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Singapore Car Hire-Purchase Loan Calculator
Financing a car in Singapore typically involves a hire-purchase agreement, where you pay a deposit and borrow the remaining amount from a financial institution. The loan is repaid in fixed monthly instalments over a set period. Unlike reducing balance loans, hire-purchase loans in Singapore commonly use a flat interest rate. This means the total interest is calculated upfront on the original loan amount and remains constant throughout the loan term.
This calculator helps you determine your monthly payment, total interest cost, and the maximum loan amount you are eligible for based on the Monetary Authority of Singapore (MAS) regulations.
How is a Car Loan Calculated in Singapore?
The calculation follows a straightforward formula:
- Loan Principal: This is the amount you borrow. It is the vehicle price minus your down payment, but it cannot exceed the MAS Loan-to-Value (LTV) limit.
- Total Flat Interest: Interest = Loan Principal × (Annual Flat Interest Rate / 100) × Loan Term in Years.
- Total Repayable: Principal + Total Interest.
- Monthly Instalment: Total Repayable ÷ (Loan Term in Years × 12).
MAS Financing Rules
To curb excessive borrowing, MAS sets limits on vehicle financing:
- Maximum Loan-to-Value (LTV): The loan amount cannot exceed a percentage of the vehicle's price.
- If the vehicle's Open Market Value (OMV) is SGD 20,000 or less: Maximum LTV is 70%.
- If the OMV is above SGD 20,000: Maximum LTV is 60%.
- Maximum Loan Tenure: The loan period cannot exceed 7 years for motor vehicles.
Your down payment must be large enough to ensure the loan amount stays within these limits.
Worked Example
Let's calculate the loan for a car priced at SGD 120,000 with an OVM above SGD 20,000.
- Vehicle Price: SGD 120,000
- Down Payment: SGD 50,000
- Loan Term: 5 years
- Flat Interest Rate: 3.5% per annum
- OMV Category: Above SGD 20,000 (max LTV 60%)
Step 1: Maximum Loan (MAS Limit)
60% of SGD 120,000 = SGD 72,000.
Step 2: Loan Principal
Price - Down Payment = SGD 70,000. This is less than the SGD 72,000 limit, so the principal is SGD 70,000.
Step 3: Total Interest
SGD 70,000 × (3.5/100) × 5 = SGD 12,250.
Step 4: Total Repayable
SGD 70,000 + SGD 12,250 = SGD 82,250.
Step 5: Monthly Instalment
SGD 82,250 ÷ (5 × 12) = SGD 1,370.83.
The borrower will pay SGD 1,370.83 every month for 5 years.
Flat Rate vs. Effective Interest Rate (EIR)
The flat rate is not the true cost of borrowing. Because you are paying interest on the full principal amount even as you repay the loan monthly, the Effective Interest Rate (EIR) is much higher. The EIR is a more accurate measure for comparing loan products. Our calculator provides an indicative EIR, but the precise calculation requires an iterative formula. Always ask your lender for the EIR.
Next Steps: The Hire-Purchase Agreement
Once you have an estimate, you will formalise the loan with a Hire-Purchase Agreement for Motor Vehicle. This legal document outlines all terms: the vehicle details, loan amount, interest rate, monthly instalment, payment schedule, and consequences of default. Ensure all calculated figures match the agreement before signing.