7 Deciding Factors for Buying a New Car or Used Car in Singapore

If you’re looking to buy a car in Singapore and have a limited budget, you will naturally ask yourself whether you should get a new car or used car in Singapore.

To answer this question, most people will jump to look at the costs of buying the car. But should that be the main or sole factor in making your decision?

Probably not.

In fact, in this article, we will discuss the often overlooked considerations when choosing between a second-hand car or new car in Singapore.

1. Costs Of Buying a New Car or Used Car in Singapore

Costs Of Buying A Used Car Are Generally Lower

It goes without saying that second hand goods are generally cheaper than new goods. As with all used products, used cars undergo a significant amount of depreciation. You may find that a gently second-hand car may fall in value just within a span of a couple of years.

For example, a brand new Honda Civic 1.6 VTi-S (A) would cost approximately S$120,000. On the other hand, a second hand version of the same car with a 5 year COE remaining may cost somewhere around S$50,000.

If you’re lucky, you can save even more on your second hand purchase. The previous owner may have already paid the road tax for the year. Thus, you won’t need to fork out an additional amount to pay for road tax.

Used Cars Are Not Always Cheaper

But hold on a second. Some second-hand cars may surprisingly be more expensive.

Driving any car for months or even years will cause parts of the car to experience some wear and tear. This is entirely normal and expected. In fact, this shouldn’t affect the value of the used car much.

However, this becomes a problem when there has been no effort to maintain the upkeep of the car properly. When that’s the case, your maintenance and repair costs may shoot through the roof. You may find that the long term costs of owning the car would outweigh whatever cost savings you had when you first purchased the second-hand car.

Moreover, it may be even more costly if the used car is of an older car model. This is because obtaining the spare parts for the car for maintenance and repairs would probably be more difficult and hence more expensive.

2. PARF / COE

The Higher The PARF and The COE, The More Valuable The Car

The PARF rebate is the amount you can get back upon deregistering your car after 10 years of use. Read the factors for buying cars in Singapore for a better understanding of how PARF works and for some useful terms you should know before buying a car.

Since PARF is money you get back, you can consider it as cash back for the purchase of your car. If a second-hand car has a very high PARF value, which depends on the Additional Registration Fee that was initially paid for the car, then the car becomes much cheaper than its advertised price.

For example, forking out S$20,000 for a second-hand car with a PARF rebate of S$5,000 means that you will effectively only be paying S$15,000 for your car.

But that’s not all.

If you deregister your car before it crosses the 10-year mark, you can claim a COE rebate.

What does this mean?

If and only if you deregister your car before your COE expires, you will be able to recoup the costs for the remaining amount of time of your COE before it expires. What’s more, if the quota premium that was paid for the car’s COE was high, you stand to receive a significant COE rebate upon deregistration.

Therefore, you may find that a second-hand car with a high COE and PARF rebate becomes a more attractive choice than a brand new car.

You May Not Always Get Your PARF

It’s easy to assume that all used cars are entitled to the PARF rebate.

The truth is, not all are.

You should check to see whether the previous owner renewed the COE of the second-hand car after 10 years of use. If yes, you would no longer enjoy the PARF rebate if you buy such a car. Instead, only the COE rebate will be available to owners of such cars (also known as “COE cars”). This also presents an important financial factor when choosing to purchase a second-hand car over a new car.

3. Car Warranty

Manufacturer’s Warranty only Covers First-Hand Cars

If you’re deciding between a new car or used car in Singapore, warranty coverage should be one of the top considerations on your mind.

New cars usually come with a manufacturer’s warranty. This means that the car producer will back the car, even if the car is sold by a third party dealer. You can protect yourself the most by getting the comprehensive bumper-to-bumper warranty. This covers manufacturing flaws and defects of almost every component of the car, excluding items meant to wear out such as windshield wipers and brake pads.

On the other hand, the same doesn’t apply to used cars. Since car warranties are usually limited to covering defects for a specific period or mileage, used cars likely won’t have any warranty remaining. You can only be assured of a car warranty if you buy the car first-hand.

Consider Taking Out An Extended Warranty

The lack of warranty for a second-hand car can be discomforting. Through years of usage, second-hand cars are prone to faults and issues. Thus, you may want some form of guarantee or warranty to financially protect yourself.

But how can you do this?

One solution is to take out an extended warranty on the second-hand car.

Nonetheless, these warranties can be quite expensive. This is because insurance companies and auto manufacturers are aware that the older the car, the more susceptible it is to damage and problems. Therefore, they offer extended warranties on cars at a higher price. Ultimately, you should add the costs of taking out an extended warranty with the other costs of the car. Thereafter, you can decide whether it’s more beneficial to get a new car or old car in Singapore.

4. The Law Can Protect You… Sometimes

You Can Benefit From The Lemon Law

In Singapore, the Lemon Law protects you as the consumer. This protection lasts for six months from the time of delivery of the product.

Under this law, you can seek recourse against a seller within the stated time period if you unknowingly buy a defective good from him such as a car. Not only can you request for repairs to rectify defects, you may also seek a complete replacement or refund where the car is irreparable.

Beware Of Consignment Cars

Unfortunately, the Lemon Law has its limitations. It only applies to transactions between businesses and consumers. Thus, buying your second-hand car from an individual seller you met on an e-commerce platform such as Carousell makes you lose all protection.

You may be thinking, “In that case, I’ll just buy my car from a used car dealer or company. Then I’ll be protected.”

Actually, that’s not always true.

Nowadays, a lot of second-hand car dealers sell used cars on consignment. In other words, they sell the car on behalf of other individuals. The law views this kind of transaction as a consumer-to-consumer deal. As such, you as the purchaser would fall outside the scope of the Lemon Law. Therefore, you cannot return the vehicle or seek legal remedies from the seller once the car has been transferred to you.

Hence, a key question you should always ask the seller is whether the car is sold on consignment. If it is, you may want to consider taking out an additional warranty on the car. Alternatively, you can consider buying a brand new car instead or look at other second-hand car options.

5. Car Loans

Loans for second-hand cars have more unfavourable terms

Want to make use of a loan to finance your second-hand car?

It’s possible, but not ideal. The terms of the loan for a used car will likely be more unfavourable compared to a new car. You may find that the interest rates that lenders offer to you are much higher than that of new cars.

This is due to the inherently higher risk in financing older vehicles. Lenders have to consider that you, the borrower, may eventually default on your loan payments. Then, the Lenders may choose to repossess and sell your car to recoup the monies owed to them. As second-hand cars would fetch significantly lower prices than newer cars, the banks risk not getting back the entire outstanding amount that is owed to them.

6. You Should Check The Car

Check For These Key Things For Used Cars

For second-hand cars, it is all the more critical that you do your due diligence. At the basic level, you should ascertain the age of the car, the mileage and examine if there are any visible defects on the car’s exterior.

With second-hand cars, you should always ask to do a test drive of the car. This enables you to uncover any potential issues with the car that you otherwise wouldn’t have known.

When driving the vehicle, you should look for tell-tale signs of issues with the car’s transmission. These include lurching, clutch and gear slippage and vibrations. Furthermore, you should be checking to see whether the brakes are functioning properly or appear worn out. In this regard, you should be cautious if the brake response is slow and there are screeching sounds when braking.

Consider Professional Help In Examining Your Car

If you want another opinion on the state of the second-hand car, you can seek out a car evaluation from the Automobile Association of Singapore or other reputable mechanics and centres. This allows you determine whether the car is in the condition as advertised and worth the price you’re paying for it.

7. Be Aware Of The Risks Of Buying Second Hand

There Have Been Instances Of Odometer Tampering

As with buying any second-hand goods, used cars also poses its own set of risks. For example, some used car dealers tamper with the odometer to artificially reduce the mileage of the car. In fact, some experts in the industry state that it is not an uncommon practice in the industry. This is a dangerous and unscrupulous tactic that misrepresents the true state of the car to the buyer. 

In order not to fall victim to such a scam, you should take some precautions.

Firstly, make sure you are getting your car from a reputable second-hand car dealer. In doing so, your chances of being scammed and misrepresented drops. Additionally, alarm bells should start ringing if the car’s price tag is exceptionally low compared to cars of the same model. If it’s too good to be true, it probably is.

To be safe, you should get the full-service records of the car to see the clocked mileage. Don’t blindly rely on the salesman’s representation. Get objective proof of the actual mileage of the car.

Conclusion

Buying a car is a big investment. If you want to save money, you can consider buying a used car over a new car. However, there are certain disadvantages and risks of buying a second-hand car.

If you are looking to purchase a used car in Singapore, you should do more thorough checks and consider taking out warranties to minimise the potential financial downside. Conversely, if the risks of purchasing a used car are far too high for you, then you can consider forking out a bit more to get a brand new car.

Also, here are more transport tips to get around Singapore more efficiently.

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