The government is just as boggled as you are. With prices so high, how are Singaporeans still buying new cars? It’s seems like a third of our collective income is dedicated to not walking. Either that, or we’re part of the world’s most expensive protest movement (against bad public transport). Still, a record high for CoE prices has resulted in acute attacks of sanity: Singaporeans are increasingly turning to the used car market. In this article, we examine the financial smarts of such a move:
A frank admission: a car is one of the worst investments we will make. Cars generate huge overheads, depreciate in worth, and take up time in maintenance. They generate indirect value at best (depending on your job) and are a pricey necessity at worst. In light of that, you should only buy a car out of need; there are less expensive luxuries to indulge in.
If you can wrap your mind around that concept, the advantages of a used car become obvious:
- Used cars are cheaper
- Used cars have lower depreciation
- Used cars are immediately accessible
- Used cars have the best freebies
- Used cars psychologically lower overheads
1. Used Cars are Cheaper
Depending on model and mileage, a used car often costs 30% less than a new car of the same model. And if you’re getting a model that’s no longer in production, you can bargain the price down even further.
Used cars are especially viable if you have about $30,000 on hand. This can net you a decent vehicle that’s fully paid, thus sparing you the banks’ interest rates. Remember, money not burned in repayments is money that can be invested elsewhere. Obviously, look for used cars that don’t still have a loan attached.
As an aside, car owners in Singapore are usually easy to “bargain down”. Their holding power is limited, since they’re paying parking and maintenance while they wait for a buyer. Even in used car lots, sales quotas are often high; approach at the end of the month, when the quota is looming, and you shouldn’t have a problem getting a discount.
Note that there’s a small transfer fee of $10 + 2% of the car’s value.
2. Used Cars Have Lower Depreciation
The ideal used car is two or three years old, though most owners wait longer than that to sell. During the first three years, the car suffers the greatest depreciation in value; by buying after that, you’re letting the previous owner take the kick in the nuts.
Most cars depreciate by 20% in the first year, and a further 10% over the next two years. So if a car initially cost $100,000, you would have saved yourself a $30,000 loss. That’s 30,000 good reasons you can live without the euphoria of having bought a new car.
3. Used Cars are Immediately Accessible
The CoE bidding process is a real pain. Unless you’re buying a car with an open category CoE, then odds are you’ll be waiting a month to drive your car. Then there’s the simple fact that the car may not be there yet, and you’ve got to wait for delivery.
With a used car, the wait is minimal. Once the papers are signed, the transfer must take place within 7 days. In some cases, the sellers will let you drive it off the moment you sign, and good riddance to their parking fees.
4. Used Cars have the Best Freebies
Car accessories are not included in the overall cost of the vehicle. If the seller insists otherwise, just walk away: that’s not a standard arrangement.
Every extra accessory in the car, from the new stereo to the body kit, should come free with the car. Because having the body kit and no car is, you know, stupid. So when you’re shopping around, keep an eye out for mods that you like. Some of those freebies would cost you a fair amount in a workshop.
I have a friend who makes it a point to buy from car freaks: they typically have their vehicles tuned to perfection, and have worked out any small defects. This goes double for Ah Beng cars, if you don’t mind driving something that looks like a Christmas tree strapped to a Tamiya toy.
5. Used Cars Psychologically Lower Overheads
If you buy a new car and it gets scratched, you must freak out and cry. You have no choice. That first scratch is like throwing out your toilet roll, replacing it with sandpaper, and wiping vigorously.
Used cars, on the other hand, merit little more than a “meh” on most occasions. Psychologically, you won’t feel an urge to empty your wallet on expensive waxing and polishing, or maxing out the accessories. To car owners operating on strict necessity, this is a combination of cash savings and mental relief. I know a number of car owners who have only ever used second-hand cars, driven them into the ground, and then moved on to the next hunk of junk…happiest drivers I know.
Do you intend to get a second hand car? Comment and let us know!
Personal finance tips delivered to your inbox!
Receive news, subscriber-exclusive promotions and guides on how to become smarter with money.
We promise never to spam you!