With the average price of a new car rivaling the cost of a 3-Room BTO flat (or a brand new Porsche 911 Turbo in the US for that matter), together with changes in COE policies, it’s easy to see why the demand for used cars is expected to rise. If you want to buy a used car, you’ll have to look at more than just the color, make, and model – you’ll need to decide whether you want a PARF or COE car.
Here’s a more in-depth look at the advantages/disadvantages of both PARF and COE cars:
What is the Preferential Additional Registration Fee (PARF) Rebate?
The PARF rebate allows buyers to offset the various upfront vehicle taxes and fees when you register a car, namely:
- The Additional Registration Fee (ARF)
- The COE Quota Premium
- The Registration Fee (RF)
- The $10,000 used car surcharge (if applicable)
The PARF rebate is computed based on the age of the car at de-registration . The age of the car is computed from the date of its registration in Singapore or its original registration in a foreign country, whichever is earlier. For a full breakdown of PARF benefits for eligible cars, check out the full table at ONE.MOTORING here.
What’s the Difference between a PARF and COE Car?
Used cars purchased just a few years ago are still laughably cheap compared to buying a new one – probably because back then the COE hadn’t grown into the unholy monstrosity that it is today. But with used cars, there’s cheap… and then there’s dirt cheap.
If you want to buy something dirt cheap that’ll last for a few years until you upgrade to something better, get a COE Car. If you want something less vintage that’ll let you collect your COE and PARF rebates after de-registration, get a PARF car. But this is only a surface-level difference.
Here’s the main reason why PARF and COE car prices differ:
- A PARF car hasn’t been de-registered before its 10-year depreciation period has ended. This makes it eligible for both the COE and PARF Rebate, which ranges from 50% – 75% of the Additional Registration Fee (ARF) paid on the vehicle.
- A COE car is not eligible for the PARF Rebate because the owner chose to pay the Prevailing Quota Premium (PQP) for 5 or 10 more years more instead of de-registering the vehicle. This means that upon de-registration, you’ll only receive the COE Rebate.
There are many other differences between PARF and COE cars that contribute to both their upfront and long-term cost, such as:
1. Down Payment
The down payment makes up the biggest chunk of your upfront cost when buying a used car. And with the latest MAS car loan restrictions, the amount you can borrow is reduced – meaning you’ll have to pay a larger down payment.
So your down payment will depend on the following:
- If the Open Market Value (OMV) of your vehicle is $20,000 or less, your maximum Loan-to-Value is 60% – meaning you’ll have to make a 40% down payment.
- If the Open Market Value (OMV) of your vehicle is more than $20,000, your maximum Loan-to-Value is 50% – meaning you’ll have to make a 50% down payment.
Go with a COE car if you don’t want to pay a lot up front. That’s because the sale price of COE cars can be up to 40% – 50% cheaper than PARF cars, and your down payment will be 40%.
PARF cars on the other hand still retain much of their OMV, meaning you’ll probably need to pay 50% down (if the remaining OMV is above $20,000).
Much of a used car’s sticker price comes from the rebates buyers receive from de-registering them. COE cars gain much of their value from the COE rebate attached to it. PARF cars on the other hand get much of their resale value from both the PARF rebate, which is based on 50% – 75% of the vehicle’s ARF, and the COE rebate.
Here’s what you receive from each rebate:
If you de-register your car before the remaining COE expires, you’re entitled to a rebate for the remainder of COE remaining. Since this rebate is passed onto the buyer, it’ll get factored into the resale value.
A used car registered in April 2008 has a PQP of $19,001 that is set to expire in April 2018.
If this car is sold in October 2013, you’d calculate the COE rebate by multiplying the PQP ($19,001) * the number of months remaining on the COE (54 months) and divide it by 10 years (120 months).
So the COE rebate would be ($19,001 * 54) / 120 = $8,550.45
If you de-register your car before the 10-year depreciation period has ended, you’re entitled to rebate based on a percentage of the vehicle’s ARF, which is also factored into the resale value.
The percentage you’ll receive is based on the following:
Number of Years Registered
|5 Years or Less||75% of ARF|
|5 Years to 6 Years||70% of ARF|
|6 Years to 7 Years||65% of ARF|
|7 Years to 8 Years||60% of ARF|
|8 Years to 9 Years||55% of ARF|
|9 Years to 10 Years||50% of ARF|
|10 Years or More||Nothing|
The used car’s condition still plays a huge role its resale value, which is reflected in the vehicle’s OMV, depreciating 10% each year for the first 10 years after registration – for PARF cars only. The value of COE cars on the other hand is more arbitrary because there’s no ARF rebate or “official” OMV remaining. This means you’ve got more leeway to negotiate price with the owner.
Whether you’re looking at a PARF or COE car, here are three factors to examine:
- Mileage: Typically, if a car has a lot of mileage, that can contribute to a reduction in the resale value. That’s because the car’s performance decreases as mileage increases (naturally), meaning certain parts will need to be replaced faster.
- Periodic Maintenance: A car that hasn’t been properly maintained is a liability (and a waste of money!). Cars need periodic maintenance, such as changing the motor oil, transmission fluid, air filter, etc. Ask to see the car’s maintenance log, and if there isn’t one, it’s a red flag that its maintenance may have been neglected. And of course, always have a mechanic check the car before you buy it!
- External Condition: Check the car’s exterior for any dents, scratches, lights, power windows, and tires. If there are blemishes, you can at least negotiate some small discount, but if the car has worn-out lights or tires, ask for replacement.
On a final note, COE cars may be much cheaper, but be prepared to pay higher (and more frequent) maintenance costs than newer PARF cars. If you want to save money on future maintenance costs, read up on How to Lower Your Car Maintenance Costs.
4. Road Tax
The road tax is another factor to consider when choosing between a PARF or COE car. That’s because depending on your choice, you may need to pay an additional surcharge on top of the road tax. Check out LTA’s website to see the formula for calculating the road tax.
The road tax is determined by the engine size of your car, so the larger the engine, the higher the tax – that goes for both PARF and COE car owners. But COE car owners need to pay an additional surcharge up to 50% because their cars are 10 years or older.
Here’s the breakdown of the surcharge you’ll need to pay if you buy a COE car:
Age of Car
Additional Road Tax Surcharge
|10 Years Old||Additional 10%|
|11 Years Old||Additional 20%|
|12 Years Old||Additional 30%|
|13 Years Old||Additional 40%|
|14+ Years Old||Additional 50%|
How Do PARF and COE Cars Compare to Each Other?
COE cars are cheaper than PARF cars. But that cost of a COE car can easily jump if you happen to buy a car with mechanical defects – plus you still need to pay higher road tax as well. PARF cars on the other hand are newer, usually in better mechanical shape, and still retain much of their resale value.
Choosing one is not only a matter of budget, but of knowing the risks that come with buying cheap. If you’re still unsure of whether to choose a PARF or COE car, here are two charts outlining the advantages/disadvantages of each:
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