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.

  • OIC asked to complete review of peace pact with MNLF
    OIC asked to complete review of peace pact with MNLF

    The Philippine government is asking the 57-nation Organization of Islamic Cooperation (OIC) to finally complete the tripartite review process of the implementation of the 1996 peace agreement with the Moro National Liberation Front (MNLF). The review – snagged  for several years as government had its hands full with the peace process with rival faction Moro Islamic Liberation Front (MILF) – tackles how the 1996 peace pact with the MNLF has been implemented and centers on the three remaining …

  • Alleged Binay dummies appear in Senate probe
    Alleged Binay dummies appear in Senate probe

    Eight of the resource persons ordered arrested by the Senate finally attended the 21st public hearing of the Senate Blue Ribbon subcommittee into the alleged anomalies involving Vice President Jejomar Binay, but the proceedings turned out to be a review of matters previously presented. For over three hours, the subcommittee heard presentations regarding the alleged hidden assets of Binay and the issue regarding the supposed P200 million in kickbacks he received from a deal between the Boy …

  • DOJ wraps up Mamasapano probe
    DOJ wraps up Mamasapano probe

    The Department of Justice (DOJ) is wrapping up its investigation into the “massacre” of 44 members of the Philippine National Police Special Action Force (PNP-SAF) in Mamasapano, Maguindanao last Jan. 25. A joint team of prosecutors and NBI (National Bureau of Investigation) investigators is about to finish the second part,” Justice Secretary Leila de Lima has told congressmen. She was responding to questions raised by former senior police officer and now Rep. Samuel Pagdilao of party-list …

  • APEC meet in Bataan seen to boost tourism
    APEC meet in Bataan seen to boost tourism

    BALANGA CITY, Bataan – More than 2,000 delegates of the Asia-Pacific Economic Cooperation (APEC) and international media outfits are expected to enjoy the splendid coastline of Bagac town, which faces the West Philippine Sea, as they converge for a workshop in this province next month. …

  • DOST opens P54-M research facility
    DOST opens P54-M research facility

    A P54-million research and development facility of the Department of Science and Technology (DOST) was recently opened in Bicutan, Taguig for scientists and researchers to develop technology and techniques to allow Filipino fashion and clothing designers and manufacturers to produce more mainstream products from local, tropical fabrics like piña, banana and abaca. Science Secretary Mario Montejo said the Innovation Center for Yarns and Textiles (ICYT) is the DOST’s flagship effort at reviving …

  • DFA worried about alleged violations of convicted Pinoys’ rights
    DFA worried about alleged violations of convicted Pinoys’ rights

    Philippine embassy officials in Doha have raised their concern with Qatari authorities over coercion and human rights violations in the alleged forcing of three Filipino workers convicted of spying to provide information and confess to the crime. Speaking to reporters, Department of Foreign Affairs (DFA) spokesman Charles Jose yesterday said the embassy has raised the matter during several high-level meetings with Qatari officials and the national human rights committee in Qatar. “Our embassy …

  • US affirms ‘ironclad’ promise to defend Phl
    US affirms ‘ironclad’ promise to defend Phl

    US Defense Secretary Ashton Carter told his Philippine counterpart on Wednesday that Washington’s pledge to defend the Pacific nation remains “ironclad” and called for an end to land reclamation in the South China Sea, officials said. In talks in Hawaii with Voltaire Gazmin, Philippine secretary of national defense, the Pentagon chief “reaffirmed” the strong ties between the two countries and discussed territorial disputes in the contested waters of the South China Sea, where Beijing has been …

  • ‘Conflict to affect economic growth, stability in SEA’
    ‘Conflict to affect economic growth, stability in SEA’

    Conflict in the South China Sea can affect economic growth and stability in Southeast Asia, New Zealand warned yesterday, amid China’s aggressive reclamation activities in disputed waters. New Zealand is marking its 40 th year of diplomatic ties with the Association of Southeast Asian Nations, and hopes to intensify trade and other linkages with the 10-member grouping. ASEAN members Brunei, Malaysia, the Philippines and Vietnam have overlapping territorial claims with China over the Spratly …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options