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Auto Financing Application Booklet - Standard Chartered - auto financing guaranteed approval

Auto Financing Application Booklet - Standard Chartered-auto financing guaranteed approval

Auto Financing
Auto Financing
Application Booklet
? Copyright 2016 Standard Chartered Bank. All rights reserved.
Important Information Document (IID) Auto Financing / Auto Re-financing
Items Details
Auto Financing The typical form of car financing in Singapore is hire purchase. If you enter into a hire
purchase agreement with Standard Chartered Bank (Singapore) Limited ("Bank"), the Bank
beneficially owns the vehicle and hires it to you. You only become the beneficial owner
when you have fully paid all the amounts required to be paid pursuant to the hire purchase
agreement. The main terms for the Auto Financing are set out in the hire purchase
agreement you enter into with the Bank. In addition, the Hire-Purchase Act may also apply.
Auto Financing The Bank offers hire periods of 1 to 7 years. Interest rates may vary depending on the
Tenor length of the hire period.
Repayment The instalments are payable on a monthly basis and shall commence the following month
after your loan has been disbursed. Please refer to the Hire Purchase Agreement for the
instalment due date.
Interest Rate The market practice is typically to charge what is known as a "flat" or "applied" interest
rate. In calculating the amount of interest payable in flat interest rate calculations, it is
assumed that the Amount Financed is constant throughout the hire period.
An example of flat interest rate calculation:
? Amount Financed = $50,000
? Flat/Applied Interest Rate = 3.5%
? hire period = 5 years (60 months)
? Total Interest = 3.5% x $50,000 x 5 = $8,750
? Rental charges/Monthly instalment = $(50,000 + 8,750) / 60 = $979.17
In reality, the Amount Financed reduces over time. Because this is not taken into account,
the "effective" interest rate is in fact higher than the flat rate. In the above example, the
effective interest rate is in fact 6.54%.
Signing a blank For the convenience of car buyers, a practice has evolved whereby they are asked to sign
hire purchase documents in blank when first applying for Auto Financing. This is so that buyers do not
agreement have to make too many trips to the dealers or financial institutions and so that they can get
the car as soon as it is registered. While this is certainly convenient, it is also potentially
risky. The one form that can be substantially completed is the Application for Hire Purchase.
Therefore, when you apply for Standard Chartered's Auto Financing, you should ensure
that the Application for Hire Purchase is fully completed and you should also ask for
a copy. The Bank will also subsequently give you a call to verify your personal details and
confirm the amount to be financed. It is important that you listen carefully and point out
any differences in your understanding of what the amount to be financed and/or other
finance details should be. The Bank relies on you to confirm such details and it may be very
difficult to undo a transaction if for any reason you subsequently want to change any details.
Complete the If you wish to complete the purchase of the vehicle before the end of the expiry of the
purchase of hire period, you must pay us the balance payable as at the date the hiring of the vehicle is
vehicle terminated, including the early completion fee, and any applicable late payment fee, late
payment interest, and rebates.
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Early 20% of outstanding interest + 1% of balance payable, if you choose to pay off all amounts
Completion under the hire purchase agreement and complete the purchase of the vehicle before the
Fee expiry of the hire period.
Illustration of Early Completion
(a) Assumptions
Total Cash Price of Vehicle = $100,000
Deposit = $50,000
Amount Financed (AF) = $50,000
Applied Interest Rate = 3.50% p.a.
hire period (N) = 60 months
Total Interest (TI) = $8,750
rental charges/Monthly instalment = $979.17
And Assuming
(i) your account is current i.e. you have no outstanding and the vehicle has not been
repossessed, therefore
Recovered Value (RV) = $0.00 and
Outstanding Amount (OA) = $0.00; and
(ii) you decide to exercise your right to complete the purchase of the vehicle (Early
Completion) on the 24th month having paid 23 instalments in arrears.
(b) balance payable (as defined in the hire purchase agreement) would be calculated with
the following formula: (AF + TI) - (RC + OI + RV) + OA
Total of all rental charges paid (RC) = $979.17 x 23
= $22,520.91
Number of months remaining in the hire period (n) = 60 - 24
= 36
outstanding interest (OI) = [n (n+1) x TI] / [N (N+1)]
= [36 (37) x $8,750] / [60 (61)]
= $3,184.43
balance payable = $50,000 + $8,750 - $22,520.91-$3,184.43
= $33,044.66
(c) early completion fee = 20% of outstanding interest (OI) +
1% of balance payable
= (20% x $3,184.43) + (1% x $33,044.66)
= $967.34
Aggregate amount payable for early completion = balance payable + early completion fee
= $33,044.66 + $967.34
= $34,012.00
The method for calculating the amount payable in the event of assignment is the same as
set out above.
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