tzlee.com/blog

Tag: PARF

  • How to buy a used car in Singapore

    I have several friends asking me for advise on their car purchases — especially used ones because the process is more complicated, so I have decided to write a guide instead of having to repeat over and over again.

    Disclaimer: Buying a car is a big financial purchase, so there are many variables to consider. You must do your own due diligence regardless of my advices/recommendations.

    Know your needs

    Ask yourself these questions:

    • Do you really need a car?
    • What kind of mileage do you do every month? Are you a going to drive a lot?
    • Do you need a 7-seater for a big family?
    • Do you often carry large and tall items?
    • Will you drive into Malaysia?
    • Will you be sharing with your spouse or siblings?
    • What other uses do you need the car for?

    All these decisions will affect the type of car you purchase. For example:

    • A travelling salesman may want a fuel economical and reliable car to reduce running costs.
    • A recreational cyclist with foldable bikes may opt for a hatchback or an SUV to fit the bikes.
    • A big family of 7 may want an MPV instead.
    • A regular traveller to Malaysia may want to avoid cars popular for theft, like Hondas and Toyotas.
    • A person sharing with his/her spouse/siblings may need to consider their needs and budget.
    • A single and lonely man may want a convertible Mini Cooper to impress the ladies at the club.

    Know your budget

    Hint: At least $1,000/month.

    A car is a big purchase, so setting a budget is important. As a general rule, the overall expenses of car ownership in Singapore starts around a minimum of $1,000/month.

    Typical expenses breakdown

    Depreciation of a typical bread and butter car (as of 2014) $6,000/yr or $500/mth
    Insurance of a first time buyer with 0% no-claims discount (NCD) $2,400/yr or $200/mth
    Fuel cost of travelling approx 2,000km/month, 12km/l @ $1.75/l $292/mth
    Parking in HDB sheltered carparks $95/mth
    Road tax for a 1,500cc (1.5L) petrol car $686/yr or $57/mth
    General servicing of vehicle every 10,000 kms $600/yr or $50/mth
    ERP (tolls), parking at the office, etc. $100 to $400/mth
    Totals $1,294/mth onwards

    Other costs to consider

    It’s easy to forget that these are also daily costs of a driving a car in Singapore: –

    • Parking at home, at work, at shopping malls, at parent’s or friend’s
    • ERP in both directions of travel
    • Traffic and parking offenses
    • In-car camera — an almost mandatory accessory in cars these days
    • Battery and tyre replacement every 2-3 years or so (rubber gets hard, so do replace them even if they are not worn)
    • Other incidentals like tyre punctures, especially if you work near construction zones
    • Unfortunate incidents such as accidents, vandalism, hit-and-run and associated repair costs
    • Car wash/grooming/beautification/”zhng”

     

    Understand the tax structure

    Additional Registration Fee (ARF)

    Understanding how the ARF tax works is the key to understanding how to calculate the straight-line depreciation for a vehicle in Singapore.

    • Cars less than 10 years old are usually called PARF cars because they carry a Preferential ARF (PARF) value. PARF value is a percentage of the ARF (right now it is 50%) that is given back to you if you dispose the car at the end of 10 years. This is to encourage purchase of newer and more green/efficient vehicles.
    • Cars that are 10 years or older are usually called COE cars because they no longer carry a PARF value and only carry a COE value.

    Certificate of Entitlement (COE)

    Most cars in Singapore are sold with COE unless stated by the seller. If you see the terms “body only” or “w/o COE” then it would mean the price does not include COE.

    Used Import Cars

    There are also used import cars where the registration date of the car starts before the COE hence have more complicated depreciation calculations; I would recommend a first time buyer to avoid these. Used Imports are typical with high-end sports cars, as the savings can be significant.

    There’s simply too much to cover here, so please Google and read up on these terms: OMV, ARF, PARF, PARF rebate and COE. A very detailed summary is available on LTA’s website but may be too confusing for a first timer.

    Work your sums

    Hopefully a table is easier to digest. Just add these all up.

    PARF cars COE cars
    Annual depreciation formula (Purchase Price – Min. PARF) / (No. of months of COE remaining / 12) Purchase Price / (No. of months of COE remaining / 12)
    Road tax
    		 Same every year Increases 10% every year, maxed out at 150% (at year 15)
    Insurance Comprehensive or 3rd party (only if not under loan) cover Mostly 3rd party cover only, i.e. does not cover your own car in an event of an accident; there are some insurers that will still provide comprehensive cover for cars between 10 to 15 years of age.
    Financing Max. 5 years, or up to remaining lifespan of COE; interest rates between 1.88-2.88% Only available for cars less than 15 years of age; otherwise usually financed using personal term loans with very high interest rates (4-5%)
    Maintenance costs Increases with car age; big ticket repairs usually starts above 5 years or 100,000 kms Same as PARF cars, increases with car age, but COE cars are even older, so will run a higher bill if anything breaks; parts may also be hard to find depending on the model of the car
    Fuel economy Similar to maintenance costs, fuel economy tends to get a little poorer when the car ages, especially if not maintained properly Similar to maintenance costs, fuel economy tends to get poorer with age, but cars built before 2000 have older engine technologies that yield even poorer fuel economy
     Safety Generally better since most cars built after 2004 should have at least an airbag and ABS Generally poorer as safety technologies improved rapidly only in the last decade

    Things to watch out for at the delaer

    Unlike new cars which usually come with a 3 or 5 year warranty, used cars dealers can be dodgy. Here’s some pointers when hunting for a used car: –

    • Don’t trust the mileage. Mileage tampering is possible and is prevalent.
    • Don’t trust the paintwork. Most dealers get a cheap single-coat respray done before cars hit the showroom.
    • Look beyond the paintwork. A car is a mechanical device and a beautiful car that doesn’t move belongs to the museum.
    • Take a careful look at the interior. Interiors are expensive to replace or repair, and will tell a story of its use/care/abuse.
    • Switch off the radio during a test drive. Pay attention to knocking, grinding, squealing or other weird noises when driving; red flag if dealer does not allow you to test drive.
    • Pay a “surprise” visit. Don’t inform the dealer that you are coming; sometimes vehicles may exhibit issues when cold (especially transmission issues), so if you tell the dealer in advance they may warm up the car before you arrive.
    • Minor issues are okay, but don’t count on the dealer making repairs for you. You will be better off asking for a discount and then getting a trusted mechanic to fix minor gremlins.
    • Be sure to ask about the loan rates, the financial institution, the payment process, admin fees (aheem, salesman commission), insurance and road tax; red flag if they offer high interest rates for “in-house” loans, high admin fees (above $500).
    • Have an experienced person help check the car for you, or at minimum have it inspected for accidents and visible issues at STA — they have laser chassis alignment measurement machines.
    • Usually the buyer pays for inspection and a deposit to the dealer should not be required; red flag if dealer insists you place a big deposit before sending the car for inspection.
    • Make sure you work your sums carefully, including the downpayment, financing, transfer fees, insurance, and even road tax.
    • Take your time and shop around, don’t be swayed by sweet talking dealers; a car is a big purchase and you should shop carefully.

    Direct owner sale

    I personally prefer direct owner sales, since I will get to really know the car’s history from the owner. Be wary though, there are many dealers masquerading as direct owners to circumvent the Lemon Law introduced in 2012. One way to tell is that they are selling on behalf of friends/family member/relatives, do not have maintenance records of the vehicle and that they also offer to help with the loan and insurance paperwork. It may be a sign that the car has some serious issue(s).

    The buyer will have to source their own insurance and loan in a typical direct owner sale, but it is not difficult these days as there are insurers and banks that offer direct applications online. The whole process may be too much cover here, and I hope to cover it in a separate article someday.

    Final words

    You’ll see that a car will cost over $1,000 a month to run in Singapore. I’m sure this will turn many potential car buyers away, but if you really need a car and you can well afford it, then do consider one as it brings significant improvement to your quality of life but do not rush into the purchase.

  • Balloon scheme (loan) is not what it sounds like

    Addendum, Oct 2017: I have further simplified this article for the benefit of the many visitors every month. This article is one of the highest hit articles on my blog, and it is actually a bit worrisome that even banks have joined in to offer the scheme now. The MAS rules for car financing have also changed, so many of the figures have been updated to be current. Please support me by clicking on ads that interest you. It will help me keep this blog alive and allow me contribute more articles to the Singapore motoring community.

    I came across a loan scheme called the “balloon scheme” recently. Some people say this loan scheme existed a long time ago, but I have not heard of it until recently so it’s new to me.

    My first thought: “Wow, these financial tools will evolve in 101 ways just to get people to take a loan.”

    But before reading on, please take some time to understand the Singapore vehicle taxation structure. Without that knowledge, it may be difficult to understand some of the terms used here.

    So what is a Balloon Scheme?

    The Balloon Scheme is deferred payment scheme designed to reduce the monthly instalment sum. The flip side is high interest rates and a large sum to pay at the end.

    Technical details: The interest rate is applied to the full loan amount, and then the minimum PARF rebate (or “scrap value”) is deducted before dividing into monthly instalments.

    The lower monthly instalments make it seem extremely favourable especially if you are buying an old car, but I would suggest to avoid balloon schemes. Why?

    Example of calculations

    Let’s say you bought a used car for $100K and intend to get a 5-year loan for $60K. The car has a min. PARF value of $10K.

    Typical Loan Balloon Scheme
    Car price $100,000 $100,000
    Min. PARF $10,000 $10,000
    Down payment $40,000 (40%) $40,000 (40%)
    Loan amount $60,000 (60%) $60,000 (60%)
    Interests $5,640
    @ 1.88% x 5 years    		 $8,040
    @ 2.68% x 5 years
    Total Instalments Payable $60,000 + $5,640
    = $65,640    		 $60,000 + $8,040 – $10,000
    = $58,040
    Instalments (Monthly)  $1,094/mth $967/mth
    Final Instalment $1,094 $10,000 + $967
    = $10,967

    That’s a $127 reduction in installments! Yeah! Let’s do that balloon scheme now!

    But wait… in addition to the extra $2,400 in interests paid, there is also a final sum of $10,000.

    The implications of the final sum

    If the COE expiry coincides with the end of the loan period then it is fine because the min. PARF rebate from the government would cover the final sum, but what if…

    What if the car has several years to go?

    You will have to cough up this $10,000 to keep your car. Or you’ll have to dispose the car prematurely and you will stand to lose even more (see below).

    What if you were stuck in a bad financial situation?

    In an event that you have to dispose (i.e. sell) the car prematurely before the end of the loan term, you will likely suffer even more financial losses.

    Early disposal

    Here is an illustrated example of an early disposal/sale.

    Selling at 8th year Selling at 10th year
    Car price $100,000 $100,000
    Sale price $20,000 $10,000 (Min. PARF)
    Years 8 years 10 years
    Depreciation ($100,000 – $20,000) / 8
    = $10,000/yr    		 ($100,000 – $10,000) / 10
    = $9,000/yr

    It is clear that selling the car at the 8th year would have cost the owner and additional $1,000/yr over 8 years, that is total of $8,000! This has not taken into account any financial charges and fees should the car be disposed even before the end of the loan term. (Read up on the Rule of 78 if you would like to find out more.)

    The reason for this is because an older car should depreciate less, so the price of the car dips more than it depreciates (in a straight line) as it ages. There are some specific situations, however, that this may be not true and will depend largely on market forces at the time of sale, e.g. high COE prices would result in high car prices.

    Final words

    If you have to use the balloon scheme to afford a car, chances are that you are stretching your finances.

    The two biggest purchases in our life would likely be a property and a car; but unlike property, a car in Singapore is not an asset. It depreciates in value quickly from the moment you buy it.

    My advise would be to avoid the balloon scheme and find a car that you can comfortably upkeep.

    Addendum, Oct 2014: Do also read the updated article I wrote here in 2014: How to buy a used car in Singapore

     

  • What does it really cost to own a car in Singapore?

    Update: Do also read the updated article I wrote here in 2014: How to buy a used car in Singapore

    OK, I read this article and felt I had to put in a few words of my own as it was not accurately represented.

    Before I move on, those who are not familiar with the basic taxation structure for cars in Singapore should read my earlier blog post.

    If you have understood the taxation structure in Singapore (I know, it’s a lot to swallow) you would realize that the author of the above article failed to take into account the minimum PARF rebate. The author also picked a car that’s way overpriced in the current market.

    Here’s the facts. A savvy car buyer would have looked at all available options. And to pick a Toyota Altis at the price of $105,988… are you out of your mind?

    Let’s take a Volkswagen Jetta. List price $115,800. Called VW, they have a $6,000 discount. So that brings the list price down to $109,800.

    The OMV of this car is $18,500, so that gives us a $9,250 PARF rebate (50% of OMV). The straight-line depreciation of the car over 10 years is hence $109,800 – $9,250 = $100,550.

    Now, that’s just the car. All taxes inclusive – GST, etc. are already priced into the list price.

    Next, the loan. Assuming if you’re buying a ~$100k+ car, you should must have some cash for downpayment. A wise tip here – at least downpay the minimum PARF rebate and don’t take a full 10 year loan or you will be in serious debt in an event you need to sell your car. If you don’t even have cash for downpayment – sorry to say but Taxi is your friend for now.

    So let’s say we take a 1.88% (compounded) loan over 8 years for the sum of $100,550, the interest works out to be ($100,550 x 1.88%) x 8 years = ~$15,123.

    Adding that to the original sum of the car you have $100,550 + $15,123 = $115,673. The monthly repayment would be $115,673 / 8 years / 12 months = ~$1,205.

    The rest is pretty straightforward… let’s use a table to add ’em up. Here’s the true month-to-month affordability of a VW Jetta 1.4 TSI as of Jan 2012. Note some variables like insurance, parking and ERP really depends on each individual’s profession and usage of the car.

    Item S$/mth
    Loan installments $1,205
    Insurance @ $2,400/yr, no NCD $200
    Road tax @ $620/yr $52
    Fuel @ 20,000 km/yr, 13km/l @ $2/l $256
    Servicing @ $800/yr $67
    Parking (HDB + Office) $200
    Others (ERP, etc.) $100
    Totals $2,080

     

    Now, that’s $2,080 for a VW Jetta. So by wise financial guidelines that you should not spend more than a third of your salary on a car, you (or your family) should take home at least $6,000 to buy a car like that…

    What if you (or your family) only take home $4,000 a month? Under $1,500 a month for a car… is it achievable? Answer is… YES! Pick up a 2005 Nissan Sunny for $23,800. Bargin a little bit and bring it down to maybe $23,000… and here’s the calculations.

    Actual car depreciation (2005 cars retain 55% of OMV) = $23,000 – ($13,000 x 55%) = $23,000 – $7,150 = $15,850.

    Loan = $15,850 over 3 years @ 1.88%: $15,850 (principal) + $893.94 (interest) = ~$16,744. This works out to ~$465 per month.

    Item S$/mth
    Loan installments $465
    Insurance @ $2,000/yr, no NCD $167
    Road tax @ $742/yr $62
    Fuel @ 20,000 km/yr, 9km/l @ $2/l $370
    Servicing @ $800/yr $67
    Parking (HDB + Office) $200
    Others (ERP, etc.) $100
    Totals $1,431

     

    I know what some of you may be thinking – it’s just $600 more a month, why not get the Jetta. Well, $600 can kill you – that’s $7,200 a year. I eat about $600 per month on average so it really makes a lot of difference. I can either eat plain bread or have good meals or I can save that and go for a crazy vacation. It’s all about balance.

    Of course on top of just plain numbers, the value of having the convenience of a car is hard to quantify – especially if you have a pregnant wife, or an old folk, or just simply need to haul that big box from Ikea.

    Public busses and trains aren’t fair comparisons as they are mass public transit and may not bring you to your doorstep. Taxis on the other hand are getting relatively expensive and inconvenient – the queue, the wait, etc.

    So if it doesn’t break your bank – for better quality of life you should consider a car.

    At the end of the day… buy wisely, drive safely. Cheers!

    – Justin

  • Buying and Financing a Car in Singapore

    Update: Do also read the updated article I wrote here in 2014: How to buy a used car in Singapore

    Ever since my two test drive posts I’ve had a few friends contact me about buying a car. I think it’s best that I share it on a blog post so it benefits many others who are considering to buy a car in Singapore.

    Disclaimer: Buying a car in Singapore is mainly a lifestyle decision, and also a big financial decision. There’s never a right or wrong time to buy a car. If you need one, just go for it, but make sure you do your finances right.

    Singapore’s Vehicle Tax Structure

    The tax structure in Singapore makes car buying/financing a pretty complicated process.

    The first thing to know is what makes up a vehicle’s price in Singapore:

    +--------------------------------+
    | OMV | ARF | COE | Profit | GST |= Total price of car
    +--------------------------------+

    GST, or Goods and Services Tax is a tax on the purchase value of goods or services in Singapore. I think this one is the easiest to understand. Right now this amount is at 7% of sale price.

    OMV, or Open Market Value is the declared value of the car. One can consider this the cost of the dealer importing the car.

    ARF, or Additional Registration Fee is a form of import tax. As of March 2008, the ARF is 100% of OMV. Prior to that it was 110%.

    COE, or Certificate of Entitlement is also a form of tax that grants the owner a right to use the vehicle for a period of 10 years. COE prices are controlled by market forces based on supply and demand and is broken into several categories based on vehicle type and engine capacity. The amount paid is known as a Quota Premium (“QP”).

    As of now, Cat A QP (cars 1600cc and below) is somewhere near $47,000. I think most of the readers know this.

    Of course, finally there’s the profit and other miscellaneous costs such as registration fees which are pretty negligible in ratio to the final selling price of a vehicle in Singapore.

    Now, it is important that one understands the tax structure first before moving on to the next part.

    Singapore’s Vehicle Renewal Scheme

    Ever wondered why most vehicles in Singapore are new and shiny? That’s because of how the Singapore government encourages renewal of cars by offering tax refunds when one deregisters a car!

    This is when you see terms like PARF (Preferential ARF?) rebate. Basically this is a tax refund scheme that reduces in value over a period of 10 years. For the 1st to 4th year, the government grants a 75% refund of the ARF if a car is deregistered. Every subsequent year thereafter, this amount drops by 5%.
    Once the car reaches its 10th year, no refund (0%) is given.

    1st to 4th year, before reaching 5th year = 75%
    5th year, before reaching 6th year = 70%
    6th year, before reaching 7th year = 65%
    7th year, before reaching 8th year = 60%
    8th year, before reaching 9th year = 55%
    9th year, before reaching 10th year = 50%
    10th year and beyond = 0%

    The same goes for COE refunds, but in a linear fashion. COE refunds reduce on a daily basis, so as each day passes, the refund amount reduces in a straight line until the end of 10 years where it will be 0%.

    Having understood the tax refund (aka “rebate”) structure, we now come to a term that car dealers like to use to confuse you – paper value.

    The oh-so-familiar term “paper value” basically refers to the amount of refundable tax on a car. In other words, it is an amount of money the dealer will certainly get from the government when deregistering the car.

    What they do NOT tell you is that your car still has a worth. Look at this chart again:

    +--------------------------------+
    | OMV | ARF | COE | Profit | GST |= Total price of car
    +--------------------------------+

    Paper value is a refund of ARF (tax) + COE (tax). What happened to the OMV, or more appropriately, the worth of the car? Ah-ha! They have suckered you into trading in your car for a low “paper value”, and then exported your shiny new car to another country for resale at a pretty decent profit!

    Remember, our country is small. Our annual car mileages are relatively low and Singapore cars are well taken care of. A lot of countries favour cars exported from Singapore. Don’t let the dealers bullshit you into believing otherwise.

    Understanding Depreciation

    So what is depreciation? It is basically the financial costs of a car after tax refunds, over a period of utilization.

    Remember the tax refund scheme? You could still get a 50% ARF refund at the 9th year just a few days before the car reaches exactly 10 years of age. This amount is known as the minimum PARF benefit.

    Therefore assuming one drives the car for the whole 10 years, the annual cost of financing a car is [(Purchase Price – Minimum PARF benefit)/10 years]. This is known as the annual depreciation.

    Why is Depreciation Important?

    Depreciation is fundamental to knowing the long-term affordability of almost anything, especially physical goods. Your house, your car, your computer, etc. Everything has a lifespan.

    By understanding depreciation, you will also be able to better know if your financial decision is sound and if you are able to cut loss in a dire situation, which brings me to my next section.

    Financing a Car and Overtrades

    Many people make a financial decision to buy a car only asking one thing: “How much do I pay each month?”

    This was my biggest mistake when I bought my first new car; I hope it won’t be yours.

    The monthly cost is just part of the affordability equation. The next part of the question is: “If I need to sell my car, will I have any outstanding loans?”

    You must be thinking now, “what do you mean ‘outstanding loans’?”

    Don’t forget – you took a loan. Assuming you didn’t pay a single cent initially as downpayment, the bank charges you lots of interest for that. Now that you’re selling your car, are you able to pay off the total amount you owe the bank (called the settlement amount) from the proceeds of your car sale?

    This is quite hard to understand now, so I’ll use an example.

    Let’s just say I bought a car for $100,000. Round figures are easy to work with.

    I took a 10 year loan. The loan interest rate is now 1.88%.

    Interest: $100,000 * 1.88% * 10 years = $18,800
    Total: $100,000 + $18,800 = $118,800
    Monthly: $118,800 / (10 years * 12 months) = $990

    So I owe the bank $18,800 in interests even before I drove the car!

    Now, assuming I drove the car for 3 years and I decided to sell it. I still owe the bank the following according to the Rule of 72:

    Amount Paid: $990 * 3 years * 12 months = $35,640
    Balance: $118,800 – $35,640 = $83,160
    Rule of 72 rebate: Complex formula, etc. = $9,245
    20% Penalty: $9,245 * 20% = $1,849
    Settlement: $83,160 – $9,245 + $1,849 = $75,764

    The real truth is that after 3 years my car would probably sell for only $65,000, So I still need to “top up” $10,764. As the car ages, this value might get lesser.

    At one point, you may be able to sell your car for as much as the settlement amount. Some people call this breaking even, i.e. you owe the bank as much as you sold the car for.

    A lot of people kill themselves here because they took way too much loan. When time comes that they desperately need to sell the car to relief themselves of a monthly burden, they are stuck in a situation where they are not able to pay off the outstanding loan.

    As an end result, most people sell their cars and buy yet another car – likely a cheaper and older car and bundle this outstanding loan into a new loan. This is called overtrade. Overtrades are the worst thing you can do – to take a loan on top of a loan. Don’t ever do that!

    Are loans that bad? Should I take a loan?

    Why not? Loans are healthy financial instruments if managed properly. The key here is to plan for an exit. My general advise is to downpay at least the dealer’s profit and part of the OMV since tax is a refundable portion. This way, you’re taking a loan on a guaranteed sum! This formula has never gone wrong on me so far.

    Financing Tips

    The best way to reduce your loan interest is to shorten the loan term. If you are taking a $100,000 loan at the prevailing interest rate of 1.88% for 10 years, that’s $18,800 of interests! Shortening your loan from 10 years to 7 years would reduce this amount to $13,160. That’s a reduction in $5,640 of interests.

    Downpayment is useful if you intend to sell your car SOON as it reduces the principal sum. But downpayment does not really reduce interests that much.

    Using the above example, if I down pay $20,000 and take $80,000 in loan for 10 years, I’ll still pay $15,040 in interests. That’s still more interests than reducing my loan term by 3 years even after coughing up $20,000.

    What are the other costs of car ownership?

    Insurance. Insurance can be quite expensive, especially if you are young or inexperienced. I have seen annual premiums of up to $3,400 which averages about $300 per month!

    Parking. You’ll need to park your car somewhere. Factor in all the parking costs, including weekend shopping. Typical HDB season parking costs $70-90.

    Road tax. These are annual and vary with the engine capacity of your car. Check with your dealer. 1600cc cars hover around $600-700 per year; or about $50 per month.

    Fuel. The average Singapore car travels about 20,000 kms per year. For most cars, this is about $300 in fuel monthly. Hybrids will be happy to do that distance for less fuel, of course.

    Servicing. All cars need regular maintenance to keep them running well. A neglected car may cost you even more in repairs! A typical car in Singapore goes for servicing twice a year. Each servicing trip can cost $100-300, depending on where you go and what you do.

    Fines. This needs no explanation!

    What about 2nd hand cars?

    2nd hand cars are certainly good financial decisions as they depreciate lesser than new cars. When cars go out of warranty after their 3rd (or 5th in some) years, their values drop quite significantly. Once they reach the magical age of 5 years where the ARF drops an additional 5%, a car’s value drops even further.

    The problem with 2nd hand cars are generally mechanical risks. You’ll need to ask yourself if you can afford to have a car in the workshop for several days. Some people depend on their vehicles for a living!

    You’ll also need to ask yourself if you have sufficient budget for repairs. I would generally say budget up to $2,000 for initial repairs (worst case) and thereafter up to $1,000 annually (again, worst case). If you cannot cough out this amount of money on top of your expensive insurance premiums and road tax, you should consider alternative means of transport.

    2nd hand car buying tips:

    • Insist that you send the car to STA for inspection of chassis alignment. STA has computerized chassis alignment tools that will be able to tell if your vehicle’s main structure has been compromised. Some small accidents cannot be detected (e.g. bumper dents, etc.) Make it clear to your dealer that a grading of C and below should be rejected immediately.
    • Insist that you send the car to a third party workshop for inspection. Ask around for reputable mechanics who would inspect the car for a small fee. If the dealer disagrees to this, drop the deal. The car is likely a dodgy deal.
    • Test drive the car – go over humps, switch off the A/C and radio, listen for noises, turn the steering left and right quickly, get on the gas and brakes randomly, test the lights, test the horns, insist on new tyres.
    • Don’t judge a car by it’s paintjob. Most dealers send the car for a respray to cover up the dings and scratches left behind by the previous owner. Look for oil and coolant leaks under the car, especially after a test drive would be more ideal.
    • Don’t trust the mileage. 9 in 10 car dealers meddle with the odometer. If you check your sales contract you’ll be surprised theres a paragraph that disclaims them from the accuracy of the odometer. Look for tell tale signs of wear and tear – seats, steering, gas/brake pedals, seat belts.

    What are COE cars?

    COE cars are basically cars without a PARF rebate. Before a car reaches 10 years of age, somebody decided to forgo the PARF rebate and renew the COE on the car so it has the right to drive for an additional 5 or 10 years.

    I would advise against purchasing COE cars unless you are into vintage cars. They may look cheap, but in actual fact they depreciate much more because of their age (more than 10 years) and the lack of a guaranteed tax rebate.

    If an average Singapore car travels 20,000km per year, a 10 year old COE car would have travelled 200,000kms! Be prepared for a major mechanical overhaul.

    Always buy a newer car that you can afford.

    With that, I end my super long blog entry. Happy motoring!