Understanding TDSR in Singapore: What it means for car buyers and subscribers
When it comes to buying a car in Singapore, key numbers don’t just show up in the price tags. The Total Debt Servicing Ration (TDSR) is another key number you should carefully think about.
Whether you're a first-time car buyer or someone planning your next financial milestone like getting a property upgrade, understanding how TDSR works can help you make more informed financial decisions.
What is TDSR and why should you care?
Introduced by the Monetary Authority of Singapore (MAS) in 2013, the TDSR limits how much of your monthly income can go towards paying off your debts. This includes home loans, car loans, student loans, and credit card repayments.
Under current rules to protect you from financial overextension, your TDSR must stay below 55% of your gross monthly income. This means if you earn $6,000 a month, your combined loan obligations cannot exceed $3,300.
So why does TDSR matter? TDSR translates to your loan eligibility. The higher your debt repayments, the less room you have to borrow for other big purchases such as a home. This is why you should consider your options before taking on a car loan to buy a new car as this can affect your loan eligibility for your next financial milestone.
How TDSR affects those with variable incomes
If you earn bonuses, commissions, or have self-employed income, banks apply a 30% "haircut" to your variable income before calculating the TDSR. For instance:
- You earn S$10,000 monthly including commissions
- Income considered under TDSR: $7,000
- Borrowing limit: 55% of $7,000 =$3,850 monthly.
Why car loans matter more than you think
Many Singaporeans underestimate how significantly a car loan can shrink their borrowing capacity. Let's examine the real numbers:
If you earn $8,000 a month, you could be eligible for a home loan of up to S$1.32 million without existing debts. This drops to $1.08 million with a typical $800 monthly car loan. That’s a $240,000 difference just from taking up one loan.
The Ripple Effect on Your TDSR
Take Sarah, a 32-year-old marketing manager earning S$7,000 a month. Her maximum TDSR limit is $3,850. Here's how different scenarios affect her borrowing capacity:
Learning from Sarah, it is crucial to understand that a reduction in borrowing capacity is not just about numbers. It directly impacts your ability to secure other huge purchases such as your next dream home.
Owning a car vs. ZipZap Car Subscription : A smart financial comparison
Owning a car in Singapore costs more than you think — not just in dollars, but also in financial flexibility.
To own a car in Singapore, you will typically need to make a 30 to 40% downpayment upfront, pay registration fees, and secure a COE (which costs between $94,000 to $119,600). From there, you’ll then have to take on a car loan which translates to monthly repayments of $800 to $1,500 for up to seven years. Let’s not forget the ongoing costs of insurance, road tax, servicing, parking, ERP charges, and depreciation costs all snowballed into one long-term financial commitment.
Notably, the car loan you would have to take up to fund your car purchase counts towards your TDSR. If your TDSR is already stretched by a car loan, qualifying for a home loan, investment property financing, or other forms of credit may be a little challenging.
On the other hand, ZipZap gives you the freedom of having a personal car with just one all-inclusive monthly fee with no downpayment or loans required. The best part is, your TDSR remains unaffected. With insurance, maintenance, road tax, and even a replacement car provided under your subscription, there is nothing tying up your credit capacity even while you freely drive a dedicated car. This means, your borrowing power stays intact for your other financial goals.
You can even opt into Subscribe & Share to share your car on GetGo’s platform during periods of non-use and offset part of your monthly subscription fee.
Who should consider ZipZap Car Subscription
Looking to get a personal car without being tied down to the heavy financial commitments that comes with buying a car in Singapore? ZipZap is a viable option if you happen to fall under the following user profiles:
🏠 Young professionals and first-time homebuyers: Planning to buy your first home in the next two to three years? Subscribing to ZipZap helps preserve your TDSR capacity so you get dedicated car access without compromising on your home loan eligibility.
💰 Variable income earners: Thinking of ways to avoid further limiting your borrowing capacity? Since ZipZap car subscription does not require a loan, getting a personal car this way would not further affect your loan eligibility.
🧳 Expats or short-term residents: Need a car but not ready to commit long-term? Skip the hassle and depreciation concerns with ZipZap.
Planning ahead: How to protect your TDSR
1️⃣ Secure Your Home First
Property loans often offer better interest rates and longer terms. If your next big financial milestone is to buy property, consider delaying your car purchase until after securing your home loan.
2️⃣ Understand your debt limits
Calculate your remaining TDSR capacity after securing your essential commitments. Use a TDSR calculator to help keep track of your borrowing capacity.
3️⃣ Match car access to your lifestyle
Consider how often you actually need a car. If you’re in need of a personal car for mid-term use, ZipZap may actually be more cost-effective.
Conclusion: Your financial freedom depends on smart choices
The TDSR isn't meant to restrict you, it's there to safeguard your financial freedom. Understanding how car financing decisions impact your borrowing capacity empowers you to make choices aligned with your long-term financial goals.
ZipZap makes dedicated car access more practical and reliable. A car gets you from Point A to Point B, but smart financial planning gets you to your life goals. Whether it’s buying a car or subscribing to one, choose the option that serves your lifestyle and financial goals effectively.
