Now and then, people write e-mails asking: “How to save money when buying a car in Singapore?” Which is really tough. You might as well ask me something like “How do I save my sense of honour while mugging old people?” The two activities are contradictory, is what I’m saying. Cars are not appreciating assets; they tend to cost more than they earn for you. Still, I guess there are ways to keep the damage to a minimum:
A Quick Word About Investing in a Car
No matter how much you save on a car, it remains one of the worst investments you’ll make.
If a car were a stock, you wouldn’t buy it. It depreciates too fast, doesn’t generate revenue (not directly), and costs you more as it matures. Also, due to the COE system, you are never paying the true value of any car model.
If you have a choice, always buy your house, your bonds, your insurance policies, etc. before you buy a car.
That said, here are some ways to save on a car:
- Wait for Your COE
- Get Maintenance Estimates for Second Hand Cars
- Check for Add-On Fees
- Use Shorter Loans
- Negotiate Your Car Insurance
1. Wait for Your COE
There are three ways to get your COE. You can buy a car with a ready COE, get the dealership to put in a bid for you, or bid for it yourself.
The longer you’re willing to wait (play the COE bidding game), the lower your price could potentially be. Former car dealer Patrick Pang, who was in the business 7 years, says:
“Rather than pay a high price for a car with an open COE, you put in a bid and hope you win. Car dealers can do this for you, or you can do it yourself; you can even put it in a bid through DBS ATMs.
Bidding is normally on the first or third Monday of the month, unless it’s a public holiday. There are two tenders a month. After you put in your bid, you will know the results three days later. If you ask your car dealer to bid for you, they will bid the amount you choose every tender until you win.
There need not be admin charges for the dealer to bid for you.”
Patrick warns that, if your bid amount is low, you might have to wait a long time. So weigh your options: How urgent is your need for the car?
2. Get Complete Records for Second Hand Cars
Second hand cars are supposed to be cheaper. But get one that looks like it came off the Flintstones, and you can expect your savings to be swallowed by maintenance costs.
Patrick warns that second-hand cars may cost you more than they save:
“If the car is old, the parts may have to be specially ordered. Older cars also tend to burn more petrol, and may need more frequent servicing. You may find that you need to change the oil or top up the air-con gas more frequently.
You should ask to see the car’s complete maintenance record. If the previous owner did not go for regular servicing, you should look for something that’s better maintained.
Also, check the odometer against the car’s age: If the car travelled more than 25,000 km per year, you might end up needing expensive replacements, as the entire drive train could be worn out.”
3. Check for Add-On Fees
I don’t get the invoices at car dealerships. I mean, shouldn’t they look like this:
1x COE = $80,000
1x Car = $30,000
Total = $110,000
– The End –
But no. The invoices look like someone stapled two phone books together, then glued on the manuscript for War & Peace for good measure. There’s bills for add-ons, bills for add-ons for the add-ons, and a bunch of bills listing words I’m sure are made-up.
Patrick says you should get the dealer to walk you through these bills:
“Don’t read them on your own and make assumptions. Ask the dealer to walk you through each item. Sometimes, you will spot add-ons that you did not request, or that you don’t feel are necessary. Have them removed to save costs.”
4. Use Shorter Loans
Car loans can extend up to 10 years; but you’re advised to keep it shorter. The longer the loan tenure, the more interest you’re paying.
Because car loan packages are variable, you’ll have to shop around for the best; and not just once either. Re-check interest rates every two or three years. You might want to refinance your car loan, if you spot a better deal.
Remember to factor in your road tax, ERP, parking, petrol, maintenance costs, etc. before picking a loan. After being added to loan repayments, these total costs should not exceed 30% of your income.
5. Negotiate Your Car Insurance
By law, all cars in Singapore must be insured.
If you buy a car without taking a loan, you might get away with TPO (Third Party Only) insurance. But if you use a bank loan, the bank will usually require you to get comprehensive insurance.
To get the best car insurance rates, shop around on sites like MoneySmart. There is some room for negotiation: For example, some insurers will agree to lower your premiums, if you agree to accept a higher excess. That means you pay less per month, but you’ll have to pay more in event of an accident.
If you’re even a half-decent driver, that’s not a bad deal. Accidents don’t happen every month, but insurance payments do.
How did you save money when buying a car? Comment and let us know!
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