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As the age of your car is coming to a decade, you'll realise that you've reached a stage whereby you need to decide on which route to take on next.
You can either keep your beloved car and renew its COE so that you'll still get to drive it for the next five to 10 years, or abandon your 10-year old ride and buy another car to create new exciting memories.
In each of these ways, there may be some pros and cons, considering factors such as cash rebates, depreciation and cost. Let's have a look at some of them to help you take on the right choice of which is the most worth it for you.
1. Forfeiting of Cash Rebates
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Firstly, you should be aware that there are 2 cash rebates you are eligible for when you sell your car. The Prevailing Additional Registration Fee (PARF) and Certificate of Entitlement (COE) rebates depreciate along with the age of your car. These cash rebates are returned to the car owner, when the car is de-registered, and can range from $6,000 to more than $20,000!
If you are buying another car, the good news is that you can use these rebates to offset its cost. Assuming that you have cash rebates of $20,000 for your current car, and your new car is $100,000, your "actual" cost is $80,000. If you factor in the rebates for the new car as well, the cost of your car becomes even lower.
However, if you choose to renew your car's COE, your cash rebates will be forfeited. When they are forfeited, you should factor these rebates as part of the cost for the COE renewal of your car. So, you have to remember to add these forfeited rebates, on top of the PQP you will be paying to renew COE, in order to get the "actual" cost.
Still unsure of what exactly is PARF or COE rebates? Click here for a better understanding as it can be very important for all you car owners out there.
2. Upfront Cost
The second thing to consider prior to your car's 10th anniversary is the upfront cost you have to pay from your pockets. Unlike buying a new car, when you renew COE, you are required to pay for the Prevailing Quota Premium (PQP), which is the moving average of the COE results for the past 3 months. The main difference between COE and PQP, is that PQP prices are less volatile than the COE price. This means that you wouldn't have to worry about PQP suddenly spiking up when you are planning to renew COE or of it plunging suddenly after you renewed COE.
One of the key advantages of renewing COE, is that you have a choice between renewing for five or 10 years. If you are renewing for five years, you only have to pay for half the PQP! So if the PQP is $40,000, you only fork out $20,000, when you renew for five years.
Want to know the latest PQP? Click here to find out!
When you buy another car that is new or less than 10 year old, you can only bid for a new 10-year COE or to pay for the existing value of the car. Unless you are buying a used car with less than two to three years left, you normally have to fork out much more cash upfront.
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The third factor to consider is the maintenance part. We all know a 10-year-old car will have its fair share of wear and tear over the years. Although renewing the COE might seem to be relatively cheaper than buying a car, you would still have to bear in mind the regular servicing and a costlier maintenance that you will need to go through for the car to be in good shape in the next 5 to 10 years. Some examples are regular change of engine oil, expensive parts to replace and also more regular visits to the workshop. The downside is that you're not equipped with any warranty for this, but the upside is that if the car is in a relatively good condition, you wouldn't have to worry about these extra costs every now and then!
In contrast, maintenance cost is less of a concern if you purchase another car, especially if it comes with warranty, or is protected under the lemon law. This is because you will be able to claim the repair cost if you find any defects or when there are issues with your car. Do note that there are terms and conditions that comes with the warranties, so remember to look through it thoroughly to know which parts are covered under the warranty, to ensure there are no issues with your future claims.
This is a reminder that purchasing a car, or renewing its COE is not just a one-time payment thing. Factors such as inspections, servicing and maintenance should be considered when making a decision.
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Fourthly, depreciation plays a part in your decision-making as well. Depreciation of a car is calculated by the car's value, minus the minimum PARF, and divided by the months left. Confusing right?
Depreciation, which is how much the value of your car decreases each year, is considered by many as a key point of comparison between different cars. As a rule of thumb, the lower the depreciation for your car, the more value for money your car is.
When you buy a car, the depreciation is usually higher. This is because there are more costs involved, namely the COE, PARF, body value of the car, and even the profit margins of the dealer where you purchase from. Do note that some cars that are less than two years old may seem cheap, with a low upfront cost, but their depreciation could be high, as compared to similar models with a further COE expiry date.
Here's a piece of good news though, if you are looking for vehicles with low depreciation. Cars with renewed COE generally has some of the lowest depreciation in town! This is because when you renew COE, your car is considered to be fully paid for, thus, only the PQP and forfeited PARF will be depreciating for the next five or 10 years.
Another quick tip! Renewing your car's COE for 10 years usually results in a lower depreciation, compared to renewing for five years, as you are able to depreciate the cost for twice the amount of time.
5. Loan Interests
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In Singapore today, you can get a loan, both for COE renewal and buying a car, and the loan repayment period is capped at five to seven years. Very enticing offer isn't it? But wait. Before you decide to get a loan, let's have a look at some things to consider.
The advantage of taking a loan is that you don't have to fork out a lump sum of money. When you buy a car, you can get bank loans for up 60% to 70% of the car price which is payable monthly for up to seven years. But the disadvantage will be that you need to pay an interest to the bank. This interest amount will be an additional cost of your car.
One key advantage, when you renew COE compared to buying a car, is that you can get a 100% loan. Because you can get a full loan, you only need to pay as low as $1,000 upfront, to renew your COE for 10 years, to be repaid in seven years as well. Similar to buy a car though, you will be subjected to interest rates, which adds to the cost of your COE renewal.
Before you make any decision, you should always do these five things first:
1. Find out what are the cash rebates you are eligible for.
2. Find out what is the latest PQP prices.
3. Go for a thorough inspection of your car with a trusted mechanic.
4. Calculate the depreciation of your car.
5. Finally, if you are getting a loan, compare the interest rates.
With these info, you will be able to make a fair comparison with any cars that you have shortlisted to purchase.
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Read more: Renew COE: Everything You Need to Know
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