seller, there is no quality control and if you don’t have the vehicle thoroughly checked, you could end up purchasing a faulty vehicle, but there is more chance for bargaining.
* The offers compared on this page are chosen from a range of products finder Singapore has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms ‘Best’ and ‘Top’ are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing products.