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Singapore is one of the most expensive countries in the world to own a car. It comes to no surprise that over 95% of the 1000 deals that we have successfully transacted requires a loan. In this article, Otua Auto explores and breaks down the different types of loan packages that are available to you as a consumer.

Bank loans

At otua.sg, we almost always encourage our car buyers to apply for a bank loan compared to the other options. The reason is simple - Bank loans are the cheapest loan option available to buyers, so you can get the best price for your car. They are also the easiest to understand, without all the convoluted terms and conditions that are often overlooked and very much unfair to the average consumer.

The only disadvantage to bank loans is that they tend to be strict with their applications as they have to adhere strictly to any MAS guidelines that are imposed on them.

Pros

Cheapest financing option

Loan applications tend to be faster

Easy to understand

Easy and fast loan settlement

Cons

Strict requirements

In-house financing

Despite their name, in-house financing actually refers to 3rd party finance companies/institutions. These loans tend to have much higher interest rates that start from 3.XX% and upwards of 5%. They are often preferred for their lenient application process.

One of the core benefits of in-house financing is that it does not reflect on your total debt servicing ratios. So for car buyers who are looking to purchase a house in the near future or are looking to apply for business loans, in-house financing could be the ideal choice.

Do take note that the terms and conditions for inhouse financing are often harsh and brutal. With expensive early settlement fees and charges to exorbitant default penalties, it should be well noted that your payments are prompt and timely to avoid a painful bill at the end of the month.

Pros

More flexibility in their loan applications

Does not affect your total debt servicing ratios

Cons

Loan processing fees that starts from $200 to upwards of $1000

Much higher interest rates 

Some of the finance companies are extremely trigger-happy with tows when you are late on your payments

Expensive fees and penalties 

Lease to own schemes

Gained popularity recently. There are probably a 100 different variations out there, but the basic concepts stay the same. The actual ownership of the vehicle actually belongs to the financing company. Some of the LTO schemes include free servicing, road tax and insurance.

Generally, this is seen as a rental service provided by the finance company to you, and after a predetermined number of years, the vehicle ownership is then effectively transferred to you. 

These types of loans often come with attractive marketing headers like “Zero dollar drive away” or “Zero dollar down payment”. However, the terms and conditions are almost always extremely harsh and you can expect to drive the car till the end of its COE or you may suffer heavy penalties that can be upwards of 50% of the original car purchase price.

Pros

Fuss free “car ownership”, since most of the LTO schemes provide free car servicing etc.

Most of them provide 100% financing, so you can literally drive away $0

Cons

Insanely harsh penalties and settlement charges

You do not really own the car

Be prepared to drive the car until its end of COE to avoid heavy charges

If you should decide to “sell” the car early, the process is often convoluted and difficult

Expensive monthly installments, since you are really renting the car instead

Balloon Scheme

Relatively popular in the early turn of the millennium, the Balloon scheme financing is basically a loan on the vehicle’s purchase price less its Preferential Additional Registration Fee (PARF). Again, there are many variations of this scheme, but in general, they all result in a lower monthly payment for the car. However, your PARF still has to be paid eventually (usually at the end of the loan period).

The balloon scheme is by far the most complicated loan option available for consumers. It has since lost popularity due to it’s much higher interest rates and also most finance companies prefer LTO schemes which are of lower risk for them. 

Since the balloon scheme is pretty much the “ancestor” of the lease to own scheme, they have many similar pros and cons.

Pros

Much much lower monthly installment compared to all the other schemes

Some balloon schemes allow for lower down payment

Lower down payment often translates to better or fancier cars

Cons

Heavy and expensive penalties and fees (especially early settlement)

Be prepared to drive the car till the end of the loan tenure

You lose the PARF rebate for your car

Extremely detrimental if you “total loss” your car or if your car has irreparable damage

When it comes to finding the right loan packages for your car purchase, there’s no 1 size fit all solution to it. Proper financial planning is crucial. It’s always best to get expert advice to help you make an informed decision. If you need help deciding on which loan package fits you best, feel free to reach out to the client advisors at Otua Auto. As a premiere car dealership, we offer a full range of financing options and have tie-ups with various lenders so you can always be sure that we are offering the best financing options to you.

Why is it important to understand the selling price of your car?

Assuming you have always meticulously and religiously maintained your car - The condition is perfect, accident-free and with servicing records to boot. Now, what about your asking price?

Without a doubt, price is almost always the most important factor in car sales, and here’s why.

The perfect time for you to get the best price for your car (period of best opportunity for selling your car at a fair and reasonable price) is always *now*. With the wonders of the internet and websites like SgCarmart and Carousell, prices, especially for car resale, in Singapore, are transparent to every car buyer. Buyers who have been spoon-fed with pricing information from said websites have been looking and waiting for the right car to pop up in the market. If your car is priced correctly from the beginning, you are in the *best position* to get the highest price for your car while at the same time, attracting the maximum number of buyers who are sincerely interested in purchasing their next car .

If your car is priced too low, you might attract plenty of buyers. But you could stand to lose thousands of dollars on probably the 2nd most expensive item you own

If your car is overpriced, you will find it extremely difficult to attract buyers to your wonderfully maintained car, with little chance of any offers to pay your unrealistic price.

Depreciation is always working against you

We see this happen far too often. Car owners tend to prefer “stress-testing” the market for a month or 2 (sometimes 3) before deciding to follow market prices. Many of them are gambling on the off-chance that there might be a “Robert” who will accept their unrealistic prices. 

Unfortunately, these gambles often turn against you, as your car continues to depreciate its value on a daily basis. The average Japanese car depreciates at a rate of $22.50 per day and the average German continental car depreciates at a rate of $33.35 per day. Stress testing the market for 2 months pretty much meant that you have lost almost $2,000 in a short period of time. 

The average number of days your car can stay idle in the car-park without being driven is about 15 days. Even though we are already well into phase 2 of re-opening of Singapore, many of us are still working from home. The specialists at Otua Auto recommend that you start your engines every 2 to 3 days and here’s why:

 1. Keeps the car battery charged

 The car engine uses the alternator to charge the battery. Thus, Otua Auto recommends that you start your engine occasionally to keep it charged. If your vehicle is left parked for a prolonged period of time (more than 7 days) without use, you might be faced with a painful bill at the end of it.

2. Prevents your tires from going out of shape

There are two main reasons why the tyres will go out of shape. Firstly, your tyres might be already worn out in the first place. The lack of movement on the tyres along with Singapore’s relatively harsh weather conditions can warp the shape of the tires or make the rubber materials more brittle.

 Secondly, when your car is parked for a long period of time, the surface area that is in contact with the road will form flat spots which cause the tyres to lose air.

3. Prevents cockroaches, insects or unwanted guest from residing in your car

 Insects fester in the car due to food crumbs and open airways that are in the car. When there is a lack of activity within the car, it promotes the growth and spread of said pests. Thus, it’s important to wash and maintain the car’s cleanliness even if you do not really use the car frequently.

Older car parks also tend to have the thrash disposal centre located in the middle of the open-air car park. Cars that are parked near to garbage collection tend to face more problems with pests. This damage could, in turn, significantly diminish the resale value of your car, so if you want to get the highest price for my car, you’d better take care of it. 

 4. Keeps the engine and gearbox parts lubricated and active to prevent any damages

 We are not going to go into the technical details, since that would be a blog topic all on its own. A car is a complicated machine consisting of many moving parts. These parts need to be lubricated regularly and lubrication happens as your car is being utilised and driven around.

Do you know? There is an estimate of 7690 road accidents involving injuries in Singapore yearly, this means that every day there are more than 20 serious road accidents happening around the island.

Let us share with you a quick guide on what you should do if you or your loved ones are involved in a road accident. <Well, first of all, check if there are any injuries. A police report is only necessary if there are any injuries involved.>

1. Refrain from moving your vehicles.

2. Take as many photos as you can of the damage incurred for both vehicles.

3. Ensure that you have exchanged personal contact details; we suggest giving the counter-party a miss-call to ensure the contact number is valid.

4. If the damages are light (small dent or just scratches), you can choose to privately settle the matter.

5. Feel free to check with OTUA on the potential repair cost, even if it's just a minor repair.

6. Otua Auto can also provide assistance should you decide to proceed with insurance claims. If the accident makes you think of "ways to sell my car", then Otua can help you answer the query of "best price for my car".

7. Not only do we handle the sales and purchase of cars as an online-based car dealership, we have a panel of professional workshops that handle insurance claims!

More interesting data:

120 people were killed in traffic accidents in 2018

Elderly pedestrians accounted for two-thirds of all pedestrian fatalities. (1 in 2 accidents involving elderly pedestrians was due to jaywalking)

Motorcyclists and pillion riders account for about 1 in 2 of overall road fatalities

73% of heavy vehicle drivers speed when traffic is light