Deciding Between a New or Used Car

Deciding Between a New or Used Car

If you’ve been following my YouTube channel, you’ll know that I bought my car brand new just about a year ago. I love it. It’s comfortable, practical, reliable and cheap to maintain, it sips fuel, and has been nothing but great at what it’s supposed to do. 

However, with the way resale prices are going lately, even cars that are two to three years old are fetching close to, if not more than what they originally cost, and one year old cars like mine are no exception. This is a rather interesting situation we have right now that is a result of a number of factors that I won’t go into today. But I’ll tell you that it has got me browsing through the used car market as I’m curious to see if there’s anything out there that can be had for similar money which could be a worthy upgrade. 

So to help with my decision making(and because it’s a slow day), I’m going to pen down my thoughts about new versus used cars which you could also take as a sharing session if you were in a similar situation.

Pros (New Car)

1. It’s new

Yes it’s new, clean and shiny. There’s not a lot needing to explain here. Zero mileage and zero wear, big plus, what’s not to like.

2. Warranty (Factory or dealer)

Warranties are great, they provide a level of assurance that your new car is covered if anything stops working through no fault of your own. Factory warranties are getting longer and longer these days too, many being three to five years while some even offer up to 10 years on certain parts. Buying from a parallel importer may not entitle you to a factory warranty but it does get you an in-house limited warranty which although shorter than the factory ones and usually through their own partner workshops, is still better than not having one.

3. You decide the service history

Since you are in fact the first owner, there’s no service history to worry about. This is especially good for those of you who are very particular about your car’s servicing interval as you will be able to decide how you want it to be. Those of you who aren’t so disciplined on servicing regularly will also benefit from having a car that is mint to begin with, not to mention the complimentary servicing packages that usually come with the purchase of a new car.

4. Blank slate

This may not be a big thing to everyone, but for those who love to customise their cars, a brand new one is practically a blank canvas for them to express themselves. Used cars have typically already been customised or been through some degree of wear by the previous owner which may matter to some people and doing it up to a condition that suits you could be a costly affair. I’m probably just trying to find more reasons to keep my current car.

Cons (New Car)

1. Costs more

While a car’s yearly depreciation in this country doesn’t usually vary that much from an equivalent used model, having to bear the full cost when bought brand new along with a full 10 years COE is a significantly higher quantum to commit to compared to a used car with only a portion of it’s COE remaining and an already depreciated body value. If you’re unfamiliar with our COE system, I’ve got a simple explanation of it right here.

2. You take the brunt of depreciation (not much in SG actually, will discuss later)

As the first owner, it’s typical to take the biggest hit of a car’s depreciation so that’s another downside of buying new. There is however an argument to be made that because of our tax and COE system, this initial depreciation isn’t really that significant after all. We’ll discuss this a bit later on.

Pros (Used Car)

1. Cheaper

All things being equal, you’ve already dodged the first owner depreciation hit by buying used. So unless you’re looking at a particularly rare or desirable model that has somehow bucked the trend and actually appreciated, there’s not much chance of it costing more than when it was brand new.

2. Can be had for significantly lower upfront

With COE being such a huge component of our car pricing here, having to pay for only the remaining COE portion on top of some body value can significantly lower the cost of car ownership here. The duration of that ownership however is another story but it does help to lower the barrier quite significantly.

Cons (Used Car)

1. Parts might be worn

Unless you’re lucky enough to find a car with very few miles on it, there’s always going to be wear and tear somewhere despite what the previous owner claimed to have replaced. Without any warranty to fall back on, this tends to be the biggest gamble you undertake when going used.

2. Service history may be questionable

Not everyone keeps a proper service record so if you happen to come across one that doesn’t, it’s hard to know what you can trust.

3. Some may be less than properly modified

I always have reservations when a listing shows a lot of modifications done to a car. Yes it did cost money to do but in my experience, more often than not something has been compromised in order to achieve a certain level of performance elsewhere. Some of these mods also have a tendency to create certain issues which tends to lead to band aid fix after band aid fix. I much prefer a car that is stock so that if I do decide to do any mods to it and encounter a problem, it’ll be much easier to trace and rectify than if I were to go hunting for something that I had no idea even existed on the car.

4. Cars beyond 10 years have lost their PARF value

Just to put things into context for those of you who aren’t familiar with the PARF rebate system, basically in Singapore if you scrap your car within the first 10 years of its COE, you are entitled to get back anywhere from 50% to 100% of it’s open market value or OMV(which is determined by the LTA) depending on which year you decide to scrap it. Cars older than 10 years can have their COE renewed but you will no longer be entitled to the PARF rebate should you do so.

So one thing to consider if you’re looking at a car over 10 years old is that you can no longer claim it’s PARF value back if you scrap it. What this means is that should you use it till the end of its COE, you’re basically running its value down to zero, or at least to its scrap value which is also pretty close to that. 

Yes it is true that you would typically pay less for a car if it has already lost it’s PARF value, but there’s something about having that value locked way that enables you to roll on to the next car more easily. Unless of course you actually have the discipline to save what you would have on buying a non-PARF car, in which case you have my utmost respect.

Other considerations and comparisons

Actual cost of ownership

One key thing to consider when buying a car is not just how much it costs to buy it, but also how much it costs to own and run it. A performance car could possibly be had for a relatively affordable price especially if it doesn’t have a lot of COE remaining, but the cost to maintain and run it could easily exceed an unsuspecting buyer’s expectations.

Another thing to note is that the road tax system here can get really expensive for cars with larger engines, not to mention that it also increases as the car goes beyond 10 years old. What this means is that your annual cost of ownership could easily go up significantly if you decide to upgrade despite the cost and annual depreciation appearing deceivingly similar to your existing vehicle. 

Is the driving experience of a higher tier model worth it

Now this one is quite subjective, different people want different things in a car. Some people want driving performance while others want luxurious comfort. Some may just want a simple and low cost ride for themselves while some want as much space as possible for their family and work. Ultimately this one comes down to what you value the most and there is no right or wrong, but rather only need or want.

Fuel efficiency of old vs new

Newer cars more often than not are more fuel efficient due to technological improvements. Of course there are exceptions but that is a whole other topic itself. But this is one of the main factors in the running cost of a car and is something that should be considered properly especially if you drive a lot.

How much COE duration is worth sacrificing

One way to upgrade is to purchase a higher annual depreciation car with a lot less COE duration remaining in order to match the cost of your outgoing car. The problem with doing that is you’ll end up having to renew the COE or replace the car altogether much sooner and depending on the duration of your remaining loan, this can become quite a costly affair. The COE these days is also at the highest it’s been in years and showing no signs of easing, hence the assurance of having a longer COE is definitely one thing to seriously think about. At the end of the day it’s pretty much a gamble and just about whether that upgrade is worth enough to you to sacrifice some length of your remaining COE.

Final thoughts

Having thought through all this, it’s really not an easy decision if you were to look at it from a logical point of view. Both sides do seem pretty balanced that there really isn’t much advantage going either way especially because of how our COE and road tax system works here. I’d say the best way to decide is to determine exactly which of the factors above matter the most to you and whether they matter enough to be worth the trade offs. 

So if you really want a fun and higher performance car and are willing to accept the higher running costs and shorter remaining COE, then that’s what’ll likely tip you over. If you value a lower running cost and simply only care about transport and reliability, then that’s your answer right there too. 

In my case, I guess while I wouldn’t mind having something a bit more interesting to drive, right now there’s really nothing much on the market within a reasonable price range that excites me enough to give up what I currently have. I suppose I am still open to the idea of upgrading, but it’d have to stir my emotions strongly enough to make me give up the low running cost and substantial remaining COE of my current car.

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