4 Insights For Potential Car Buyers In Singapore

On hindsight, the previous article on car costs was more click-bait than anything.

Really, this article’s the real distillation from a few weeks of reading up. Hopefully, the content provides some real and unique insights to people who are pondering over the decision of buying a new car in Singapore. And yes, I won’t be blabbering about cars again until I pull the trigger, if I ever do. =p

And on a side note, argh, if only ERSG wrote this useful article on owning a car frugally way before I spent so many hours camping in the My Car Forum threads.

1. Know Your Why

For most people who purchase cars eventually, it can be considered a need. 

Perhaps you are in the sales line or something similar. The convenience of having your own transport enables you to earn a higher income or do your job better. Or you need to make multiple stops to send your children or elderly parents and then pick them up. Cabs without a doubt could be more costly then. I would also consider the elimination of peak hour public transportation woes or inaccessible work places (like Tuas) under this category too.

Alternatively, it’s more of a want, like our situation. It’s not necessary and might even border on being frivolous. Compared to the first group, a car would only improve the quality of life marginally.

Theoretically, for this group of people, they should not break a sweat with regards to dumping $150k to $200k on a car over ten years of usage. This amount could be a small portion of their assets or less than a year of household income. Basically, more than enough disposable income/assets to spend on a car.

The third reason, also the most important reason, is the ego or “hole-in-the-heart” syndrome. 

I am not surprised that people buy car for their “badges”, especially the continental types. But what I found incredulous was how much people care about their car models not being tagged as “Taxis” or “Private Hire Vehicles”.

Personally, I see it the other way round. If they are used as taxis or PHVs, that’s a signal that these cars are reliable.

The ego also helps explain why there is almost always a spike in car prices just before the turn of the year. For some people, it’s worth a few thousand bucks to be able to drive a new car to your relatives’ place during CNY and receive envious looks. Nothing strokes the ego better.

I am not immune to this too. In my Secondary school, most of my classmates’ parents owned cars whereas my family could not afford one. This could be a festering hole-in-my-heart. Deep down, there’s a part of me that still clings on to this narrative:

“15HWW, most of your peers in school are already upgrading to continental models and yet, you can’t even afford a basic car. How far you have fallen…” – Evil 15HWW

Perhaps naively, I believe that I could shatter the above with a purchase of a car?

2. The Fixation on COE

People often forget that COE prices is actually a small component of car costs. 

Imagine the COE price dropping by $12k during the next COE bidding. Many people, including you, might just rush down to the showrooms. However, if you are buying a car with the intention to use it for the full 10 years, this only translates to $100 savings every month.

Framed in this way, that’s not a lot of savings, right?

Seriously, a drop in COE prices should not influence your buy/not buy decision so greatly.

If one could wait 6 months or even a year, that would definitely negate any potential rise in COE prices, so the “locking-in” car price for 10 years when COE is low strategy does not seem so sound.

A low COE price does have significant value in protecting the resale value of your car. For eg, owners of 3-5 year old cars (who bought at peak COE prices) will have a hard time selling their cars without incurring huge losses right now.

3. Is Now A Great Time To Buy New Cars?

I wanted someone to give me a reassuring answer to this question a month ago. But that someone did not appear, and never will. It’s really a little bit like asking if this is the best time to buy Stock X?

But still, I will take a shot and my answer is it really depends on your timeline and the type of car you are looking at. 

If you’re looking at it from the “years” point of view, now is definitely a better time than 3-5 years ago. Because of the downward COE trend, most car models are at least $30k cheaper as compared to then.

But if your timeline is in terms of “months” or even “weeks”, it’s not so straightforward. In fact, I would even argue that the $25k Cat A COE a month ago is not good news for a potential buyer. 

Why? Because that kind of sudden plunge would bring in people like me who were previously not interested in getting a car at all. Simple demand and supply. The time to buy a car is when no one else is really interested. A slow gradual decline is better for buyers.

And even though COE prices dropped by $9k a month back, most dealers only adjusted the car prices downward by $3k or $4k. However, the COE headline worked and many took the bait. It appears that the huge demand on that particular weekend will help to support a weak car market for the next month or so.

But why is the market becoming weaker? A big reason is the new and more stringent VES system that applies from July 1 this year, which penalises cars which are more polluting. Because of higher taxes or lower rebates, even with the lower COE prices right now, there are some car models selling at a higher effective price as compared to 3 months ago.

Brands like Toyota and Nissan were especially affected by the new VES. Many of their previously popular models were slapped with the VES surcharges and they became uncompetitive in the current market.

So a model like the Hyundai Elantra which has no VES tax can be priced at about the same range as half a year ago even though COE has fallen by $10k. The distributor will benefit since they can make bigger margins in the meantime before their competitors re-calibrate the engines of their cars.

Effectively, the VES system has created different tiers of COE prices for different cars and no rational buyer of bread-and-butter cars will pick one that incurs a VES surcharge.

It will be interesting to wait and see how the “suffering” distributors retaliate in the next few months and see if this translates to lower car prices overall in the market.

There are of course, some good deals in the current market, especially for people looking at bigger and slightly more expensive cars than the entry-level. Models like the Mazda 6 and Subaru Forester 2.0L are really compelling right now.

4. Relationship Between Retirement And Cars

Cars are really expensive in Singapore. Something very basic could cost between $1,200 to $1,500 a month. Continental models will set you back by about $2,000 to $3,500 and luxury cars probably cost >$5,000 a month to upkeep.

In comparison, a domestic helper is so much cheaper. Even a child enrolled in atas pre-schools or loaded with tuition should not make a parent spend more than $5,000 a month.

So for a median family household, a car could be the difference between a basic retirement vs a comfortable retirement.

Of course, as a financial blogger, in this case, I will believe that a car is not a worthwhile trade-off for that family. But I can understand if a family thinks otherwise and believe the utility of having a car over 10 years > a comfortable retirement. Who’s to judge?

One thing for certain though. Ironically, it’s best to own a car in Singapore when one has retired or reached financial independence. With more time, one can travel to inaccessible gems like Sungei Buloh, Turf City or Pasir Ris Farmway more frequently. The car is likely to achieve more utility then, instead of just being parked at the office for 10 hours a day.