Buying New or Used Car in Singapore?
Singapore has at least one very restrictive regulation concerning car –Certificate of Entitlement (COE). In simple way, COE is the license received from successful winning bid which grants the holder to register, own, and use a car for only 10 years period. Because demands for COE are high, the price can exceed the actual value of the car!
If the owner decides to use the car for 5 or 10 more years, he/she must pay PQP (Prevailing Quota Premium). However, if the owner decides to deregister the car before 10 years of ownership, there is a rebate calculated based on the age of the car.
The overall taxing system makes it very expensive to buy new car in Singapore. There are often arguments on conceivable that COE tends to favor the wealthy elite who can afford to bid higher than most people. The cost for bidding is therefore a significant overhead of a new car. COE bidding process is quite difficult or at least time-consuming as well. Most types of vehicles will only be available for you to drive after a month of purchase. Apart from those, Singapore also applies car loan restrictions; the LTV (Loan-to-Value) depends on the car’s open market value(OMV). An LTV of 60% applies if your new car’s value is $20,000 (or less) and 50% is your car costs more than $20,000.
Purchasing new car in Singapore involves lengthy and costly processes, and this is one of the main reasons why used cars are more viable investments. The best benefit is the price, of course. Depending on the models, the price for used car can be 30% less than new car of the same model. You don’t even have to do the bidding process to acquire COE; transfer process must take place within 7 days instead of a month. To get the vehicle registered with your name, there is a transfer fee indeed, but it only costs $11.
In terms of depreciation, used car is better option. Most cars depreciate by 20% after the first year and by 10% during the following two years. But after that, the depreciation decreases significantly. It is worth mentioning that used car has lower psychological overheads, meaning you will not encourage yourself to pay a lot to repaint or purchase new parts should a fender bender occurs!
On the dollars and cents perspective, buying a pre owned vehicle often makes more cents!