Considering the cost of buying a new car in Singapore starts at S$120,000 —that’s ridiculously expensive. Regardless, there’s no denying the convenience of owning a vehicle, especially if you have young children or elderly parents to ferry around.
Enter, second-hand cars, which cost a fraction compared to a brand-new vehicle. Despite the cost savings associated with used cars, it’s no secret that the used car industry (dealerships, especially) has gained somewhat of a notorious reputation for being a financial minefield. So how do you ensure that you’re getting the most bang for your buck on a second-hand car?
We discuss three mistakes you should avoid if you are in the market for a used car.
Mistake 1: Not Comparing All the Car Loans Available
Despite the lower price point, forking out roughly S$50,000 upfront for a used, compact car is still extremely difficult for an average Singaporean consumer. This is where vehicle financing comes into the picture.
When taking out a car loan, you have two options: work with a bank or sign a loan through the auto dealer. Whenever possible, you should avoid getting your financing from a dealership; there are a few who charge higher interest rates than banks as a means to generate additional revenue!
| Car Loan Interest Rate | Monthly Payment for a S$50,000, 5-year loan | Total Loan Paid | |
|---|---|---|---|
| DBS Green Car Loan | 2.48% | S$936.67 | S$56,200.20 |
| Hong Leong Finance Used Car Loan | 3.08% | S$961.67 | S$57,700.20 |
| OCBC Car Loan | 2.48% | S$936.67 | S$56,200.20 |
| *Interest rates obtained from DBS, Hong Leong Finance and OCBC on 30 May 2024. Subject to changes | |||
Ultimately, do your due diligence and compare all the different car loans available. Tiny as the differences in interest rates may seem, the interest paid over the life of the loan can compound to significant sums. For instance, getting a 5-year, used car loan of S$50,000 with an interest rate of 2.48% p.a—compared to 3.08% p.a.—can help you save S$1,500 throughout your loan tenor.
Mistake 2: Failing To Consider if the Car Is Eligible for a PARF or COE Rebate
Don’t just purchase the lowest-priced second-hand car. When you’re choosing between cars, consider which rebate – PARF or COE – the vehicle is eligible for when you de-register it. These two rebates are sums of money the Land Transport Authority gives you for taking your car off the road. In other words, you can think of them as a way to offset your initial cost outlay.
| Volkswagen Touran 1.4A TSI Trendline | Honda Civic 1.6A VTi | |
|---|---|---|
| Registration Date | 30 September 2016 | 12 February 2008 |
| COE Left | 2 years 3 months | 3 years 8 months |
| Purchase Price | S$48,000 | S$44,000 |
| COE or PARF rebate? | PARF | COE |
| Open Market Value (OMV) | S$22,789 | S$19,302 |
| Additional Registration Fee (ARF) | S$18,905 | $21,233 |
| Registration Value at 1 Years Left on COE | S$15,227 | S$4,201 |
| Cost After Rebate Offset | S$31,773 | S$39,799 |
| *Information obtained from SG Car Mart, accurate as of 30 May 2024. Subject to changes | ||
If you choose a vehicle that’s less than ten years old, you’ll be entitled to the PARF rebate, which is a percentage of the Open Market Value. If you choose a car that’s past the 10-year mark, however, you’ll only get the unused portion of your COE back.
That means after accounting for the respective rebates, a used 16-year-old car (e.g. the Honda Civic) may not necessarily wind up cheaper than an 7-year-old car (e.g. the Volkswagen).
Related: Your Essential Guide to Buying a Used Car in Singapore
Mistake 3: Believing That the Car Is ‘as Good as New’, as per Advertised
The Consumers Association of Singapore received 1,061 and 1,213 complaints against the motor industry in 2021 and 2022 respectively, some of the highest numbers we have seen in year. Many used vehicles appear fine at first glance but look closer, and you may find that they’re not exactly ‘as good as new’ – as per advertised.
To protect yourself, you should check all the parts of the car carefully. More importantly, go for a test drive in the vehicle before you purchase it; this will give you crucial information on how the car handles (i.e. the condition of its suspension, steering, and gearbox). If possible, you should hire a reputable mechanic to inspect the car, so you can be 100% sure of its condition, age, and mileage before you buy it. This will help you save on long-term repair and maintenance costs.
Related: Is Paying More on Car Insurance to Choose Your Own Workshop Worth It?
Buying a Second-Hand Car Is Still a Smart Financial Choice
If you do your due diligence and avoid all the mistakes listed above, you’ll find that opting for a used car is still a smart financial choice.
Of course, don’t forget to get your own car insurance (you cannot buy over the seller’s insurance). Under the Motor Vehicles (Third-Party Risks & Compensation) Act, you can be fined up to $1,000, jailed up to 3 months, or both if you drive a vehicle on a public road in Singapore without car insurance!
Learn more about the different car insurance plans out there.
Find The Best Car Insurance PlansFind Out More
Read More:
- What’s the Average Cost of Car Ownership in Singapore?
- How to Find the Best Car Insurance Plan
- What Determines Your Car Insurance Premium?
- How Much Does It Cost to Renew Your Car in Singapore?
- The Guide You Need To Refinance Your Home, Car Or Other Loans In Singapore
Cover image source: Pexels
This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our Site constitutes a solicitation, recommendation or endorsement by AMTD PolicyPal Group in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
Under AMTD Digital, AMTD PolicyPal Group consists of PolicyPal Pte. Ltd., Baoxianbaobao Pte. Ltd., PolicyPal Tech Pte. Ltd., and ValueChampion.