The Trend More than one in five car loans now stretch to seven years or longer, with average loan terms reaching about 70 months for both new and used cars. This represents a significant shift—ten years ago, loan terms averaged around 67 months.
Why It’s Happening Rising car prices, higher interest rates, and affordability pressures are driving buyers toward longer loans. These extended terms offer lower monthly payments, making expensive vehicles seem more affordable upfront.
The Hidden Costs The article provides a clear example: On a $50,000 car with $5,000 down and a 7% interest rate:
- A 5-year loan costs $891/month with $8,463 in total interest
- A 7-year loan costs $679/month but $12,050 in total interest
That $212 monthly savings comes at the cost of paying nearly $3,600 more overall.
The Risks Longer loans increase the likelihood of being “underwater”—owing more than the car is worth. This can trap you in debt and create problems if you need to sell, trade in, or if the car is totaled.
What Experts Recommend If you can’t afford to pay off a car within five years, consider a less expensive model, a used car, or saving for a larger down payment. The article suggests that needing a seven-year loan might be a signal that the vehicle is beyond your budget.
analyse in singapore context, using singapore scenarios
10:47 am
I’ll search for information about Singapore’s auto loan market and car financing practices to provide a relevant local analysis.
Singapore car loan terms duration 2025
10 results
Understanding the Average Car Loan Length in Singaporesingsaver.com.sg
How to Calculate Car Loan Payments in Singapore (2025 Guide) – SingSaversingsaver.com.sg
Car Loan in Singapore – DBS Bankdbs.com.sg
COE Singapore 2025: Guide to Bidding, Prices & Loans | MoneySmartmoneysmart.sg
Buying a Car in Singapore? Here’s Your Guide Picking a Loandbs.com.sg
Car Financing 101 – Understanding Loan Eligibility! | Articles | Motorist Singaporemotorist.sg
Rules for Motor Vehicle Loansmas.gov.sg
OCBC Car Loan & Interest Rates – Car & Vehicle Financing Singaporeocbc.com
Car Loans: Downpayment, Tenure, and Rates » BanksinSG.COMbanksinsg.com
2025’s Car Loan Interest Rates – Save on Your Next Vehicleloanadvisor.sg
Singapore car prices COE 2025 2026
10 results
Car Prices in Singapore (2025 Overview) – ERIC KIMerickimphotography.com
Latest COE Prices and Bidding Results 2026 | Motorist Singaporemotorist.sg
Cost (S$) For Cars Registered in Nov 2025 without COE with COE without COElta.gov.sg
COE Prices & Latest Bidding Results in Singapore 2025toyota.com.sg
VINCAR | COE Prices & Bidding Results – Jan, 1st Bidding 2026vincar.com.sg
Singapore COE Prices To Remain High In 2026dsf.my
Singapore COE Prices And Total Numbers To Rise In 2026 – Automachaautomacha.com
COE Singapore 2025: Guide to Bidding, Prices & Loans | MoneySmartmoneysmart.sg
The True Cost of Owning a Car in Singapore in 2025 (Beyond the Sticker Price) – Key Motorkeymotor.sg
Now let me analyze the longer auto loan trend in the Singapore context with local scenarios:
Analysis: Longer Auto Loans in Singapore Context
Key Differences from the US Market
Regulatory Framework Singapore has strict regulations set by the Monetary Authority of Singapore (MAS), with a maximum loan tenure of seven years SingSaverMonetary Authority of Singapore – ironically, the same duration that US experts now consider problematic. However, Singapore has additional safeguards:
- Mandatory downpayments of 30-40% depending on the vehicle’s Open Market Value (OMV) SingSaverSingSaver
- Total Debt Servicing Ratio (TDSR) limiting all debt repayments to 55% of gross monthly income SingSaver
- Loan-to-value ratios capped at 60-70% based on OMV Motorist Singapore
Current Market Reality Many Singaporeans commonly opt for 72-month (six-year) terms to reduce monthly payments SingSaver, approaching the maximum allowed duration. This is happening in an environment where industry research in 2025 could not find any brand-new car priced below S$140,000 EK.
Singapore-Specific Scenarios
Scenario 1: The Mass-Market Sedan Buyer
Let’s say you want a Toyota Corolla Altis, which costs approximately S$178,888 including COE:
- Required downpayment (30%): S$53,666
- Loan amount (70%): S$125,222
- Interest rate: ~2.78% p.a. (typical bank rate)
Comparing loan terms:
- 5-year loan: Monthly payment ~S$2,267 | Total interest ~S$10,800
- 7-year loan: Monthly payment ~S$1,715 | Total interest ~S$15,702
The savings of S$552/month comes at a cost of nearly S$5,000 more in interest.
Scenario 2: The “Underwater” Risk with COE Depreciation
This is where Singapore’s unique COE system creates an even more dangerous version of being underwater. Unlike US cars that depreciate gradually, Singapore cars depreciate sharply, especially when the Certificate of Entitlement (COE) nears expiry SingSaver.
Example timeline for a car bought in 2026:
- Year 0: Purchase price S$150,000 (including S$100,000 COE)
- Year 5 (on 7-year loan): You still owe ~S$66,000, but the car’s value has dropped to perhaps S$70,000-80,000 (5 years of COE remaining)
- Year 7 (loan paid off): Car worth maybe S$50,000-60,000 with only 3 years COE left
- Year 10: COE expires, and you must decide between renewing (paying another large premium) or scrapping the vehicle MoneysmartVincar
Scenario 3: The Income Trap with TDSR
Unlike the US, where your car loan mainly just needs to fit your budget, Singapore’s TDSR creates a binding constraint. Consider a household earning S$8,000/month:
- Maximum total debt servicing: S$4,400/month (55%)
- If mortgage is S$2,800/month, only S$1,600 left for car + other loans
- A 7-year loan allows a higher car price to fit within this limit
- But this maximizes your debt load for the entire 7 years, leaving no buffer
Scenario 4: The Renewal Dilemma
With a 7-year loan on a new car:
- Years 1-7: Paying off the loan
- Years 8-10: Only 3 years of “paid-off” ownership before COE expires
- Year 10: Face a COE renewal cost of S$90,000-115,000+ Key Motor or scrap/sell
Compare this to a 5-year loan where you have 5 years of paid-off ownership before the COE decision.
Singapore-Specific Risks
1. Compressed Ownership Window The article’s advice about thinking long-term is even more critical here. With only 10 years of COE, a 7-year loan leaves you just 3 years to enjoy a paid-off car before facing another massive financial decision.
2. COE Volatility COE prices are expected to remain high in 2026 due to persistent demand from EV buyers and private-hire car fleets Drive Safe and FastAutomacha. If you’re still paying off your car when COE expires and renewal costs have surged, you’re trapped between:
- Paying another S$100,000+ to renew
- Scrapping and losing significant value
- Selling at a loss because buyers factor in the renewal cost
3. The “Double Whammy” Effect Unlike US buyers who only face car depreciation, Singaporean buyers face both:
- Vehicle depreciation
- COE value depletion (which is the largest component of the car’s price)
Practical Advice for Singapore Buyers
Instead of stretching to 7 years:
- Target 5 years maximum – This gives you 5 years of ownership before COE renewal decisions
- Buy used strategically – A 5-year-old Toyota Corolla Altis costs around S$85,000 with 5 years COE left EK – savings of S$93,000 upfront
- Consider the total 10-year cost – Calculate: (downpayment + total interest + insurance + maintenance) vs. the car’s residual value at year 10
- Use the TDSR cushion – Don’t max out at 55%; leave room for rate changes and life events
- Match loan term to usage plans – If you typically change cars every 5-7 years anyway, a shorter loan prevents overlap between loan payments and new car downpayment
Bottom Line for Singapore
The longer loan trap is actually more dangerous in Singapore than the US because:
- You’re not just risking being underwater on a depreciating asset
- You’re racing against a 10-year COE clock
- The regulatory constraints mean you’re probably maxing out your borrowing capacity
- The absolute costs are much higher (S$150,000+ vs. US$50,000)
While a 7-year loan reduces monthly financial strain, it significantly increases total interest paid and reduces financial flexibility SingSaverBanksinsg. In Singapore’s expensive car market, this advice is even more critical: if you need 7 years to afford it, you probably can’t actually afford it.