The Best Time to Change Your Car in Singapore

If you’re like me, you only change cars once the traffic police stop you. Then the cop who pulls me over makes choking noises, while deciding to laugh or cry. Well, don’t you mock me! Cling-wrap is a perfectly good alternative to windscreens! Anyway, MoneySmart readers might wonder about the financial impact of changing cars. In this article, I look at how to time your upgrade (or downgrade, which is any time you’re buying a Proton):

 

Honda car on show

"And if you buy first, we'll give you this free guide to insider trading."

 

1. Now is Not the Best Time

I’ll start with a straight answer: Not now. Okay? That’s April 2012, which will go down in Singapore history as “That time when everyone who could afford a car was subject to CID investigation.”

With COE bids in excess of $90,000, there’s only one good reason to buy a car this month; and it involves a gang fight, 15 stab wounds, and being too far from A&E. Anything less is insufficient reason to even look at a new car. Because the COE adds tremendous cost to the vehicle (the certificate might cost more than the car), it’s important to track the COE rates.

 

Expensive cars on a Singapore road

"I have ways of affording my car. Oh, and here's my house…it's that dumpster around the corner."

 

COE rates are affected by the current car quotas. Since the government intends to lower that quota in August, we can expect the prices to keep on rising, at least till 2013.

No promises, but 2013 is when the 10 year COEs from 2005 begin to expire. Back then, the car quota was a lot higher, and they were handing out COEs like door prizes. As those COEs die out, there will be more room for cars on the road. Most car owners who got their COE in 2005 will also be eager to scrap in 2013, since they want their two year rebate.

 

2. Your Maintenance Costs are Too High

Maybe you’ve played live action Grand Theft Auto once too often. Or maybe the mechanic at the plant had one too many beers the night before. Whatever the case, some cars cost more to maintain than they’re worth.

Singaporeans hesitate to change cars just because of maintenance issues. After all, cars suffer rapid depreciation, and COE bidding is about as enjoyable as open heart surgery. The sale of the old car won’t cover the cost of the new one. But do the maths, and you might find keeping a lousy car costs you more.

 

Datsun engine

"Sure, I can fix it. But you'll have to pay the museum for the right parts."

 

Here’s an easy way to decide:

  1. Total the monthly cost of keeping your car (fuel, ERP, repayments, maintenance, etc.)
  2. Total the cost of your car maintenance over one year, then find the average monthly cost of maintenance.
  3. Compare the averaged monthly cost of maintenance to the monthly cost of keeping your car.

 

As a general rule, your vehicle is counter-productive if the maintenance cost equals or exceeds 20% of the total monthly cost.

If you’re self-employed, and rely on your car for income, you should also count the days when your vehicle is unavailable. Include your income for the day as part of the maintenance cost.

 

3. The Five Year Mark

Five is a magic number, because of the PARF rebate. Right up to year five, the PARF rebate remains at a steady 75%. Beyond that, every year reduces the rebate amount by another 5%. Likewise, note that cars depreciate most heavily within the first three years.

All this suggests that, if you want to change your car, don’t take your time. The longer you wait, the more expensive it will be. But of course, there are other factors involved. If COE prices are too high for your taste, for example, you may have no choice but to wait. In which case, you can aim for…

 

Antique car

"Yeah, that's a five year old car alright…back in 1895 it was."

 

4. The Eight Year Mark

You want to quickly get your COE rebate, before it expires. This rebate is based on the amount of “unused time” on your COE. So if you have your car scrapped at eight years, you get paid two years worth of your COE.

By coincidence, eight years is also when most cars start to wear down. Car manufacturers like to claim new vehicles last much longer than old ones, but I believe that as much as I do Ris Low’s condom advice. Car manufacturers make the vehicles last longer so the public will buy fewer cars? Yeah, sure.

Anyway, after eight years you’ll be driving something that would look better on The Flintstones. Cash in, grab the rebate, and change cars. There’s little benefit to waiting the full 10 years.

 

Car break down

"You want my 8 year old car? I'll trade it to you for cab fare."

 

5. You Have No Upcoming Loans

Look three months ahead. Are you going to need any kind of loan? If your housing loan is already approved, and you don’t see any other loans you’ll need, go ahead and change cars.

Otherwise, it’s inadvisable get a car loan just before another major loan (e.g. home loan). It might not prevent you getting another loan, but it might affect the amount you can borrow. Getting a new car could mean your bank will only finance 60 – 70% of your house, instead of the usual 80%.

While it’s not common, a bank might also refuse to give you a home loan until your car payment is settled.

 

Cup of coffee

"We decided to extend you a loan you can afford. You just spent it on that coffee."

 

Image Credits:
linademartinez, Shiny Things, asgw, Roberto Verzo, andrijbulba, Vasenka, netan

Are you looking to change cars? Comment and tell us your worries!

Get more Personal Finance tips and tricks on www.MoneySmart.sg

Click to Compare Singapore Home Loans, Car Insurance and Credit Cards on our other sites.



More From MoneySmart
Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • China ignores global outcry vs reclamation
    China ignores global outcry vs reclamation

    On Wednesday, G-7 foreign ministers issued a Declaration on Maritime Security expressing alarm over “unilateral actions, such as large scale land reclamation, which change the status quo and increase tensions” in the region. In their communiqué, which did not specifically mention China, the ministers expressed belief that reclamation activities were meant to “change the status quo” in the West Philippine Sea and South China Sea, through which 40 percent of global trade passes. …

  • Project NOAH exec receives recognition
    Project NOAH exec receives recognition

    Project NOAH executive director and University of the Philippines professor Mahar Lagmay recently received recognition from the European Geosciences Union (EGU) for his work in disaster risk reduction and mitigation in the Philippines. …

  • Nightclub ban for US troops
    Nightclub ban for US troops

    The US Pacific Command has banned its troops in the Philippines from bars and nightclubs, a spokesman said yesterday, with the trial under way of a US Marine accused of murdering a transgender Filipino he met in a bar. Thousands of American and Filipino soldiers will kick off tomorrow the 10-day annual military exercises, according to Capt. Alex Lim, a spokesman for the US forces, but there will be strict controls on their free time. Lim would not say why the restrictions were imposed but …

  • US-Phl war games to start under China’s shadow
    US-Phl war games to start under China’s shadow

    Thousands of American and Filipino soldiers will kick off tomorrow expanded wargames, showcasing a deepening  defense alliance as alarm bells ring over China. The 10-day exercises in the Philippines are an annual affair between the longtime allies, but this time they will involve double the number of soldiers as last year in a sign of their expanding military partnership. The Philippines is seeking more US military and diplomatic support to fend off China’s increasing forcefulness in its bid …

  • Palace defends legal tack in sea row
    Palace defends legal tack in sea row

    There is nothing weak about taking the legal and diplomatic approach to push for the country’s claims in the disputed West Philippine Sea, Malacañang maintained yesterday. On Friday, Bayan Muna Rep. Neri Colmenares led a rally in front of the Chinese consulate in Makati City to protest China’s massive reclamation activities in the Spratly island group to fortify its presence in the disputed waters. Colmenares also criticized the Philippine government for supposedly not doing enough to defend …

  • Veloso sons urge authorities to save mother from death
    Veloso sons urge authorities to save mother from death

    The sons of Mary Jane Veloso, who is facing execution in Indonesia for drug smuggling, yesterday appealed to government officials to do everything to spare their mother from death. “We love you,” Mark Daniel, 12, said when asked for a message for his mother following a press conference at the University of the Philippines in Diliman, Quezon City. Mark Daniel, an incoming Grade 8 student, reiterated his appeal to those in power to help save his mother from death. His younger brother, …

  • US-Philippines wargames to start under China's shadow
    US-Philippines wargames to start under China's shadow

    Thousands of American and Filipino soldiers on Monday will kick off expanded wargames, showcasing a deepening defence alliance as alarm bells ring over China. The 10-day exercises in the Philippines are an annual affair between the longtime allies, but this time they will involve double the number of soldiers as last year in a sign of their expanding military partnership. The Philippines is seeking more US military and diplomatic support to fend off China's increasing forcefulness in its bid …

  • Bar ban for US troops in Philippines amid murder trial
    Bar ban for US troops in Philippines amid murder trial

    The US Pacific Command has banned its troops in the Philippines from bars and nightclubs, a spokesman said Saturday, with the trial under way of a US Marine accused of murdering a transgender Filipina he met in a bar. Thousands of American and Filipino soldiers will on Monday kick off 10-day annual military excercises, according to Captain Alex Lim, a spokesman for the US forces, but there will be strict controls on their free time. Lim would not say why the restrictions were imposed but …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options