Financing A Used Car!

14 Aug 2020

Buying a brand new car is a fairly straightforward affair. You walk into a dealership of your choice, look at the car you’d like to acquire, request for a test drive of a similar model. Iif all is jolly and good, you then spec out your new ride, and proceed to put your 30% downpayment, and arrange for a bank loan for the rest of that sum.

Used car financing is a little less straightforward. For starters, used cars are governed by the same 30% downpayment rule as their brand new counterparts, but various loopholes and creative interpretations of the law have yielded some extra complexity when purchasing a 2nd Hand vehicle. We’re here today to dissect all the different options you have should you decide to head this route!

In-House Loan

It is as its name implies. This is a loan that is issued not by a bank or an insurance company, but by the dealer itself. There are a couple of pros of entertaining this option. Generally speaking, dealers offer you more flexible terms than compatriots at various financial establishments. Part of this flexibility can range from full loans, to an extended tenure over what the banks can offer you.

If you’re not after a full loan, some dealers often also offer flexible downpayment schemes, allowing you to put down whatever dollar figure upfront that you’re comfortable with. As a cash strapped petrolhead in need of some wheels, this can be a tempting prospect. However, do note that bank loans often yield lower effective interest rates. Also, in some cases, personal loans offer you a similar effective interest rates but potentially with less hassle, so do be prudent in your research before committing to what superficially seems like a really tempting offer from an overzealous car salesperson!

“Pass-Through” Loan

It’s reassuring to know that the person attending to one of your largest ticket item buys in your life is open and accommodating. He understands your reluctance to go with their in-house loan, realising that you’d feel much better and more secure with a loan from an established financial institution. He enlightens you on the tie-up options they have with the aforementioned, and the offerings actually look fairly decent.

His enthusiasm may come from his innate desire to provide the best service to his customers, or from the simple fact that banks offer a commission on each of these “Pass-Through” loans signed. Typically, you’re better off sourcing and applying for a loan on your own, though do take a careful look at the fine print on the offers from your dealer, as there are occasional promotions with interest rates that are superior to what you can find on your own!

COE Renewal Loan

Purchasing a PARF car with the intention of renewing its COE can also be another avenue into car ownership. The main depreciation hit would have already been borne by its original owner(s), so all you need to do, once the car checks out mechanically, is revalidate its COE and you’ll be good to go.

COE loans are fairly straightforward, and a number of financial companies offer some fairly competitive rates. As long as your paperwork checks out, their interest rates are comparable to any other used car loan.

Personal Loan

Believe it or not, this can actually be a viable option for financing a used car. Personal loans are not intended for cars, so the interest rates are higher than any of the previous solutions. The biggest pro it offers over the other alternatives is flexibility. The money is disbursed into your chosen bank account, and you can then use it to purchase any car you’d like within that set budget.

You also don’t have to adhere to the government’s 30% downpayment guideline, as you aren’t applying for a car loan. However, this is really only suited for COE-renewed economy cars, as the higher interest rates will make this an unrealistic proposition if you’re using this route to fund that new-to-you sports car you’ve been lusting after. It can be hard to get loans for older COE cars, so this may sometimes end up being your only option, especially if you’re buying it off a private seller!

Balloon Scheme

This is a loan scheme for cars with a PARF value (aka non COE cars). Essentially, this is a way of lowering your monthly installments by factoring in the cost of the PARF value at the time of deregistration the instant you sign on the dotted line. If you’re after a car that costs $80,000, but has a minimum PARF figure of say $20,000, you’ll only need to borrow $60,000 instead of the former.

This also translates into less interest paid despite higher interest rates. However, you’ll have to commit to owning this vehicle until the vehicle has to be scrapped. Stiff penalties await should you sell the car off before the stipulated period, so make sure you are able to afford the payments regardless of the state of the economy.

We’ve touched on the more common ways of purchasing a used car. But what if you’re looking to sell your existing car? We’ve got you covered there too.


SwiftQuote makes selling your car at a better price a complete doddle. It leverages a network of trustworthy local dealers, with a reputable track record to boot, to come up with a better offer for your vehicle.

Within just one working day, SwiftQuote will offer you only the highest quote from out network. Should you accept the offer, the dealer will be notified, and you can then arrange for a meeting place for their staff members to check out your car. The dealer will then proceed with all the paperwork, and your car can be sold in as little as 2 days, to a couple of weeks, depending on your arrangement with the dealer.

Our staff members are experienced with the ins and outs of the industry locally, offering quick response times as well as friendly customer support! If you’re looking to sell your vehicle, stop short changing yourself, and consider flipping your vehicle via SwiftQuote now!

Simply fill in your details below, and we will be in contact shortly!

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