We have an old car in the family expiring next year, and I’m sure everybody out there is wondering the same — will COE fall?<\/p>\n
My personal opinion is that it may fall a wee bit (Category A at around $50K) but may not fall further than that.<\/p>\n
Vehicle population growth rate has been reduced steadily from 3% to 1.5% to 1% and now 0.5%. I believe it may be further reduced next year, and it may possibly be capped at close to 0% growth because that’s really the limits of our infrastructure and limited land space.<\/p>\n
So if you are in such a situation, what’s the best way to get a cheaper car if you really need one?<\/p>\n
It’s actually very simple, but there’s one catch: you’ll need to\u00a0pay fully in cash (no leverage).<\/p>\n
The trick is to buy a car with 1 year or less left on the clock, and renew when you think it’s right.<\/p>\n
Take for example a relatively new\u00a0Jan 2013 Toyota Altis<\/a>\u00a0selling at close to $100K. The depreciation is about $12.5K\/yr.<\/p>\n If you bought an old Aug 2005 Toyota Altis<\/a>\u00a0at around $17K and renewed the COE (assuming current price at $66K), you will pay $17K + $66K = $83K for around 128 months of usage. This works out to a depreciation of only $7.8K\/yr.<\/p>\n No doubt older cars will also come with rising road tax (capped at 150%) and rising maintenance costs, and possibly even poorer fuel economy, but with the savings of almost $5K\/yr you could spend that on an engine overhaul\u00a0and still have spare change for a small holiday.<\/p>\n If you feel that such a hefty sum of money can be better used to invest, then there’s only one way to leverage: long time owners of private properties can consider a mortgage term loan<\/strong> (using property as collateral) to partially<\/em> finance COE renewal.<\/p>\n Even if interest rates rise to 3%+ it may still be cheaper than a conventional vehicle loan because a mortgage loan is a reducing interest loan while a vehicle loan is a fixed interest loan.<\/p>\n Business owners with overdraft facilities can consider too, if the vehicle is to be used for business purposes.<\/p>\n I do not encourage taking a loan on the full value of COE. Although any unused amount of COE is fully redeemable,\u00a0interests can get quite hefty, especially when OD interests are around 5-6%.<\/p>\n","protected":false},"excerpt":{"rendered":" We have an old car in the family expiring next year, and I’m sure everybody out there is wondering the same — will COE fall? My personal opinion is that it may fall a wee bit (Category A at around… Continue Reading →<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[11],"tags":[315,263],"class_list":["post-2421","post","type-post","status-publish","format-standard","hentry","category-automobile","tag-coe","tag-interest-rates"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/posts\/2421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/comments?post=2421"}],"version-history":[{"count":7,"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/posts\/2421\/revisions"}],"predecessor-version":[{"id":2428,"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/posts\/2421\/revisions\/2428"}],"wp:attachment":[{"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/media?parent=2421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/categories?post=2421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tzlee.com\/blog\/wp-json\/wp\/v2\/tags?post=2421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}