There are days I wonder why so many Singaporeans insist on owning a car despite the ridiculous cost involved in purchasing one. Naturally, on those very same days, I am late for work thanks to our world-class public transport system.
But is avoiding being late for work every once in a while worth the cost of buying a car? Even a second-hand car? Let’s do the math.
- How much is a second-hand car in Singapore?
- Breakdown of the upfront payment
- Breakdown of the monthly repayments
- Conclusion: is it worth it to buy a second-hand car in Singapore?
How much is a second-hand car in Singapore?
We’ll split the cost of a used car into 2 categories: the upfront payment and the monthly repayments.
For illustration purposes, let’s just focus on a 5-year-old Toyota Corolla Altis 1.6A. It’s reasonably affordable, built to last and ridiculously fuel efficient.
You can expect to pay at least $60,000 for one that doesn’t look like it belongs in the latest Mad Max film.
1. Upfront payment when buying a second-hand car
Here’s a quick overview of the expected upfront payments for the selected case study:
In order to ensure the lowest downpayment, you want to be able to qualify for the maximum loan in terms of largest amount and longest tenure. That means your car’s Applicable Open Market Value (OMV) needs to be $20,000 or less (in order to qualify for a loan of 60% of the car price). The older the vehicle, the lower the Applicable OMV probably is, but it’s always a good idea to check.
I didn’t pull those numbers out of a hat, okay. Here is the breakdown:
The minimum downpayment of a car depends on the difference between the car’s price and the loan amount. Assuming your Applicable OMV is $20,000 or less, your loan amount is 70% of the car price.
That means your downpayment is 30% of the car price. You also have to pay an LTA transfer fee of $11.
Using the same example above, the car price is $60,000, so your downpayment is $18,000. The LTA transfer fee is $11. If you take the maximum loan amount and tenure, the monthly repayment is expected to be $794 (see the breakdown below).
Since you have to pay your 1st month instalment at the same time with your initial payment, that’s a total of $18,809 you have to come up with as soon as you sign on the dotted line. So make sure you have that amount liquid and ready.
What? That’s excluding insurance? Now you tell me.
Car insurance (~$1,200)
According to Singapore law, car insurance with 3rd party coverage is mandatory. When it comes to using a car loan to purchase a car, the financial institution you borrow from may have stricter requirements for car insurance coverage. For example, they may demand 3rd party, fire and theft car insurance, or even comprehensive policies.
How much will this insurance cost you? Well that depends you on you, really. There are several factors that determine how much you pay per year. The main factor? Whether you’ve managed to find the best car insurance for yourself. Use a comparison site to make sure you’re not paying more than you have to. Still, expect your insurance to come up to about $1,200… at least. This amount has to be paid upfront and in full, and your insurer will issue you a cover note.
Make sure the insurance policy is already in force when you purchase the vehicle and covers the full period of the vehicle’s road tax.
Road tax (~$742)
Speaking of road tax, make sure to check if your vehicle requires inspection prior to the renewal of your road tax. For cars that are older than 3 years, it is compulsory to have annual car inspections. Sometimes, the used car comes with a few months of road tax still valid. But you’re still going to have to pay it sooner or later. For the 5-year-old Toyota Corolla Altis 1.6L, the road tax should be $742 for a 12-month renewal.
There, that’s all you need to worry about, right? Well, yes, assuming you’re planning to bring your new ride home and spend the rest of its short life caring for it in your carpark.
If – as I assume – you actually expect to drive it around, then be prepared to spend more money. Before we get to that, let’s break for some quick maths.
So how long do I need to save for the upfront payment?
Now that you know you have to fork out $20,751 upfront, in cold hard cash, are you able to save enough to make that payment?
$20,751 means you need to save $1,729.25 a month for a year, which is pretty unrealistic for most Singaporeans.
An alternative – ahem, more achievable – target is to save $864.63 monthly. If you do that, it’ll take 2 years before you can think of affording a second hand car (at today’s prices).
But the bleeding doesn’t stop there.
2. Monthly repayments of a used car
After making your initial payments, you’ll need to think about the monthly loan repayments and whatnot.
|Car loan instalments||$798|
|Car maintenance and repairs||$30|
All costs considered, you can expect to shell out $1,108 monthly for 5 years. This is the breakdown:
Car loans (~ $798 monthly)
To qualify for a car loan, your monthly instalment should not exceed 1/3 your monthly salary. To get the maximum loan possible of 70% of the car price, you should go for the maximum tenure of 5 years. (Do note that the maximum tenure is dependent on the number of months left on the COE, capped at 5 years.)
Assuming the car price is $60,000, the maximum loan you can get is $42,000. As an illustration, let’s assume the car loan interest is 2.8%. Over 5 years, that means a monthly instalment rate of $798. Therefore, to qualify for the loan, you need a minimum monthly income of at least $2,394.
If you’re earning that much, don’t rejoice yet. There’s a lot more to worry about than just paying $798 each month.
Car maintenance & repairs (~$30 monthly)
When buying a second hand car, always check the mileage and how well the previous owner(s?!) maintained it. It’s probably a good idea to check the car’s maintenance log (and panic if there isn’t one!) and get a mechanic to look it over before paying cash.
Depending on how many miles are already on the second hand car, you can probably expect to be replacing some parts. And even if you don’t have to replace any parts, you still the need to change the oil, check tyres, flush the air-con and top up brake fluid on a yearly basis.
Say your second hand car is, miraculously, in the best of conditions. You should still expect your maintenance and servicing costs to set you back by, on average, at least $360 a year.
Petrol (~$180 monthly)
Whether a new or second hand car, it’s going to need petrol. Even if you’re not paying top dollar for Shell V-Power, your petrol bill’s still going to come to about $200 a month.
Okay, fine, if you use the best credit card for petrol you might be able to knock that down to about $180 a month.
Season parking (~$100 monthly)
You probably live in a HDB flat, which means you’ll need to pay to park – even at home.
HDB season parking prices range from $80 to $110 depending on area, so let’s put it at about $100 monthly.
Conclusion: is it worth it to buy a used car in Singapore?
Nobody can answer that for you, but there’s no doubt that even a used car is costly in Singapore.
You’ll need to be prepared for a 5-figure downpayment and have at least $1,000 of your salary to spare for the monthly repayments.
Do you think there are ways to further reduce the costs of owning a used car in Singapore? Share them with us in the comments below!