Top 3 Mistakes To Avoid When Purchasing a Second-Hand Car

With horror stories about shady sales practices and problematic cars plaguing the used-car industry in Singapore, how do you know if you’re getting the best value for money on a second-hand car? Below, find the mistakes you need to avoid when purchasing a used car.

ValueChampion Editorial Team

by ValueChampion Editorial Team on May 30, 2024

driving a yellow car

Considering the cost of buying a new car in Singapore starts at S$120,000 —that’s ridiculously expensive. Regardless, there’s no denying the convenience of owning a vehicle, especially if you have young children or elderly parents to ferry around.

Enter, second-hand cars, which cost a fraction compared to a brand-new vehicle. Despite the cost savings associated with used cars, it’s no secret that the used car industry (dealerships, especially) has gained somewhat of a notorious reputation for being a financial minefield. So how do you ensure that you’re getting the most bang for your buck on a second-hand car?

We discuss three mistakes you should avoid if you are in the market for a used car.

saleswomen infront of a car in carpark
Source: Pexels

Mistake 1: Not Comparing All the Car Loans Available

Despite the lower price point, forking out roughly S$50,000 upfront for a used, compact car is still extremely difficult for an average Singaporean consumer. This is where vehicle financing comes into the picture.

When taking out a car loan, you have two options: work with a bank or sign a loan through the auto dealer. Whenever possible, you should avoid getting your financing from a dealership; there are a few who charge higher interest rates than banks as a means to generate additional revenue!

Car Loan Interest RateMonthly Payment for a S$50,000, 5-year loanTotal Loan Paid
DBS Green Car Loan2.48%S$936.67S$56,200.20
Hong Leong Finance Used Car Loan3.08%S$961.67S$57,700.20
OCBC Car Loan2.48%S$936.67 S$56,200.20
*Interest rates obtained from DBS, Hong Leong Finance and OCBC on 30 May 2024. Subject to changes

Ultimately, do your due diligence and compare all the different car loans available. Tiny as the differences in interest rates may seem, the interest paid over the life of the loan can compound to significant sums. For instance, getting a 5-year, used car loan of S$50,000 with an interest rate of 2.48% p.a—compared to 3.08% p.a.—can help you save S$1,500 throughout your loan tenor.

Mistake 2: Failing To Consider if the Car Is Eligible for a PARF or COE Rebate

Don’t just purchase the lowest-priced second-hand car. When you’re choosing between cars, consider which rebate – PARF or COE – the vehicle is eligible for when you de-register it. These two rebates are sums of money the Land Transport Authority gives you for taking your car off the road. In other words, you can think of them as a way to offset your initial cost outlay.

Volkswagen Touran 1.4A TSI TrendlineHonda Civic 1.6A VTi
Registration Date30 September 201612 February 2008
COE Left2 years 3 months3 years 8 months
Purchase PriceS$48,000S$44,000
Open Market Value (OMV)S$22,789S$19,302
Additional Registration Fee (ARF)S$18,905$21,233
Registration Value at 1 Years Left on COES$15,227S$4,201
Cost After Rebate OffsetS$31,773S$39,799
*Information obtained from SG Car Mart, accurate as of 30 May 2024. Subject to changes

If you choose a vehicle that’s less than ten years old, you’ll be entitled to the PARF rebate, which is a percentage of the Open Market Value. If you choose a car that’s past the 10-year mark, however, you’ll only get the unused portion of your COE back.

That means after accounting for the respective rebates, a used 16-year-old car (e.g. the Honda Civic) may not necessarily wind up cheaper than an 7-year-old car (e.g. the Volkswagen).

Related: Your Essential Guide to Buying a Used Car in Singapore

white car
Source: Unsplash

Mistake 3: Believing That the Car Is ‘as Good as New’, as per Advertised

The Consumers Association of Singapore received 1,061 and 1,213 complaints against the motor industry in 2021 and 2022 respectively, some of the highest numbers we have seen in year. Many used vehicles appear fine at first glance but look closer, and you may find that they’re not exactly ‘as good as new’ – as per advertised.

To protect yourself, you should check all the parts of the car carefully. More importantly, go for a test drive in the vehicle before you purchase it; this will give you crucial information on how the car handles (i.e. the condition of its suspension, steering, and gearbox). If possible, you should hire a reputable mechanic to inspect the car, so you can be 100% sure of its condition, age, and mileage before you buy it. This will help you save on long-term repair and maintenance costs.

Related: Is Paying More on Car Insurance to Choose Your Own Workshop Worth It?

Buying a Second-Hand Car Is Still a Smart Financial Choice

If you do your due diligence and avoid all the mistakes listed above, you’ll find that opting for a used car is still a smart financial choice.

Of course, don’t forget to get your own car insurance (you cannot buy over the seller’s insurance). Under the Motor Vehicles (Third-Party Risks & Compensation) Act, you can be fined up to $1,000, jailed up to 3 months, or both if you drive a vehicle on a public road in Singapore without car insurance!

Learn more about the different car insurance plans out there.

Find The Best Car Insurance PlansFind Out More

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Cover image source: Pexels

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