Purchasing of 2nd Hand Car!! Worth it or not?

bezfrez SG

Hi everyone,

just wanna find out from all the drivers out there whether buying a second hand car is worth it or not.... i'm a relatively new driver so do reply if anyone have some good suggestions!! Thanx!

kmkm SG

You may be able to find a good buy in the resale car market given the high turnover of new cars in recent years.

If you intend to drive for a short 2-3yrs, resale is more worthwhile provided you buy one that is no older than 3yrs old. Upon resale or scrap 2-3yrs later, you will likely get back more rebate value compared to a new car.

If you want to drive for 5yrs or more, go for new car since COE is at all time lows nowadays which makes depreciation much lower in the longer term on average.

bezfrez SG

Thanx for the reply… i was wondering whether a new driver shd be a second hand car to sort of practice our driving skills before getting a brand new car. i was also thinking whether is it cheaper to buy a second hand car?? btw.. i intend to use it for only abt 2-3 yrs..

canaan SG

Originally posted by kmkm:

If you intend to drive for a short 2-3yrs, resale is more worthwhile provided you buy one that is no older than 3yrs old. Upon resale or scrap 2-3yrs later, you will likely get back more rebate value compared to a new car.

Also a newbie here...

What is the reason why it is recommended to buy a resale car that is more than 3 years old? If someone is offering to sell me his car that is 2 years old, compared to looking for one that that is >3 years old?

Well, another question that I've always been wondering...is it more worth it to buy a 2 year old car (when COE were much much higher), or consider a similar model that is brand new?

Thanks in advance!

photo_seeker SG

I believe the previous post was saying getting one that's isnt more than 3 years old.

zaxis SG

more than 3& half year the car deprecision rate is different formula.

if you are new car owner that mean you do not have much discount when you purchase the car insurance,

bigger car purchase amount = more amount for insurance too.

lay man term you do not have discount. with 5 year owner ship of car or more can enjoy 50% for insurance perium provide you do not has any claim, NCD

my view is go small then go big in later stage

Neutral

kmkm SG

canaan, yes, if you intend to drive for a short 2-3yrs, resale is more worthwhile provided you buy one that is NO older than 3yrs old.

I agree with zaxis... go small then go big in later stage. I drove 3 resale cars before starting to buy new, but in the past COE was at different level.

canaan SG

Thanks for all the clarification, and for pointing the oversight on my part.

One more thing, possible to share the different formula mentioned by zaxis below?

Originally posted by zaxis:

more than 3& half year the car deprecision rate is different formula.
if you are new car owner that mean you do not have much discount when you purchase the car insurance,

bigger car purchase amount = more amount for insurance too.

lay man term you do not have discount. with 5 year owner ship of car or more can enjoy 50% for insurance perium provide you do not has any claim, NCD

my view is go small then go big in later stage

Neutral
[/b]

tedyeo SG

For a new driver who intends to drive only for 2-3 years, buying a 2nd hand car has 2 advantages:
a) Being a relatively young driver, try out with a used car to perfect your driving skill. If touchwood, there are some driving mistakes committed, you won't feel so "heartache". Secondly, you can find out what you like about your preferred car (performance or comfort or reliability or fuel efficient?). This is important so that you put your money on the right type of car you want. Does not make sense to throw in say $70k on a new car to find out that it is too slow (but cosy and comfortable) to your liking.
b) as what kmkm pointed out, a brand new car being sold after 2 - 3 years will suffer a lot of loss. Get the previous owner to absorb the new car loss and take over from him at a good price for the 2nd hand car. You won't lugi so much when the car is sold when it is about 4-5 year old.

kmkm SG

canaan, let me try to answer your question on depreciation formula.

We need to be clear about what depreciation and rebate value means. Depreciation is a calculation to assess the AVERAGE rate of value loss over a specific time. FORMULA is the SAME regardless of time.

Rebate value is the minimum amount to get back upon scraping the car (total of COE and PARF rebates) and this FORMULA WILL VARY AFTER 5 YEARS due to formula changes in the PARF rebate component (check it out at LTA website).

e.g. New car price at 50k, OMV = 15k, COE = 10k

1 yr later, Rebate value = 75% x 110% x.15k (PARF rebate) + 9k (COE rebate) = 21.4k
Value lost = 50k 21.4k = 28.6k (57% of car price)
Depreciation of car over past 1yr = 28.6k per year

At year 3, Rebate value = 75% x 110% x.15k (PARF rebate) + 7k (COE rebate) = 19.4k
Value lost = 50k 19.4k = 30.6k (61% of car price)
Depreciation over past 3yrs = 30.6k /3 = 10.2k per year

At year 5, Rebate value = 75% x 110% x.15k (PARF rebate) + 5k (COE rebate) = 17.4k
Value lost = 50k 17.4k = 32.6k (65% of car price)
Depreciation over past 5yrs = 32.6k /5 = 5.7k per year

At year 7, Rebate value = 65% x 110% x.15k (PARF rebate) + 3k (COE rebate) = 13.7k
(Notice the PARF value rebate formula starts to change after Year 5)
Value lost = 50k 13.7k = 36.3k (73% of car price)
Depreciation over past 7yrs = 36.3k /7 = 5.2k per year

At year 9, Rebate value = 55% x 110% x.15k (PARF rebate) + 1k (COE rebate) = 10.1k
Value lost = 50k 10.1k = 39.9k (80% of car price)
Depreciation over past 9yrs = 39.9k /9 = 4.4k per year

1) Notice how depreciation of a new car is very much higher during the initial 3-4 yrs while its rebate value falls at constant rate?

2) Notice how the rebate value starts to fall faster after 5 yrs even though depreciation is getting lower towards the end of its lifespan?

Shocked

binZ SG

Shocked

photo_seeker SG

Hardworking statement. LOLS

canaan SG

Thanks so much kmkm! Now I get the complete picture! Appreciated your taking time to clarify!

Unidentified SG

i rather get a new ones

joeacid SG

wahh thanks alot kmkm~ i only know abit, didn’t know so much~ thanks alot hehe

kmkm SG

Most welcome. Buying car is definitely a value losing venture, so the key is how to minimize loss, which is = what you pay what you get back.

So knowing how long you intend to keep the car is very important. Compare different scenarios to make a better choice. Dont just buy because everyone around you tells you so or its the in thing.

Of course, this is an evaluation purely from a financial perspective. Guess it may not be of much use if your spouse insists on buying what he or she likes, haha. Good luck! Wink

bezfrez SG

Thanks for sharing guys!! so.. if i’m intending to drive for a term of abt 2-3yrs.. it is definitely better to get a 2nd hand car instead of a new one even though the price of brand new cars are cheap… m i right to judge it this way?