Firstly, welcome to Singapore, where our public transport is perhaps one of the most reliable, convenient and high quality in the world. We are also just a short 40 minutes from one end of the island to the other end by train, and our bus system is highly comprehensive and ply almost every inch of our roads.
Despite this, people here still choose to spend six-figure sums on a car. And no, we are not even talking about luxury cars yet. It is not for no good reason though, because, let’s be honest, owning a car is just really convenient.
If you are aspiring to be a permanent resident or citizen here, you may not know this, but owning a car in Singapore is a decision you need to consider very carefully; a mint-condition Toyota Corolla Altis, an entry-level sedan, costs about SG$100,000 today.
However, there are many ways where you can drive around Singapore, fill your tummies and still fill the tank. For instance, you can get a second-hand car. The same Toyota Corolla Altis could fetch a price tag of just SG$70,000 at 5-years old and as low as SG$$30,0000 at 8 year’s old.
But not every cheap second-hand car is a good deal. So, before you race to the car dealer or car mart, you should understand the following five considerations first:
Restrictions on Car Loans
Indeed, second-hand vehicles are significantly more affordable than a new one, but not everyone has SG$70,000 sitting in the bank waiting to be used. If you identify with this group, you will need to go apply for a car loan.
It does not matter if the vehicle you are buying is first-hand or second, you can only borrow up to 70% of the car’s buying price or valuation, whichever is the lower figure. The highest amount you can borrow is dependent on the car’s OMV, shorthand for Open Market Value. If you are buying a second-hand car, this is good news for you since the car’s OMV decreases over time.
While we do not recommend you to max out your loan if you really do not need it, because you will then have to pay the interest which is not exactly worthwhile, but being able to own a car worth $70,000 with just $21,000 cash feels great!
Just a little note: get from the bank the in-principle approval of your loan first so that you can see what kind of car your budget will allow before you start fantasising about a sports car.
What Can You Afford?
As mentioned above, you will need to consider these before taking a car loan: firstly, the downpayment, which is at least 30% of the purchase or valuation price. If you do not have enough cash to burn, you should withhold your purchase of the car. And even if you possess that amount on hand, you will need to calculate how much is the loan repayment amount per month. You do not want to own a car, empty your month’s budget on the repayment and the costs associated with owning a car, and leave nothing for your daily essentials, right?
COE Car or PARF car?
PARF is shorthand for “Preferential Additional Registration Fee”. Simply put, PARF is the cash amount that will be refunded back to you when you deregister your car before it hits its 10th year of ownership. As the car gets older, the PARF amount decreases. Cars that are owned for less than 10 years are thus known as PARF cars.
However, if your car has been owned for more than 10 years old, it is known as a COE car, since you will not be getting back the PARF rebate upon scrapping it. In fact, depending on when your car is scrapped, you may not even be able to get back any COE rebate if you squeeze your car’s utility up to the very last day.
When you are purchasing a secondhand car, you will want to consider this point, since it will mean if you will be getting back any rebate when you send your car to the scrapyard.
The Condition of the Used Car
In Cantonese, there is a saying that translates as, “Cheap things are never good and good things do not come cheap.”
It may not always be true for every circumstance, but it is a generally useful guideline to follow when considering a purchase. When the car salesperson dangles a seductively cheap deal in front of you, you may want to think it through triple. Used cars that are priced so low that it makes you want to snap it up immediately are likely to possess some defects that are not always immediately apparent. It is best to scrutinise your candidate car as best as you can.
Luckily for you, there are many used car websites on the internet that require sellers to put out as much information and details about their cars as possible; some even allow past buyers to rate the seller. As such, the purchases you are about to make can be as transparent as possible so you are able to make well-informed decisions. If it is too much of a hassle, what about renting cars instead?