The invention of the gas-powered automobile truly changed the world. It is probably one of the most opted for the land transport system in the world. It is a struggle to reach our destination without riding a private car, taxi, or bus.
Next to a house, people look forward to purchasing their own car. Although mass transport systems are available, nothing beats the convenience and comfort of driving your own vehicle.
On the flip side, businesses buy cars for their logistics operation as well. From freight trucks to employee fleets down to express delivery services, companies invest heavily in vehicles.
In reality, car prices are not relatively low. That is why car dealers and sellers provide several options to ease the burden of the purchase cost. These options include car rental, hire purchase in Singapore, andvehicle finance solutions.
This article will discussbusiness vehicle loans.
An Introduction To Vehicle Finance Solutions
This part will discuss the frequently asked questions aboutvehicle finance solutions: the definition, where you can getbusiness vehicle loans, and what you need to have to be eligible for one.
What is vehicle financing?
Vehicle financing, auto financing or car loan is a financial arrangement that allows people to get a car without paying the entire amount in a single paying– outright buying.
The vehicle finance solutions lift the burden of paying the entire vehicle cost from the buyers who do not have enough budget for the car. This financial arrangement may come with different provisions and conditions, depending on thefinance companies and institutions in Singaporethat will lend you the money.
Everyone, private individuals and businesses or corporations, can get vehicle finance solutions. However, some requirements must be met before vehicle financing is granted.
Who provides vehicle finance solutions?
There are two car financing options for private individuals and businesses. These are direct lending and dealership financing.
Direct Lending
Direct lending is when the buyer applies for a loan from banks, money lenders, credit unions, and other financial institutions to purchase a car. In this financial arrangement, the buyer has to pay the financial institution over the agreed period. The lender or the financial institution then pays for the vehicle.
The buyer can choose between using a personal loan and a car loan. A personal loan is a sum of borrowed money that can be used in different things, such as vacation, home renovation, or purchasing a car. If the borrower fails to pay the loan, the lender seizes the borrower’s assets and properties.
On the other hand, a car loan is a sum of borrowed money strictly intended for vehicle purchase only. Similar to the personal loan, the borrower has to pay the bank or lender over the agreed period. The financial institution has the vehicle’s ownership until the loan is fully paid. If the borrower fails to finish the payment within the timeline, the bank or lender seizes the car.
Both business vehicle loans are subjected to terms and conditions such as interest rates and the repayment period.
Dealership Financing
Dealership financing is a financial agreement between the buyer and car dealers. Similar to direct lending, the buyer and dealer sign a contract where the buyer agrees to pay the vehicle over the agreed period. One form of dealership financing is hire purchase in Singapore.
In the hire purchase agreement in Singapore, the car buyer has to put down a deposit before proceeding to monthly instalment payment. The buyer only gains ownership once the loan has been fulfilled.
Although the buyer pays the dealer, dealers often sell the contract to the banks and other financial institutions. The bank or finance companies in Singapore that purchased the contract then collects the payment from the car buyer. If the buyer fails to fulfil the loan, the bank or the lender that possesses the contract seizes the vehicle.
Similar to direct lending, dealership financing is also bound to terms and conditions like interest rates and the repayment period.
What are the basic requirements for vehicle financing?
Everyone can apply for vehicle finance solutions orbusiness vehicle loans, but not everyone is qualified. Financial institutions like banks and credit unions, and car dealers often require car buyers to bring necessary documents to be eligible for vehicle financing. Requirements vary depending on the car dealers and finance companies in Singapore. Here are the basic requirements that you need to qualify for vehicle finance.
Proof of Income
To ensure that the person can pay for the money they will borrow, car dealers, finance companies and institutions in Singaporemay require the person to bring their proof of income.
Active proof of income can be the latest payslip or pay stub, income tax returns, and bank statements.
Your car dealer and lender may require supplementary documents other than those that are mentioned.
Proof of Identity and Residency
Lenders also ask for proof of your identity and residency. It may include several documents like an identification card with your current address, signature, and picture on it. Your passport and other government IDs may also be submitted. Property and asset titles are accepted as well.
For proof of residency, car dealers and lenders also accept utility bills with your name and current address on them besides the IDs. For people who rent an apartment, a lease agreement and contract can satisfy as well.
Proof of Insurance
Due to the adherence to government laws, car dealers andfinance companies in Singaporerequire you to show car insurance before handing you the vehicle.
Some car dealers provide insurance as well. You can purchase the insurance from your dealer or get coverage from a separate vendor.
Lastly, car dealers and lenders also require you to show your driver’s licence before granting you the business vehicle loanand giving the car.
Financial and Credit History
Aside from your proof of active income, car dealers andfinance companies in Singapore may also review your financial and credit history to determine your capacity to pay. It is to ensure that you are capable of paying the loan. They may check your current debt-to-income ratio as well as your past debt history.
People with good credit scores often get approved and receive better terms and conditions and financial arrangements. Meanwhile, people with bad credit scores are frequently givenbusiness vehicle loans with higher interest rates.
Car dealers and finance companies in Singapore can only access your financial history with your consent, using the information you provided.
Down Payment
For the car dealership financing andhire purchase in Singapore, vehicle sellers may require you to deposit a down payment. Down payment is a sum of money that covers a portion of the vehicle price. Buyers who put down payment often get their car financing application approved much faster. Monthly instalment payment and the interest rate is much lower for people who deposited down payment.
Finance A Car or Pay Cash: Which Is The Better Deal?
Are you torn between buying brand new cash outright and taking your car dealer’s best COE renewal loan offer? People capable of paying cash may opt for a single purchase, but others still consider loan and instalment payments. Weigh the advantages and disadvantages of outright buying and vehicle finance solutions.
Advantages and Disadvantages of Buying A Car With Cash
ADVANTAGE #1: ONE-OFF PAYMENT
Buying your car with cash eliminates your monthly billing– instalment payment. Thinking about the monthly or fortnightly repayment sometimes bothers and makes the car owner anxious. One-off payment removes these worries.
ADVANTAGE #2: CHEAPER
Buying a brand new or used vehicle could be expensive upfront; however, the sale price of the car is usually lower than the loan–interest inclusive–you will apply for. The buyer does not have to pay the interest rate of the best COE renewal loan.
ADVANTAGE #3: THE CAR BECOMES YOUR PROPERTY
The best thing about buying a car with cash is you already own the vehicle once you step outside the shop. You can freely drive the automobile without worrying about the mileage limit and usage restrictions. The car automatically becomes your property, unlike with business vehicle loans.
ADVANTAGE #4: YOU CAN SELL THE CAR
Because the car buyer owns the vehicle outright, they can sell the car right after getting it. It can be an advantage, especially if the owner needs immediate cash. With thevehicle finance solution, the car “owner” needs to finish loan repayment, which can take months or a year, before becoming a legit car owner.
ADVANTAGE #5: YOU CAN PART-EXCHANGE
If selling your car is a pretty slow and painful process for you, the fastest way to get a new vehicle is the part-exchange. Part-exchange is where a car owner trades their current vehicle to a dealership in exchange for a new set of wheels with the same value as your old one. Car owners subject their old vehicles to valuation before they can part-exchange.
DISADVANTAGE #1: MAY DEPLETE YOUR SAVINGS
The upfront price of brand new and used cars are high. Many buyers use their savings to cover the expensive cost, and it can be disadvantageous during emergencies.
DISADVANTAGE #2: DOES NOT BUILD YOUR CREDIT SCORE
Paying outright may eliminate your worries about monthly payment but taking thebest COE renewal loanhelps you build a good credit score. You can use your good credit score for other financial arrangements.
DISADVANTAGE #3: LIMITED CAR SELECTION
Car price depends on the model and brand. Luxurious brands and newer models are expensive and can break the bank when bought with cash.
DISADVANTAGE #4: DEPRECIATES
Cars depreciate in just three years, making them unideal for investments. You may sell it for half of its original price.
Advantages and Disadvantages of Vehicle Finance Solutions
ADVANTAGE #1: CAR SELECTION
Buyers who choose vehicle finance solutions have more car options since they are not budget restricted. Buyers can spread the payment and only need to deposit down payments.
ADVANTAGE #2: INSTALMENT PAYMENT
Buyers can pay for the car for six months to one year, depending on their capability. It avoids depleting the savings.
ADVANTAGE #3: PERSONAL CONTRACT PURCHASE (PCP)
With vehicle finance solutions, buyers can have a flexible agreement called Personal Contract Purchase (PCP). With PCP, the car owner could cut and end the contract, purchase the car, or change the vehicle with a new one. The PCP agreement is applicable for a brand new and used car.
ADVANTAGE #4: FIXED PAYMENT
Car dealers often offer business vehicle loan packages that have fixed payments. The monthly payment cost and interest rates vary, depending on the package. It gives an affordable instalment payment for people who can’t pay cash.
ADVANTAGE #5: BUILDS CREDIT SCORE
If the buyer can pay the loans within its timeline, it reflects positively on their credit score. The better the credit score, the more eligible you are for other financial arrangements.
DISADVANTAGE #1: INTEREST RATE
What makes people stay away fromvehicle finance solutionsis the interest rates. The best COE renewal loanpackages may offer different interest rates. People who choose car finance end up paying more money than the vehicle’s original worth.
DISADVANTAGE #2: PRONE TO ADDITIONAL FEES
The borrower shoulders damage costs and mileage limit fees of the car. If the borrower decides to purchase the vehicle through PCP, they may hand in additional fees based on the contract agreement.
DISADVANTAGE #3: YOU DON’T OWN THE CAR UNLESS THE LOAN IS PAID
Unfortunately, in business vehicle loans, the lender or car dealer retains the ownership of the vehicle before the completion of the loan repayment, which could take months to years. It also means that you cannot sell nor part-exchange the car for immediate cash.
DISADVANTAGE #4: HAS USAGE RESTRICTIONS
People who have vehicles under car finance should be extra careful when using the car. Usually, these vehicles have mileage limits and usage restrictions until the loan is completed.
DISADVANTAGE #5: TARNISHES CREDIT SCORE
Business vehicle loans are a double-edged sword concerning credit scores. If the buyer fails to pay the loan, it reflects negatively on their credit score.
Cars are expensive, but you can still own one without breaking your bank throughvehicle finance solutions. With vehicle finance solutions, you can get the best COE renewal loanthat suits your budget.
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