Have you been thinking of buying a car in Singapore, but you are short of funds? One of the methods you can use to get the vehicle of your dreams is car financing. This involves taking a loan to purchase the car and repaying in installments, but what options do you have?

This post digs deep into car financing in Singapore to help you understand everything you need to know. We will outline the main car financing options available in Singapore, the most important things in car financing, and the benefits to anticipate. Finally, we will wrap up the post by telling you the simplest way to apply for car financing – using Lendela.

The Two Main Car Financing Options

There are two main options to consider when looking for car loans in Singapore; a car dealership or taking a direct car loan from a bank.

Car Dealership

Car dealerships are perhaps the most common method of financing vehicle purchases in Singapore. With it, you only need to select your dream car, and the dealer will organise for financing through the preferred bank. Note that the dealer acts as the middleman between you and the bank, making the process pretty straightforward. Other benefits of using a car dealership to finance your car in Singapore include:

Simple Process

Your credit score potentially matters less

More Options

You only need to tell the dealer the car model you need, and they will work out the rest of the details on your behalf.

Dealers care more about optimising sales than other factors. It is possible to get a car even when your credit score is poor.

Most sellers have multiple cars with different requirements for their clients in order to maximise the chance of having the deal.

Car Loan

Using a car loan implies that you get directly to the bank for financing as opposed to working with a dealer. Although this might look like a long route, it comes with a number of benefits, including the following:

You get more negotiating power

Greater flexibility

Low-interest rates

You get to negotiate the loan’s terms and conditions directly with the bank.

When dealing with the bank, it is possible to get some leeway in the coming months if necessary.

There are no third parties involved when you work directly with the bank, making it possible for you to negotiate for lower interest rates.

Understand the Following Crucial Components Used in Car Financing

Once you decide to go for car financing in Singapore, it is crucial to understand the following things because they directly or indirectly impact the deal.


Maturity Date

Interest Rate

APR (annual percentage rate)


  • Total amount that you borrow to purchase a car in Singapore

  • Calculated as the value of the car less the deposit you make

  • Entire period that you need to clear the loan

  • The cost of car financing in Singapore

  • Amount that you pay on top of the principal

  • Broken down in instalments

  • Factors in all other cost, including administration fees and penalties

  • A process whereby the amount of the fixed monthly payment on your principal increases and the amount applied to the interest decreases

  • Implies that your interest rate is calculated based on the reducing principal, leading to high interest after the loan approval

Main Advantages of Using Car Financing Singapore

When you own a car, it comes with a unique sense of achievement, pride, and satisfaction. This freedom is what car financing in Singapore seeks to deliver to Singaporeans and permanent residents (all the about cost of living in Singapore). Other benefits of using car financing include:

You Get to Drive Off with the Car of Choice and Repay in Instalments

The truth about most assets, be they houses, machinery, or cars, is that they are very expensive (Why cars are so expensive in Singapore?). During difficult times like now, most people would find it very challenging to put this amount together. However, car financing in Singapore makes it possible because the bank pays off the cash, and you are able to drive the car of your dreams right away.

You Can Enjoy Low-Interest Rates even if your Credit Score is Very Low

Although car dealers or banks can come for the car if you fail to repay the money, they largely rely on your credit score to fix the interest rate. If your credit score is high, you are also likely to enjoy lower interest rates compared to another person with a lower score.

It is a Good Way of Building Your Assets

If you take a closer look at most people in Singapore, cars are the second most valuable assets after their homes. In the future, you might want to sell the car or use it as collateral to access more funds.

You can Use the Loan to Build Your Credit Score

When calculating credit scores, the Credit Bureau Singapore factors in a number of things, such as credit mix and timely payment of debts. Once your car loan is approved, it can also be an opportunity to improve your score because it increases your credit mix. If you strictly follow the agreed loan repayment schedule, your score will also improve significantly. Check our car loan calculator in Singapore.

Before Applying for a Car Loan in Singapore

Thinking deeper about the car financing you are taking can help you avoid pitfalls, such as being unable to repay in the coming months. So, here are the most important things that you need to do:

  • Review Your Credit Score

To ensure that the credit score is correct, you should ask for your report and keenly go through it. Because the Credit Bureau Singapore relies on third parties, such as banks, to get clients' details. It is not uncommon to get errors as a result of omission. If you find such errors, ask the bureau to rectify them before applying for a car loan.

  • Loan Repayment Ability

To establish your repayment capability, think of other debts that you are paying at the moment and compare them against your monthly income.

You should also examine other monthly payments, such as utility bills, rent, food, and contribution to the emergency funds. If you can comfortably pay all the costs combined without straining your finances, car financing will be a good option.

  • Factor the Additional Costs that Will Come with the Car and Budget for Them Too

Driving a car to your destination and back is awesome, but this freedom, comfort, and luxury come with some costs. For example, travelling on the road requires your car to have insurance cover, which is an additional cost to your finances. Other expenses that might come along the way include parking fees when travelling to town and the cost of repairs.

If you have not taken all these costs into consideration, they are likely to come as a shock when you get behind the steering wheel and drive off. Remember also to follow the traffic rules to avoid penalties associated with breaking the law.

Things to Avoid when Looking for Car Financing in Singapore

For most people, the excitement of finally being able to drive on the road can easily make them draw the wrong judgments about car loans in Singapore. So, here are some things that you should avoid when looking for car financing:

  • Picking Loan Providers Randomly

In Singapore, there are many loan providers willing to finance the purchase of your car, but selecting them randomly can be a big mistake. There is a risk of picking a loan provider with high-interest rates and punitive terms and conditions if you do that. To identify the best bank, consider working with reliable loan comparison sites.

  • Not Thinking About Your Needs when Selecting a Car

Before making the first step to buy a car, failing to decide why you actually need it can be a major undoing. For example, if you are a part of a 3-people family with your wife and your baby, a five-seater car might be a better option than a seven-seater vehicle. A pick-up truck might come in handy for a person whose task involves hauling cargo to different towns in Singapore.

Simply put – do not just pick a car under peer pressure. Instead, go for the model that will deliver the highest value to your life and cater to your needs.

  • Trying to Apply for a Car Loan on Your Own

As we highlighted earlier, there are so many things that come into play when looking for car financing. For most Singaporeans, making meanings of all these components can be challenging, especially if they have busy schedules. This is why you should always work with professional comparison sites to help you narrow down to a bank with the best conditions.

Personal Loan: Alternative to Car Financing

If you still want to buy a car but feel that a car loan is not the best route to take, you might want to consider a personal loan. Unlike car financing, where the approved funds can only go into paying for your car, a personal loan gives you a free hand on how to use the cash. Indeed, the money is deposited into your account, meaning that you can walk straight to a seller, select the preferred car, and pay.

It is also important to note that because a personal loan is unsecured, your car will not be recovered if you fail to repay as per the agreement. However, you need to be disciplined to ensure that the cash deposited into your account after personal loan approval goes into paying for the vehicle of choice.

Lendela: The Best Way to Identify a Good Loan for Your Car Purchase

If you ask most people who have used car financing Singapore, they will tell you that the process can be pretty tedious. Imagine having to apply for the loan from several banks and taking a lot of time only for the loan request to get declined. It can be discouraging, especially for busy persons who can only spare a short moment for the loan application.

Lendela has come to the rescue. Instead of juggling many financial institutions and multiple applications, Lendela has simplified the application process and helps you to identify the best bank. Our comparison platform is like having an expert hold your hand as you wade through the complex world of car financing.

Key Takeaways

  • You can go to a car dealership or take a direct car loan from a bank in Singapore when it comes to financing a car purchase.

  • Principal, Maturity Date, Interest Rate, APR and Amortisation are some must-know, crucial components to learn about for you to find the best car financing plan in Singapore.

  • Applying for car loans in Singapore can be tedious - think twice about your actual needs and financial situation before selecting the best loan provider.