Singapore is known to be one of the most expensive countries in the world. Hence, buying a brand new car can be pretty expensive too. As a professional, owning a four-wheeler can be very useful as some jobs make it a necessity. Also, COE prices are rising, due to which more and more Singaporeans are choosing to purchase used cars until the COE prices fall. Or, at least that’s what they hope for.
If you are interested in buying a second-hand car, you must do your research well. BankBazaar Singapore has compiled some useful tips to assist you through the buying process so that you can buy the car that suits your needs the best.
What Should I Know Before Buying a Used Car?
Here are few things one should consider before buying a second-hand or used car in Singapore:
- Compare sellers in your region
- Thoroughly inspect the car
- Look at the maintenance and servicing records
- Go for a test drive
- Document the deal in the presence of a third party
Lets have a look at each.
Who Should be Your Seller?
The car advertised by the seller should be the car you pay for. Depending on who you are buying it from, you need to be vigilant about double-checking. If you can afford to pay a little more, you can buy a used car from either a dealership or an official showroom. Since their visibility in the car market is high, they are compelled to maintain a good reputation for reliability, honesty, and quality. This way, you can have more confidence in buying the pre-owned car that matches with the one advertised.
In addition, used cars from showrooms or dealership come with warranties, reassuring buyers about the sturdiness of second-hand cars. Furthermore, as a buyer, you are protected under the Lemon Law, which states that cars and other consumer goods sold by licensed businesses must repair or replace if the car is found defective.
You can find cheap cars if you wish to purchase from an individual seller. Although, you will have to do more work to ensure you get the right car. Should you choose to go down this route, make sure you follow these precautions:
- Compare sellers: Visit any of the car comparison websites and get an idea of how much a car that fits your requirements is being sold for in the market. This will help you negotiate with your seller and pay a fair price.
- Thoroughly inspect the car: Hire a reputed mechanic to thoroughly inspect the vehicle so that you can be satisfied with its age, condition, and mileage before purchasing it. Disreputable sellers might try to mislead or cheat you into buying a defective car by covering up scratches, tampering with the odometers, and hiding information like accidents and its age and mileage.
- Look at the maintenance and servicing records: The car should be serviced regularly according to the car maker’s recommendations. This will help the car to perform better and have a longer lifespan.
- Go for a test drive: This is the best way to know if the car has any defects. Take the car for a test drive and pay attention to how the brakes, suspension, gearbox, and steering are functioning.
- Document the deal in the presence of a third party: Always read the terms and conditions of the contract before signing it. This way, you can dodge any unnecessary or ambiguous hidden fees. Avoid signing a form or contract until the deal is final and cannot be changed by the seller.
PARF or COE Car – Which One Should You Choose?
When you go to a showroom to buy a pre-owned car, you will be given the option of purchasing a PARF car or COE car. A COE car will have its COE renewed by its former owner for 5 or 10 additional years. The car is a minimum of 10 years old. A PARF car, on the other hand, is a car which is less than 10 years old and can qualify for a PARF rebate in case you deregister it before it crosses 10 years.
A COE car will be the cheapest option since it requires a lower down payment. The Open Market Value or OMV of a COE car will depreciate from the time it was first launched. If you deregister the car before the COE expires, you are entitled to get a COE rebate for the unused time left on the COE during deregistration. However, such cars also come with certain drawbacks. If the vehicle surpasses the 10-year mark, you will have to pay a large amount as road tax. The tax will increase by 10% every year up to 14 years. Subsequently, you need to pay 50% in tax each year till the COE expires.
Purchasing a PARF car, on the contrary, gives you the chance to drive a newer car with less wear and tear and better mileage. The road tax is also less since the car is under the age of 10. If you deregister your car before it turns 10 and the COE expires, you will benefit from both the COE rebate and PARF rebate. The down payment for a PARF car might be higher than that of a COE car, but you will save significantly in the long run.
How Much Can You Borrow?
Now that you’ve decided which car to buy, you need to figure out how much you can borrow. According to the Monetary Authority of Singapore, if your car’s OMV is S$20,000 or below, you can loan up to 70% of the valuation price of the vehicle from the bank. If the car you want to buy has an OMV of S$20,000 or more, then the bank will loan you up to 60% of the valuation price of the car. The car loan must be repaid in 7 years or less. If the car crosses the 10-year mark, you will not be allowed to extend the loan term, which may affect your cash flow every month.
The OMV of the pre-owned car will always depend on the vehicle’s age to determine the loan-to-value or LTV ratio. For a car loan, you must consider the following factors:
- The bank’s monthly income criterion.
- Your current financial commitments like housing loan, personal loan, any previous car loans, among others.