Areyou planning for your next big ride? Are you in the market for a new vehicle and you don’t know how to save for it? Well, you are not alone. We understand that getting a new car is an important financial decision. But rather than only focusing on saving, you need to consider certain factors to buy your dream car. Therefore, we have put together some tricks to help you navigate through the process of buying your next car.
1. Research Your Car Ahead of Time
Before you start to head out with the ways to buy your car, research about it. With so many models and the latest technology in the market, you need to update yourself with the market value and the availability of cars in your area. You can even research online and be updated with the price fluctuation.
2. Be Patient with Your Search
Havingresearched your car and buying it on the same day can be the worst decision for you. An impulse purchase can mostly result in spending more money and facing losses.
3. Compare Prices with MultipleDealerships
Saving money before buying a car is vital to ensure that you factor-in the entire cost of the car. You also need to check the selling price of your favorite car offered by different dealers near you. Talk to local dealership agents and compare the final price of the car. The final price may include the following factors:
- Interest rate if you purchase onloan
- Cost of extra features andadditional accessories
If you are confused with car loans, ask and find out what several dealers are offering to at least get an idea of the price range. It is easier to negotiate the prices when you decide to purchase one.
4. Plan Your Car Loan
Many people suggest you pay in full for your car rather than opting for a car loan. But let’s face the fact, it is difficult to purchase a car without a car loan for a common man in Singapore. The reason is that the import duty and the cost of Certificate of Entitlement (COE). Well, everyone knows how COE makes the car so expensive in Singapore. If you are already planning to buy a car with a car loan, it is important to know what the car loan costs are on average and factors that affect the cost. You need to consider the tenure, principal, market interest rate, and your credit score while planning for your car loan. The longer tenure you opt for, the higher the interest you pay. With an interest rate of 2.78% p.a. (as of Feb 2019), you need to plan your car loan accordingly.
5. Learn About Your Car’s OMV
OpenMarket Value (OMV) is the real purchase price excluding the taxes and dutieslevied on the car. Based on the regulations, the maximum amount you can borrowbased on your car’s OMV is:
- Up to S$20,000 – 70% of thepurchase or valuation price
- More than S$20,000 – 60% of thepurchase or valuation price
According to the Total Debt Servicing Ratio, you can’t use more than 60% of your income to repay loans. So here are the three car financing options for you to choose from:
- Car dealers in-house car financing package – Your car dealer will probably offer you a deal that will be difficult to resist. That’s what every car dealer does. Even if your car’s OMV is more than S$20000, they will make sure you borrow 70% instead of 60%. Make sure you are aware of the price.
- Bank loan through a car dealer – Car dealers do offer loans through banks as well. You may get a fuss-free experience with some freebies in the boot because the banks pay them a good commission. Research about possible offers that the car dealers provide.
- Find your own car loan – You may research and shop around to find your own car loan, and that’s totally okay. You can also directly go to a bank or other financial institution to select your loan with the best-suited interest rate.
6. Aim to Save for a Downpayment
In today’s world, you cant brace into a car dealership with 30%-40% in downpayment and then walk out interest-free. You need to save for at least 30% of your car payment. The more money you can put as the down payment, the less interest you will pay in the future. Many buyers consider the lowest monthly payment but don’t forget to consider the tenure and the interest as well.
7. Don’t Be Afraid to Negotiate
It never hurts to negotiate with the price of the car. If you notice minor flaws (such as features), you can take it as your chance to negotiate. You can always lower several hundred dollars by merely knowing the value of the car and being willing to walk away if the price is not right. You can use your negotiation skills to both car dealerships and private individuals.
8. Choose Used Over New
Many people say that buying a new car is a bad investment. With the constant increase in the interest rates of car loans in Singapore, it is difficult for common people to afford cars. It is advisable to buy a used car if it suits you to save on taxes. Taxes on a used car are lower compared to buying a new one. If you have an old car, trade-in or better sell it before you get a new one. If your car is in great condition, you’ll get more money by selling it on your own rather than trading it for another used car
Make sure that you plan ahead of time with the type of upgrades you are interested in. We hope that these tricks can help you save money for your car and have you driving around in style soon.
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