What are the things to consider in choosing your first car? Let’s find out. Singaporeans love cars: although cars in Singapore can cost five to six times more than they do in other countries, there has been a steady demand for new cars in the country. Land Transport Authority records show that more than 87,000 new cars were registered in 2016, up 52% from 57,000 new registrations in 2015. The strange thing is that this has been happening even though Singapore has one of the best public transportation systems in the world: it’s not like you need a car to get around the city.
If you have decided to buy a car or are seriously considering doing so, here are some tips that could help you in the process.
1. Decide Whether Your Budget Can Afford A Car
As cars are so expensive, a majority of buyers take a bank loan to finance their purchases. However, you still have to arrange a substantial sum as a down payment. If you decide to buy a Toyota Corolla Altis, one of the most popular models in Singapore, not only do you need to arrange about S$31,000 just for the down payment, you also need to pay a monthly installment for your five-year car loan over S$1,000.
But why should a car cost so much? A Toyota Corolla Altis costs S$102,988 in Singapore, while its open market value (OMV), which indicates the purchase price and associated costs for delivery of the car to Singapore, is only S$18,690. The remaining amount consists of taxes and duties. Some of the additional taxes and duties come from a few major pieces:
- Additional registration fee – this is calculated at a tiered rate, which ranges from 100% of the OMV to 180%.
- Certificate of entitlement – anyone who wishes to register a new vehicle in Singapore must first buy a certificate of entitlement (COE) from the Land Transport Authority. This represents a right to use the vehicle for a period of 10 years. The COE for a Toyota Corolla Altis? A hefty S$50,889.
- Car buyers also have to bear GST, excise duty, and the dealer’s profit margin.
The high prices deter many Singaporeans from buying cars. If you have the budget to easily afford it, there’s not much to worry about. However, if you need to take out a loan to buy a car, really make sure you can afford the monthly installments for the duration of your loan. Otherwise, it could really have a devastating effect on the quality of your life.
2. Use Your Negotiating Skills At the Car Dealership
Car dealers in Singapore have substantial profit margins, and you should always ask for a discount on the price that you are offered. Even if this is not forthcoming, it is still possible to get free service credits and free or substantially discounted accessories. There are few things to keep in mind when negotiating with the dealership. First, you should check the year and month in which the car that you are buying was manufactured. If it was manufactured many months or a year ago, you can ask for a discount. You could also try to buy a car that the dealer has been using for providing prospective customers a with test drive. While there will be no discernible difference in the car’s condition, you could get a hefty discount.
You should also be very careful about the documents that you sign at the dealership. Read each pre-printed form that you are given and ask for clarifications if you need them. The Singapore Motor Traders Association has issued a brief guide that describes the sales contract that you will need to enter into with the dealer. This contract lists various details including the model of the car that you are buying, its engine capacity, the year of manufacture, and the color. Study the sales contract carefully before you sign it. The price stated on the contract should be the same as the price that you have negotiated. If there is a difference, you must enquire with the salesperson.
3. Don’t forget about running costs
According to the Singapore government’s Ministry of Communications and Information, the amount that you will spend every year on your car will be about S$14,000. That is the sum for an entry-level car and the figure excludes the monthly loan installment, which can easily add more than S$1,000 per month on top of these costs. Before buying a car, you should remember to budget for these expenses (at least S$2,000 per month including car loan installment). Here are the various costs that you will have to incur: (yearly figures)
- Road tax – S$564
- Insurance – S$2,000
- Servicing & repairs – S$2,000
- Petrol – S$2,880
- Parking – S$5,280 (includes HDB season parking, office season parking, and parking at malls and other locations)
- Electronic road pricing (ERP) – S$2,112
4. Should you get a used car instead?
You can save a significant amount of money by opting for a used car. However, arriving at a fair price for a car that is several years old is not easy.
Also, you should remember to test drive the car that you intend to buy. Not only that, you shouldn’t just drive a few hundred meters down the road. Instead, take the car for a long drive so that you can get an idea about how it handles in different conditions. Are you comfortable driving it in heavy traffic? Does it vibrate at high speeds? In fact, it may be a better idea to have a friend or colleague who is very familiar with cars to test-drive it with you. If you invest some time and effort, it is possible to find great bargains in the used car market.
Shop around and drive a hard bargain
In your search for a car, you should never make the mistake of visiting only one dealer. Draw up a list of at least three different car models that you like. Then, enquire about the price of each car and the accessories that you want, at at least three different dealers. By doing this, you will understand the different options that you have and likely be able to negotiate better with each of the dealers. Once you have all the information that you need, you can be sure that you get the best deal possible and make your final purchase decision.
Insurance Market offers a wide range of general insurance products (such as Travel Insurance, Maid Insurance, Pet Insurance, and more) online and life insurance through personal advice from our qualified brokers. Please contact us at suppo[email protected] or +65 69081811 if you have any questions.