How To Calculate A Car Loan Payment In Singapore

Denise Bay

Denise Bay

Last updated 21 January, 2022

Knowing how to calculate a car loan payment is your first step to making an educated decision when it comes to picking the best car loan. 

Regardless of whether you’re interested in buying a new or used car, it is important that you know how to calculate your car loan payment. This essential step will most certainly come in handy when you shop around and compare the different car loans available in Singapore

Besides, knowing your total and monthly car loan costs allows you to budget more effectively, all while encouraging you to take a harder, closer look at your financial standing. 

Read on to find out the basics of car loans in Singapore, how to calculate a car loan payment, how to reduce yours, as well as answers to the frequently asked questions by potential car owners. 

How much car loan can I get?

The maximum amount you can get from a car loan is either 70% or 60% of your car’s open market value (OMV): 

  • Motor vehicle with OMV ≤ S$20,000: maximum LTV is 70%
  • Motor vehicle with OMV > S$20,000: maximum LTV is 60%

That said, you may or may not receive the full loan amount you’re hoping to get. The bank or financial institution will take into account your other debt obligations and repayment ability before deciding on the amount of car loan you can qualify for. Also, your car loan has to be compliant with Total Debt Servicing Ratio rules.

How do I calculate a car loan payment in Singapore?

You need to know the following details in order to use a car loan instalment calculator or calculate your car loan payment manually:

  • Loan amount 
  • Interest rate 
  • Loan tenure/ term 

Here’s a free car loan calculator you can play around with. It’s quick and easy to use — perfect for those who want to avoid crunching numbers and dealing with mathematics post-school. 

Calculating a car loan payment the mathematical way

Feel like exercising your brain? Calculate your interest costs using the mathematical formula I = P x R x T, where:

  • ‘I’ is the interest cost
  • ‘P’ is principal, or the original amount borrowed
  • ‘R’ is the rate of interest, expressed as a decimal
  • ‘T’ is tenure, or term of the loan

To ensure your mathematical equation is accurate, ensure your interest rate (R) and loan tenure (T) are both being measured by the same time intervals. For example, if you are using an annualised interest rate, you need to calculate your loan tenure in years (i.e. five years instead of 60 months).   

To find your total loan payment amount, first find out how much you have to pay in interest. Thereafter, add your interest cost to the principal car loan amount

To find your monthly car loan repayment amount, simply divide that total loan payment amount by the number of months it will require for your loan to be paid off. Easy peasy. 

Other important things to note

While it is always prudent to get a better idea of how much your monthly car loan instalment will be and how much interest you’ll have to pay, keep in mind that various fees and charges may also be applicable for your car loan, such as processing fees or administrative fees, early repayment fees, late payment charges, late interest charges, etc.  

Back to top

Analysing my car loan payment calculation 

It pays to use the information gathered from your car loan payment calculation wisely. Shop around and repeat the calculation process for all the different car loans you’re considering. 

Definitely pay attention to the total loan payment amount to get the best idea on the ‘cheapest’ loan option for you — don’t just shoot for the car loan with the lowest monthly repayment amount without considering your loan tenure or total loan payment amount! 

While you are at it, remember to factor in car insurance when budgeting for your car. Car insurance is a necessity if you’d like to drive in Singapore. Just as you would shop around for your car loan, be sure to compare car insurance quotes and the coverage and perks that each one offers.

How do I lower my car loan payment? 

Apart from seeking out low interest car loans, surefire ways to lower your car loan payment include: (i) downsizing the amount you’re borrowing, (ii) cutting your loan tenure, and (iii) getting a less expensive car. 

Don’t discount the importance of doing your homework. Doing the necessary loan payment calculations and comparisons will help you make better financial decisions. 

Ask yourself if the monthly repayments are manageable and if you have the bandwidth to take on a shorter loan. In general, the longer your loan tenure, the more interest you’ll end up paying. 

Back to top

What is the monthly payment on a S$30,000 car loan?

Let’s assume you’ll be getting the DBS Green Car Loan which has an interest rate of 1.68% p.a. 

For a loan amount of S$30,000 and a loan tenure of five years, your monthly payment will work out to be approximately S$542 per month. 

Is 6% good for a car loan?

Not really. Major banks in Singapore usually offer competitive car loan interest rates in the 2% – 3% p.a. range. These are more competitive than those that car dealerships offer, typically in the 3.7% – 4.5% p.a. range. 

Therefore, a 6% p.a. interest isn’t exactly something you’d want to be dealing with even though it may not seem like a whole lot of difference on paper; your eventual cost of borrowing will be magnified significantly if you do the sums. 

Is it smart to do a 72-month car loan?

A 72-month car loan is quite common amongst car buyers in Singapore. Typically, you are allowed to borrow for up to seven years (i.e. 84 months) and that’s what many people do to lower their monthly loan repayment amount. 

There’s no hard and fast rule regarding the ‘smartest’ loan tenure you should go for, really. Just keep in mind that the longer your loan tenure, the more interest you’ll end up paying. 

That being said, it is also important that you ensure the monthly instalment amount is manageable for you and that you foresee no issue paying back this amount monthly in the next few years.

Back to top

Is a five-year car loan too long?

Considering how expensive cars in Singapore are, a five-year car loan is a pretty reasonable term that drivers should consider if they can afford their monthly payments comfortably. Remember: a shorter car loan means lesser interest, and interest equals money down the drain.

Apart from minimising the amount of interest you’ll be paying, the shorter the loan tenure, the quicker equity can build up in the car. Equity gives you choices: you can trade in or sell your car without taking too much losses bar your car’s depreciation costs.   

Ideally, consumers should opt for the shortest car loan tenure they can afford. However, everyone may have different priorities, so think carefully before deciding on your ideal car financing option. Case in point: my dad, who’s been driving (and changing cars) for the last 30-odd years, always tries to keep his car loan tenures to five or six years even though shorter tenures would have been no issue. 

Is S$0 down payment car purchase a good idea?

While it sounds like an absolute dream to drive away with a new car with S$0 down-payment, the reality is far from that. 

Finance companies that offer potential car buyers such deals aren’t charity organisations — they make money by charging very high interest rates, already carefully woven into the total price quoted to potential customers. 

Definitely think twice or thrice before signing such a deal! 

Read these next
Best Car Loans in Singapore: Interest Rate And Features Comparison
A Depreciation Cost Guide For First-Time Car Owners
Is It Really Worth Buying A Cheaper Red-Plate Car?
How Much Does It Truly Cost To Maintain A Car In Singapore?
All The Legal Loan Limits You Need To Know About In Singapore

While Denise has a thing for travel, K-dramas, 0% sugar bbt (with boba!), Japanese cuisine and flat white, her curious nature means all sorts of random tabs are open on her phone 24/7. She doesn’t like to pay full price for anything, too.