Let’s face it, cars in Singapore don’t come cheap. With Bloomberg recently warning of the city-state’s “sky-high” car prices and the typical cost of buying a brand-new car in 2023 averaging out at around $130,000, the only way seems to be up, too. For this reason, frugal Singaporeans are increasingly eyeing-up a potential used car purchase instead.
But wait. While you’re certain to save big on the purchase price of a secondhand car compared to that of a shiny new car, you will need to jump through a few hoops. From choosing between a PARF or COE Car to securing the right car loan and motor insurance product, there’s a lot to wrap your head around. And that’s exactly where our helpful guide comes in. Read on, and all will be revealed.
Pros and Cons of Buying a Second Hand Car
Any tough decision can be made much more easily by scribbling down a few pros and cons, right? So, to start, here’s roughly what to expect when opting for a secondhand car over a new one:
Pros
- Lower upfront cost – and monthly installment payments.
- Less depreciation – i.e., your used car won’t lose so much value so quickly.
- Affordability – luxury or high-end models will be more attainable.
Cons
- Higher maintenance costs – a given with older vehicles, right?
- Higher bank loan interest rates – as you’ll be taking out a “riskier” loan in their eyes.
Case Study: Potential Savings When Buying a Used Car
Let’s say you’re looking to buy a family-friendly electric model, like the Hyundai Ioniq. We’ll take this car as an example here, as even Reuters is warning of the phasing out of combustion cars as the city-state pushes for an “all-EV Future” by 2030. So, are used cars or new cars the better bet, Ioniq-wise?
Well, SGcarmart shows that a shiny new Hyundai Ioniq 5 Electric will set you back just shy of $268,000 with reputable local car dealers. This is for a top-ranking “Inspiration 77 kWh” model. A more basic, “Exclusive 58 kWh” car will set you back around $188,000 – which is still pretty awful.
So how do the used alternatives compare? Well, used car dealers have comparable Hyundai Ioniq 5 Electric’s in stock for close to $215,000 for two-year-old, high-end models, or as little as $137,000 if you’re willing to drop down to a three-year-old, hybrid version. This is an obvious up-front saving, but we also need to talk about depreciation.
When driving a squeaky-clean 2023 Ioniq Electric out of the Hyundai showroom, you can expect that car’s Open Market Value (OMV) to lose an eye-watering $25,000 a year on average. Now, if you opt for the 2019 hybrid version in our used car example instead, you can expect an annual loss of $14,000. Not great, but much more manageable.
How to Buy a Second Hand Car in the City-State
Right, let’s dive right in. Here are the five most important considerations when buying a secondhand car.
1. Identify What Kind of Used Car You Want
Whether you’re looking for a humble Nissan Leaf or a top-of the-range Tesla, start out by deciding what kind of car exactly you need (or just want). Think about car price and budget, too, obviously…
Here, you’ll need to weigh up basic considerations such as how many doors you need, as well as more subtle ones such as whether the rumble of a 5-liter V8 is worth the extra tax and insurance premiums some more striking vehicles might attract.
2. Calculate the Initial and Annual Costs of Car Insurance and Ownership
Now, we really can’t stress this enough – you shouldn’t overlook the financial implications of your car purchase choice, in both the short and long-term.
From the downpayment you’ll need to initially pay on your loan, to future repair and insurance costs (which are inevitably higher on some cars than others). So, sit back and determine how much your dream car is going to set you back overall – and whether you can realistically afford it, or if it’s time to go back to the drawing board.
3. Research Various Used Car Options and Models
Still hell-bent on buying your dream car? Or considering an older car model to save money now instead?
Comparing the market is everything. Car manufacturers offer a truly dizzying range of models, trim levels, and optional extras, too, so you’ll want to read up on these to properly understand what you’re looking at. Car-lover editorials like TopGear Singapore and REV Magazine are a good place to start if you want to get clued-up on must-have car specs.
4. Search for Special Offers and Discounts
A secondhand car will almost always cost less than a new car – but you should look out for special car dealer promotions that might save you even more. The same goes when comparing car loan products, of course.
Top tip: If you’re on a tight budget, it’s generally cheaper long-term to opt for a car with a smaller engine capacity and competitive servicing packages with the dealer – as you’ll run up lower bills in terms of insurance, tax, and future repair costs.
5. Choose between a PARF or COE Car
Now, you also have to choose whether you want a car with a Preferential Additional Registration Fee (PARF) or a Certificate of Entitlement (COE). Huh?
Bizarre acronyms unpicked, the former refers to cars that are less than 10-years-old – which will offer you a 50% PARF Rebate if scrapped before hitting that all-important age. Conversely, COE cars are a little longer in the tooth. COE prices are cheaper, and a COE rebate might be up for grabs, too. But because COE cars are older, road tax and repair bills could cost more. So, it’s swings and roundabouts, really.
Common Car Buying Mistakes to Avoid
Feeling confident yet? Buying a used car is clearly a little complex, but it’s also great fun if you’re well prepared for the process. Or if you just like cars.
Here are a few common traps many secondhand car buyers fall into. Steers clear of these for a smoother car buying process.
Mistake no.1 – Forgetting to Check Whether You’re Buying a COE or PARF Car
COE cars and PARF cars are different. We covered that already, right? When you buy a used car, be sure to double-check the car’s age. If it’s less than 10-years-old, it’s PARF, and you can get a PARF rebate of 50-70% of the Additional Registration Fee (ARF) cost if you deregister and scrap it before the decade’s up.
If it’s more than 10-years-old, it’s a COE car. It’ll be cheaper to buy, and you’ll still be able to claim a (admittedly much smaller) COE rebate when scrapping it later down the line, but you’ll want to watch out for maintenance costs between now and that point.
Mistake no.2 – Not Looking Over the Car’s Condition Carefully…
Whether you’re going for a total old banger or a mint condition, two-year-old Mercedes, carrying out a proper inspection is vital. And we’re not just talking about double-checking the car’s mileage or taking it for a quick test drive here – you should give any preowned car a thorough car evaluation before you buy it. Be sure to:
- Research and calculate the car’s depreciation rate.
- Check for engine oil leaks, a fit-for-purpose spare tire, and any worrying mechanical woes.
- Give the car’s condition an all-around once-over. This includes the engine compartment, guys. Take a mechanic with you if you don’t know what you’re looking at!
- Inspect the car’s exterior and interior carefully before finalizing the purchase.
Mistake no.3 – Not Paying Attention to the Car’s History and Maintenance Records
Now this tie a little into the last point. As well as looking over the physical condition of the car, you should take a little time to trace back its service and maintenance records, too.
Car listings aren’t always 100% accurate. Always ask used car dealers to let you see the vehicle’s service history for yourself when viewing the car. While older vehicles might have a paper record or service book, this tends to be all-electronic with most modern manufacturers. If it’s been maintained by the original dealer, some brands, like BMW’s Performance Motors Singapore, might be able to trace any missing records for you. You can also cross-reference between service records and spare parts receipts, if the seller has kept any.
Mistake no.4 – Failing to Go for A Test Drive or Get a Car Evaluation
A car might look absolutely beautiful body-wise, but what’s underneath? Taking a test drive is essential, as you never know how an older vehicle has been treated by its previous owner.
So, road-test it on different kinds of roads, TopGear-style, and listen out for any bangs, rattles, or suspicious noises. If something doesn’t feel quite right, get your dealer to attend to any issues before buying. Reputable dealers will be happy to oblige.
Mistake no.5 – Forgetting to Explore Financing Options
Whether this is your first-time shopping for a pre-owned car or this isn’t your first rodeo, weighing up the different finance options available to you each and every time you buy is important, especially if you want the best possible deal. Here are some things to keep in mind, finance-wise:
- In house financing is available at most car dealers – but you should always compare the market with Loan Advisor to see if you can get a better deal.
- If the OMV is less than $20,000, you can get a car loan for up to 70% of the vehicle’s value. Loans are capped at just 60% on cars above that amount, mind you.
- Going for fixed interest rate financing is, in most cases, the most stable borrowing option.
- Balloon scheme loans might also be worth eyeing up – particularly for first-time buyers.
Don’t overlook the importance of comprehensive cover insurance-wise, too. Third party coverage is very limited – and unwise if you’re buying a more prestigious vehicle.
Car Insurance, Tax and More – Additional Expenses to Consider
Insuring your vehicle is mandatory in the city-state. Period. Current laws stipulate that you must have a minimum of third-party cover – i.e., the most basic kind of insurance that will cover the other person only in the event of a collision. For obvious reasons, you’re probably going to want more comprehensive coverage than that.
Road tax is also compulsory. You’ll need to pay this annually based on the engine capacity of your car – with gas-guzzlers attracting higher premiums than modest hybrids. If you’re eyeing up a COE Car, it’s worth noting that for cars that are 10 years old or more, your road tax will increase by 10% each year until your vehicle hits the grand old age of 14. Even on a basic Toyota Corolla, this could cost you an additional $200 annually.
Here are some top tips on additional used car ownership expenses:
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Car Insurance – Consider Your Needs Vs. Costs
Opt for a fully comprehensive plan if you care about keeping your car in tip-top condition, or being able to choose where to get it fixed in the event of an accident. If you’re not the car-proud type, however, going for third party, fire and theft could save you some up-front cash.
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Road Tax – Less Powerful = Less Expensive
Bigger, more powerful vehicles with a larger engine capacity (think 3,000cc or more) are going to cost the most tax-wise. Older vehicles will attract a pretty penny, too. As such, you can save by going for a slightly newer – or slightly more modest – model.
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Administration Fees – Unavoidable, But Thankfully Small
A $25 fee applies each time you register a car. An additional Vehicle Transfer Fee applies to cars 4-6 months from registration, which you can determine here. These fees are by no means soul-destroying, but they’re definitely something to think about if you’re already stretching your car-buying budget to its limit.
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Mandatory Inspections – More Frequent for Older Cars
Another cost you simply won’t be able to steer your way around is mandatory car inspections. You’ll need one once every two years on vehicles that are three years old or more – and this is increased to once annually on COE Cars aged 10 years or more. Again, this may influence the age of the car you choose to buy.
FAQs About Buying a Used Car in Singapore
How Much is the Downpayment for a Second Hand Car in Singapore?
Cars with an OMV of $20,000 or more qualify for a maximum loan of up to 60% of their value, while this stretches to 70% for OMV’s of $20,000 or less. So, basically, you’re looking at a 30-40% downpayment with a standard secondhand car loan – though this could differ with other kinds of financing.
What is the Best Car Age to Buy Second Hand?
If you’re dependent on a car loan, we’d suggest listening to the lenders on this one. DBS Bank, for example, suggests that buying a car that is four to eight-years-old is best, for the simple reason that most cars will depreciate the fastest in the first few years of their life. This means you’ll be buying a vehicle that’s left its most dramatic depreciation days long behind in its rear-view mirror. Translation: You’ll save money.
See Also: How to Finance Used Cars in Singapore?
What is the Car Buying Rule in Singapore?
Well… there are actually a few. And they’re best expressed in list form, really. You’ll need:
- A Certificate of Entitlement (COE) – which must be renewed every 10 years on older cars.
- Road Tax – which could be more expensive on older vehicles, or those with a larger engine capacity.
- Financing – such as a car loan to help you purchase the vehicle from the outset.
- Insurance coverage – which must legally extend for the entire duration you’ll be paying your road tax.
- Admin fees – these apply when registering a car in your name.
- Mandatory inspections – you’ll need these, too, on older vehicles.
- A HDB or URA parking ticket – if you don’t want fines for parking in unauthorized locations.
What Should I Look for When Buying a Secondhand Car?
We’ve touched on this a lot already, but here’s a quick refresher. Check whether your dream car is a COE or PARF Car, calculate how much it’s going to cost you in the long and short-term, carry out a proper car evaluation, both physically and maintenance-wise, and above all else, make sure you’re purchasing the right vehicle for you. And at the right price, too. That’s a lot to take in, right?
Conclusion – approach your used car purchase very carefully in Singapore
Congratulations! You’re now officially prepared to go and buy yourself a used car in Singapore. But wait, we’ve condensed a ton of information into this guide, and it’s important not to forget any of it. Most importantly, keep the following in mind:
- Buying a pre-owned car will cost you less up-front than a new car. And depreciation should be less of an issue, too. But you’ll need to carry out a full car evaluation on any vehicle you’re seriously thinking of buying, and carefully consider longer-term expenses, such as car insurance.
- Hold up. You’ll also need to choose between PARF and COE. PARF Cars will qualify for a bigger rebate, whereas COE Cars will cost a little less up front – though you’ll need to watch out for potential maintenance and repair hiccups in the future.
- Finally, don’t overlook the importance of car financing. Fixed rate financing and in house financing are worth considering – and comparing the market is crucial. Of course, you’ll need to tread equally carefully when looking into car insurance plans.
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