Buying A Car Through Hire Purchase In Singapore

Are you planning to buy a car on hire purchase? Hire purchase is an option opted not only by individuals but also by substantial business firms. When an individual or a firm is not in the position to buy the machinery automobile in one shot, they opt for hire. To know what is hire purchase read the following article.


Hire purchase is a method to buy a car by making the payment in monthly installments. The hire can take the car, start using it, and make the payment of the installment price along with interest. This is one of the easiest ways to finance Hire purchase car SingaporeOne excellent option to get the deal of hire purchase is from Capitall SG.

How Does It Work? 

Hire purchase is a process involving two parties. The first party is the hirer and the second party is the hiree. The hirer is the person who hires/purchase the car from a car dealer on an installment basis. A hiree is the car vendor who gives out his vehicle to the purchaser/hirer. The hire purchase works on a contract signed by both parties. The agreement includes the personal details of the parties and the payment amount.

Initially, as a hirer, you are supposed to make any advance payment to the hiree to get a car. The advance can either be 10%, 20% of 30% of the total amount. Once you have made the installment payment, you can take the car. The tenure of the loan is between 1 to 5 years. It depends on you how much payment you can make to clear the balance as soon as possible. The rate of interest depends on the type of car you are purchasing. The interest rate of a second-hand automobile can be changed between 3 %to 9%.

To get the lowest interest rate, you need to maintain a good credit score. A credit score is a score given by your financial institution bye scrutinizing your previous payment records. If you have made your payments on time, you will have a good credit score. If you maintain a terrible record of your payment, the credit score will be less. Thus the interest rate on your car loan will depend on your credit score.

Bright Side Of Hire Purchase

  • In hire purchase, you are not required to make the payment in full. You can divide the amount in multiple installments and pay it within the tenure of 5 years.
  • To acquire the card, you have to pay at least 10% of the advance amount at the commencement of the contract.
  • By paying a small amount, you can acquire the whole car and start using it.
  • The rate of interest is fixed, and the agency doesn’t ask for an increase in the interest rate in midst of the journey.
  • You can even terminate the contract in midst of the way. To do this, you have to return the car and make a small compensation for breaking the agreement.
  • On one payment, you acquire the whole car for your use.

Drawbacks Of Hire Purchase

  • You are not given the ownership until and unless you make the complete payment of the total amount.
  • The hiree has the power to take away the car from you if you fail to make the payment in the midst of the way due to financial classes.
  • Your money goes in vain if they retakes park the car due to your financial problems.
  • You are not in the position to sell the automobile to a third-party since you do not hold the ownership.
  • The interest rate is high if you have a bad credit score.
  • Until the ownership is transferred to you, you can not damage the car. The extra amount on maintaining the car also goes from your pocket.

Example Of Higher Purchase

Lets us study hire purchase with a small example. Mr. A purchases a car on hire purchase from Mr. B for $20,000. An advance payment of $2000 is made by Mr. A at the commencement of the contract. The contract is signed for four years, with an interest rate of 4%. Now let’s calculate the total amount Mr. A pays for the contract.

  • Car price – $20,000
  • Advance amount – $2,000
  • Interest rate – 4%
  • Time – 4 years (48 months)

Calculation of EMI = 18,000 ÷ 48 = 375

375 * 4 ÷ 100 = 15

EMI = 375 + 15=390

  • The rate of interest payable monthly is $15
  • The total EMI along with installment amount is $390

How To Get A Great Deal

  • CALCULATE OVERALL COST: Before getting into an agreement, calculate the overall cost, you’ll be incurred at the end of the payment. By calculating various total costs, you will be able to choose a plan with the least amount invested.
  • TRY DIFFERENT AGENCIES: Every agency has different criteria set to grant loans. As the requirements disperse, so the rate of interest. To get the best deal out of your package, try to determine the interest rate from various agencies. Once you have the result, you can opt to go with the agency asking you the least interest rate.
  • DONT BE IMPULSIVE: Usually, people tend to get excited while buying their dream car. They will receive advice from various people. But it is essential to take the help of a financial advisor only. Every individual will give recommendation based on their personal experience, but a financial advisor is the one who knows your economic conditions. Thus go with the guidance of the financial advisor rather than people.
  • ESTIMATE YOUR FINANCIAL CONDITION: You can only decide to buy a car if the flow of your finance has stability over a while. To show off in front of people who don’t even care, you cannot go beyond your financial limits. By doing this, you will put yourself in a problem. If you fail to repay the installment amount, the financial institution has a complete right to confiscated other properties. Thus make a precise estimation of your economic conditions and then decide to hire a car.