Buying a Car
Owning a car can be a “high maintenance” relationship. Before you decide to buy a car, consider if public transport can meet most of your transportation or commuting needs. Try adding up the cost of each journey you and your family members make every day and compare this to the cost of owning and running a car. Owning a car may not be a better option.
How much does it cost?
Buying a car can be expensive, especially if you are eyeing a luxury or prestige car. If you need to sell your car later, it will most likely be at a value lower than its original purchase price. The price you receive may not be enough to pay off your car loan.
Click here for more information on the various costs for buying a car. There are also running costs such as fuel expenses, Electronic Road Pricing (ERP), road tax, servicing and repair costs, as well as motor insurance premiums.
Borrowing to pay for the car
Most of us may not have enough cash to pay for a car without borrowing money. If you are going to borrow money for a car, work out what you can afford to borrow first. In addition to meeting all your current household expenses, debt and other financial obligations, you will be adding more debt to your expenses and you still need to have enough money for the upfront payments to buy the car as well as to run it.
Work out how much money you need for each item, and decide if your budget is able to accommodate these expenses. As a rule of thumb, your total debt repayments (including credit cards, home and car loans should not exceed 35% of your monthly income. The Land Transport Authority (LTA)’s portal One Motoring has a Car Loan Calculator which can help you to get a better sense of your financial commitments when buying a car.
Your car dealer is likely to introduce to you some car financing packages and offer to facilitate the application process for you.
Different lenders may quote different interest rates and the methods of computing interest may vary as well. Find out more about the actual interest cost. As with shopping, make a comparison between the loan options available. It is also useful to check if there are any penalties if you wish to settle the loan earlier.
It is against the law to drive a car without a valid insurance policy. Minimally, the policy should provide cover for personal injury to other parties. Insurers offer three main types of motor insurance policies:
(i) third party policies;
(ii) third party, fire and theft policies;
(iii) comprehensive policies.
To read more on motor insurance, visit the General Insurance Association website.