Here’s How You Should Be Budgeting to Buy a Car in Singapore

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Welcome to Singapore. We’re a city-state where public transport is, despite the higher rate of breakdowns in recent years, still one of the best in the world. We’re also an island nation so small you could fit two Singapores into Batam island. And yet, many Singaporeans are still spending hundreds of thousands of dollars to buy a new car, and for good reason – the sheer convenience of having a car is immeasurable.

But given the way the economy has been for the past several years, less and less Singaporeans can truly afford to buy a brand-new car. Fortunately, we don’t have to. The second-hand car market in Singapore is thriving and you can find some excellent bargains if you just look hard enough. For example, a brand-new Toyota Corolla Altis could set you back by about $100,000. A decent 5-year-old model? Only $70,000. An 8-year-old car that’s still in great shape? As low as $30,000!

When you’re strapped for cash, being able to buy a car for $30,000, even if it’s for only 2 years, is a pretty sweet deal.

Great! So, I should go out and get the cheapest second-hand car in the market?

If that’s what you want! Just do me a favour and sign this form here first. It’s a life insurance policy that benefits me in the highly probable chance that your car is a rattling death trap. That’s because you should never buy the cheapest second-hand car you can find. Before you head out to look for your next set of wheels, it’s important to know these 5 details first:

 

1. Car loan restrictions

Sure, second-hand cars are significantly cheaper compared to a brand-new one, but unless you have $70,000 lying around, you’ll probably still need to apply for a car loan. Here’s what you need to know about car loan restrictions in Singapore.

Regardless of whether it’s for a new car or not, you can now borrow up to 70% of the car’s purchase price or valuation price, whichever is lower. The maximum amount you can get depends on the car’s open market value or OMV. For used car buyers, this is great news, because the OMV of the car decreases with time.

And while we wouldn’t advise maximising your loan (because the interest you end up paying isn’t worth it), imagine being able to buy a car worth $70,000 with only $21,000 on hand.

Just a reminder: get an in-principle approval of your loan first from the bank. This lets you know exactly what your budget is so that you don’t go overboard thinking you can get a Ferrari or a Porsche.

 

2. Just how much can you afford?

As we mentioned earlier, if you take a car loan, you will need to consider two things – firstly, the downpayment amount. This is at least 30% of the purchase price or valuation price, whichever is lower. If you don’t even have this amount in cash and ready to burn, don’t even think of getting a car, used or otherwise.

However, even if you have that amount handy, you will need to consider how much you will need monthly to repay the car loan. DBS has a simple and straightforward car loan calculator on their site, which is a quick way to find out your maximum budget for cars and how much you can expect to pay each month based on your salary and financial commitments.

 

3. PARF car vs COE car

Don’t know what the Preferential Additional Registration Fee, or PARF, Rebate is? Put very simply, it’s the amount you’ll get back when you deregister a car before its 10th year. The older the car, the less you can get back. For this reason, cars that are less than 10 years old are known as PARF cars

On the other hand, you have cars that are more than 10 years old. These are known as COE cars, because you do not get back the PARF rebate when you scrap it. In fact, depending on when you scrap the car, you may not even be eligible for any COE rebate if you use the car until it’s very last day.

When buying a used car, you’ll want to take this into consideration – especially since it could mean the difference between getting some money back when you scrap your car.

 

4. Just what is the condition of the used car you want to buy?

When a ridiculously cheap bargain is being dangled in front of you, it’s probably too good to be true. This is definitely the case for used cars, as there could be hidden defects that an unscrupulous seller may be trying to gloss over in their desperation to sell it to you.

Fortunately, there are used car sites out there that insist that sellers provide as much information about the car as possible, so that any transaction is transparent and you know exactly what you’re paying for.

You might want to check out Carro, an online platform for used car owners to buy and sell direct. They also have an existing partnership with DBS, which makes settling your car loan much easier as well. Carro doesn’t just provide pictures of the car and the price, it also lists the important details like registration date, mileage and road tax. But just in case you think this is information that should be on any used car listing, Carro takes it one step further by analysing the data and advising you accordingly.

For example, a 5-year-old Toyota Corolla Altis on the site has a mileage of only 23,000km. This suggests it is severely underutilised as a normal mileage is about 10,000km per year. Usually, underutilisation suggests that the car is in great shape. What’s more, Carro notes that the car has only had one owner. That is, it’s never been sold before. This further adds to the car’s perceived value, since you are dealing with the owner who has bought it brand new.

You can also obtain an attractively priced car loan when you go direct to DBS. It is one of the cheapest car loan interest rates in the market.

There are also additional goodies that you can enjoy from DBS when you visit their site.

This article is brought to you in collaboration with DBS.

I am the poster boy for reinventing one's self. I've been a broadcast journalist, a technical writer, a banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.