> ## Content Index > Fetch the complete content index at: https://www.theweekendinvestor.sg/llms.txt > Use this file to discover other available public pages before exploring further. # 0% downpayment for a car. How much interest are you actually paying? - URL: https://www.theweekendinvestor.sg/0-downpayment-for-a-car-how-much-interest-are-you-actually-paying/ - Published: 2026-10-05T08:55:23.000Z - Updated: 2026-10-05T08:55:23.000Z - Author: dylonpoh Quite recently, I've been seeing more and more 0% down payment for cars. Just a couple of days back, BYD launched a [scheme](https://www.straitstimes.com/singapore/transport/phv-drivers-electric-hybrid-vehicles-zero-down-payment-grab-gxs-bank-byd-by-jc?ref=theweekendinvestor.sg) for private-hire drivers. [Concerns over 100% borrowing for vehicles as outstanding car loans hit 12-year highThe ads promise buyers that they can skip the 30% or 40% down payment for a car through various schemes Read more at The Business Times.![](https://storage.ghost.io/c/59/89/59896f3c-f7b5-4b57-8eb0-65accd9d7f0c/content/images/icon/favicon-b2be9802-e177-4a97-bd9f-3c3d4f70a95c.webp)The Business TimesThe Business Times![](https://storage.ghost.io/c/59/89/59896f3c-f7b5-4b57-8eb0-65accd9d7f0c/content/images/thumbnail/598baf788b56f5f057f7efe0d2226ed50b2a5568d58f994a16d23bd478e35e6c-122c5ca5-8c84-4cd6-a49c-77633a3d158f.webp)](https://www.businesstimes.com.sg/zh-hans/singapore/concerns-over-100-borrowing-vehicles-outstanding-car-loans-hit-12-year-high?ref=theweekendinvestor.sg) This isn't actually new. Back in February 2013, buyers could obtain 100% financing with loan tenures stretching as long as 10 years. Amid escalating COE premium, MAS restricted borrowing to 50/60% and shortening loan tenure. For people new to buying cars, these days you can take a maximum loan of 70% or 60%, depending on the open market value of the car, because MAS have later relaxed their regulation. Now that 100% borrowing is back, you may wonder how is this allowed? Well, i'll leave that out from this article. What I'm more interested is how much does 100% financing actually cost you? Because what looks like a small difference in the advertised interest rate can hide a surprisingly expensive borrowing decision. I wanted to explore the differences if you are paying a 70% loan versus a 100% loan. First, let's understand how a car loan works. Car loans in Singapore are commonly quoted using a **flat interest rate**. When you pay your car loan, your interest will not come down. Compared to a home loan, which is a reducing-balance interest rate. As you pay, your interest goes down. But what you may not know is whatever interest that is being advertised on a car dealer website or SGCarMart is not the "REAL" interest. Lets say its 2.18% p.a. This 2.18% is different from a housing loan 2.18%. A rule of thumb to convert the car loan interest is to multiply it by 2. The actual effective interest rate is more like 2.18% x 2 = 4.36% p.a But let's check how close this rule of thumb is to the real effective interest --- **How a car loan interest work. It is very simple!** Assuming you took a 70% car loan of $100,000 for 5 years at 2.18% Total interest = 2.18% x 100,000 x 5 = $10,900 Total loan + interest = $100,000 + $10,900 = $110,900 Monthly Repayment = $110,900 / (5 years x 12 months) = $1,848.33 You should end up with the same number if you use a calculator with SGCarmart or dealer Convert this to Effective Interest. Present Value = $100,000 (Loan you took) Payment = -$1,848.33 (Payment you have to make) N = 60 (How long) Future Value = $0 Rate = 4.148% **So the car loan you thought was 2.18% is actually 4.148% p.a** Our ×2 shortcut wasn't too far off. --- **Now let's look at 100% financing** What really got me curious was because of an advertisement I saw. 70% car loan, the interest is 2.18% 100% car loan, the interest is 2.88% At first glance, it may just be a 0.7% difference, kind of small, but if you were to apply the formula or the rule of thumb, the entire interest suddenly looked like 5.6% p.a. A little steep. **If we go a step further are break down the loans as 2 separate decision.** Using the same example as above, $100,000 loan for 5 years Decision 1 : Take up a 70% car loan : $100,000 Decision 2 : Take up a 30% loan to pay for the downpayment : $42,857 Decision 1 loan is 2.18%. the total interest you pay is $10,900. Decision 2 loan is 2.88%. Because of this loan, your 70% became 2.88%. So the interest u are paying is $42,857 x 2.88% x 5 years = $6,171.41 Additional interest you pay on your 70% loan = $100,000 x 0.7% x 5 years = $3,500 Total interest on Decision 2 = $6,171 + $3,500 = $9,671 We should attribute all this interest to the $42,875 loan you took for downpayment. The total loan + interest = $42,857 + 9,671 = $52,528 Repayment because of this decision = $875.47 Hence, the effective interest you are paying is **8.298%** **What may appear as a small 0.7% p.a is actually hiding a 8.298% p.a loan decision** A marketing gimmick can conveniently hide the math behind and make an expensive purchase looks affordable. Unfortunately, many Singaporeans may fall for this trap because they are unaware. I hope this article helps!