5 Factors to Consider in Singapore to Buy a Second Hand Car
Singapore’s market is filled with both new and used cars, each catering to a different need or budget. Deciding on which make, model, engine, colour and other features of a car to get can be overwhelming, especially for first-time car buyers. While many Singapore used cars offer affordability, there are several factors buyers need to take into account before making a purchase.
Here are 5 factors to consider in Singapore to buy a second hand car:
1. Know the Meaning of Used Car Jargon
There are specific, authorised vehicle terms in Singapore for used cars. Navigating and familiarising themselves with the used car jargon can help people benefit during their buying process. Here are a few terms buyers should know before purchasing a second-hand car: COE, OMV, ARF and PARF.
The Certificate of Entitlement (COE) is a quota license introduced as part of the government’s policy to manage the number of vehicles on the road. All cars in Singapore need COE registration. Under normal circumstances, the final price of the new car includes the new COE. However, purchasing a used car with an existing COE will provide you with a good value. For instance, a five-year-old car’s COE expires in five years; hence, the used car is more affordable because of the COE terms.
The Open Market Value (OMV) is the price of a car decided by Singapore Customs when importing. This amount includes charges such as the purchase price, freight, insurance and other fees incurred through the sale and delivery of the vehicle to Singapore. The OMV matters during the buying process of a second hand car, as it affects the maximum loan you can take. For instance, as indicated by the Monetary Authority of Singapore (MAS), 60% of the car price is the maximum loan that can be taken for a car that is more than $20,000.
The Additional Registration Fee, also referred to as ARF, is a tax charge based on the registered car’s open market value (OMV). This qualifies a vehicle for a Preferential Additional Registration Fee (PARF) rebate if it is scrapped before the 10th year, returning some of the car’s value to the vehicle owner. Find out more about Singapore car jargon at Land Transport Authority.
2. Understanding the Factors that Affect Your Used Car Value
The two main factors that affect the used car value are PARF and COE rebates; these rebates are determined by the Singapore government and car dealerships respectively. The amount of PARF and COE rebates that a used car can fetch is thus an important point to note when negotiating for its sale price.
A secondhand car is eligible for the PARF and COE rebate if its owner has not deregistered before the 10-year term. Therefore, since the car has more value before scrapping it, PARF cars are more expensive than older cars.
Another factor that can determine a used car’s value is the outstanding car loan that is attached. If the value includes the car’s outstanding loan, the buyer shall take over the loan or repay the full amount.
There are also smaller fees such as the excise duty, goods and services tax and transfer fee for registering a used car. Used cars will need to undergo inspection in the workshop to ensure they are in good condition for selling. Hence, this adds up to the cost and will affect the price of a used car. It will be best to score a deal through a trustworthy and credible car dealer to make the most out of your purchase.
3. Find Out How to Finance the Purchase of Your Used Car
According to the Monetary Authority of Singapore, a loan for a used car cannot exceed 70%, considering the price is less than or equal to $20,000. If a second-hand car’s OMV is above $20,000, the borrowing limit will be up to 60%.
An extra percentage on top of your loan is the interest rate, which may depend on market factors and the buyer’s credit score. Generally, the interest rate for car loans in Singapore is between 2% – 4%.
When looking for a car loan, opt for in-house financing through a dealer, especially if they offer promotional rates. Another way is to take up bank loans via dealer partnerships with the banks. The third way is to contact the bank directly and discuss with the loan officer how to finance a car. Ensure if the bank finances cars that are over ten years old, if the chosen vehicle is older. Most importantly, be sure to factor in any ‘hidden’ cost, such as the processing fee or early settlement fee for paying off your loan early.
4. Understand the Loan Tenure
The loan tenure refers to the amount of time borrower needs to pay off his/ her loan amount. The tenure can be between three years or seven years.
Choosing a shorter tenure would mean that the down payment and monthly instalments would be higher, but the total interest payable would be lower.
Longer tenure, capped at seven years in Singapore, may offer flexible payback schemes allowing the car loan borrower to adjust their monthly budget accordingly. However, do note that financiers may impose fees if the monthly repayments are not met.
5. Explore Insurance Options
In order to drive in Singapore, it is mandatory for all vehicles, including used cars in Singapore, to have valid insurance coverage. Furthermore, the car owner needs to pay the road tax, which can only be purchased after getting insurance.
While there are many car insurance plans, vehicle owners should, at least, get one that covers third-party liability in case of a traffic accident. The Third Party Only (TPO) plan covers any damage costs or medical fees incurred in an accident.
In case the car owner is still financing the vehicle, then it will be compulsory to get comprehensive insurance with a broad umbrella of coverage for both the car and the driver.
Generally, it is ideal to purchase car insurance for peace of mind. Therefore, after purchasing a used car, start looking for car insurance or ask the dealer if they have recommendations.
What Steps to Take in Singapore to Buy a Second Hand Car?
Having considered all the factors above, here are the steps involved to buy a second hand car in Singapore:
- Choose a car
- Find out the cost
- Look for the best financing option
- Apply for a loan
- Purchase car insurance
For more information on purchasing a second-hand car of any make and model, contact Car World Automobile Pte Ltd! Car World has extensive experience with Korean, Japanese and Continental cars, providing the best options to their customers to get them their dream cars.