Rising COE drives more buyers to used cars and personal loans

[SINGAPORE] Are COE costs killing your automobile dreams? You are not alone. With sky-high premiums making brand-new vehicles seem out of reach, more Singaporeans are opting to buy used. According to ChannelNewsAsia, Singapore's used automobile industry would expand by more than 20% by 2027, demonstrating that it is a movement rather than a trend.

Even pre-owned autos come with high prices and the dreaded COE. Traditional vehicle loans can also be beneficial, but they frequently come with conditions. A personal loan may provide you with greater freedom and control over your purchase.

Here's how it works—and we'll show you some of the greatest personal loan options available right now.

Why get a personal loan to purchase a used car?

What is the difference? A loan is just a quantity of money given to you in order to buy anything, correct? Yes, at the most fundamental level. However, each sort of loan has its own set of limits, terms and conditions.

A car loan is a secured loan designed expressly for the purchase of a vehicle, but a personal loan is a flexible, unsecured loan that may be used for a variety of purposes, including automobile purchases.

The Monetary Authority of Singapore (MAS) regulates car loans, and loan amounts and tenures are limited. Not to mention that until the loan is returned, you do not really own the automobile; it belongs to the bank.

You may also utilize a personal loan to purchase a secondhand automobile, giving you more freedom and flexibility in how and what you use it for. Personal loans provide additional flexibility, particularly when purchasing a used automobile that is beyond the scope of typical financing solutions.

Before you start exploring automobile classifieds, you should question yourself: Is a personal loan the best option to finance your used car?
A personal loan, unlike a standard automobile loan, is not secured by the vehicle. That means the money goes directly to you, not the vendor. However, the bank must analyze your ability to repay.

Things to Consider Before Taking a Personal Loan

Before jumping in, it’s important to evaluate whether a personal loan is the right fit for your financial situation. Here are some key points to keep in mind:

Credit Score Matters: Since the loan isn’t secured by the car, lenders will rely heavily on your creditworthiness. A higher credit score often translates to lower interest rates.

Where You're Buying From: Personal loans are particularly useful if you’re purchasing from a private seller or parallel importer, where traditional car loans may not be an option.

Upfront Payment Advantage: Planning to pay in full upfront? A personal loan gives you the lump sum you need—potentially strengthening your position to negotiate a better deal.

Additional Costs: COE top-ups, insurance, repairs, and road tax can add up quickly. A personal loan can help you cover these without tapping into your savings.

Need a Top-Up Only? If you’ve already saved most of the cost, a personal loan lets you borrow just what you need—no more, no less.

Immediate Ownership: With a personal loan, you own the vehicle outright from day one. Unlike car loans, there’s no waiting until the loan is repaid for full ownership.

Pros and Cons of Using a Personal Loan for a Used Car

Pros:

Greater flexibility in how funds are used

Quick approval and disbursement

No downpayment or collateral needed

Ideal for older vehicles or private seller deals

Cons:

Higher interest rates than traditional car loans (though competitive rates are available)

Loan amount may be limited by income or credit profile

Risk of overborrowing if not financially disciplined

Possible early repayment penalties

Evaluate carefully to determine what suits your budget and long-term financial health.

What to Look for in a Personal Loan

Used car buyers typically want value and speed, without being tied down by long-term financial commitments. Here's what to consider when comparing loan options:

Interest Rates: Focus on the effective interest rate (EIR), not just the advertised flat rate. Even a small percentage difference can significantly impact the total cost.

Loan Tenure: For a used car, a shorter tenure (12–36 months) might be sufficient and save you money in interest.

Early Repayment Terms: Planning to pay off the loan early? Make sure you won’t be penalised for it.

Application Process: Go with lenders offering fast, digital applications and Singpass login for convenience.

Transparent Terms: Use the lender’s loan calculator to get a full picture of your repayments and any hidden charges.

Costs Beyond the Loan

Before finalising your financing, don’t forget the additional expenses involved in buying a used car:

COE: Even used cars need a valid COE. If it’s expiring soon, be prepared for the cost of renewal.

Insurance: Premiums for older vehicles may be higher. Shop around to compare policies.

Road Tax & Inspections: Cars over 3 years old need regular inspections, plus annual road tax.

Transfer/Admin Fees: Budget for fees whether you’re buying from a dealer or direct from a seller.

Servicing & Repairs: Without warranty protection, repairs for wear and tear are on you. A pre-purchase inspection is strongly recommended.

When Is a Personal Loan the Right Choice?

Choosing to finance a used automobile with a personal loan might be a wise decision, especially if you want immediate access to money and greater flexibility than a standard car loan provides.

Finally, if you intend to acquire an automobile, you more or less require or desire it for your everyday activities. However, if you believe that taking out a personal loan would acquire you a car, either used or new, you should assess if you have the necessary money to cover the COE, maintenance costs, and repayments over time.