Thursday, May 26, 2016
Ok, so I just shared an article on FB about how Straits Times is sensationalising the easing of Car Loan restrictions by MAS ("MAS lifts Car Loan Restriction") when they should have just titled it as an easing of restrictions.
The reaction to the share was quite amazing. Almost 100% of the sharing was excitement over the easing... as this ostensibly means that a car is more attainable now.
Hey, I dream every day of getting a car, but I know I can't quite afford one. The moment I get one, it's bye bye all my holidays. (NOOOOOOOO!)
SO! Since I had shared that article, I feel it important to also put up just how much of a difference the new loan restrictions makes.
And yes, I'm only talking about the legit stuff okay.
Current scenario (effective until 26/05/16)
OMV 20k and less: Max Loan 60%
OMV More than 20k: Max Loan 50%
Max Loan Tenure: 5 years
A common car in Singapore will cost around 100k with 20k or less OMV, so we shall use that as tabulation.
For a 100k car under current loan restrictions, you will have to pay $40000 up front and then about $1120 (depends on your interest rate!) per month for 5 years.
Total amount paid at the end of loan tenure: $107200 (estimated)
New scenario (effective from 27/05/16)
OMV 20k and less: Max Loan 70%
OMV More than 20k: Max Loan 60%
Max Loan Tenure: 7 years
For a 100k car under new loan restrictions, you will have to pay $30000 up front and then about $966 (depends on your interest rate!) per month for 7 years.
Total amount paid at the end of loan tenure: $111144 (estimated)
If you hadn't been able to afford a car previously, the situation is still not much better. True you pay 10% less down payment upfront, but then you add it to your installment which accrues interest (though admittedly, a 4k difference for a 100k transaction is miniscule). You also only have a difference of $150 or so for the monthly installments.
Yeah, it's so great and tempting... this easing of restrictions but it's really not ground breaking. Do your sums. Wheels are nice and flashy... but your bank account will love you if you think harder.
p.s. Yes I still daydream about driving.