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As a working adult in busy Singapore, owning a car can be very useful, and some of our jobs may even make it a requirement. But a brand-new car is extremely expensive.
A second-hand car is the compromise that most rivers decide to go for. You may have some doubts about second hand buying, especially if you've never done it before. Worry not, the process can be simple if you follow this guide! Here's what you need to do when buying a used car:
1. Work out Your Budget
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For a big transaction like this, you'll definitely need to have a very clear budget in mind. The payment for a car is not a one-time affair—you'll likely have to budget for months or even years of instalments and repayments. Keep these things in mind when planning your budget: loan, deposit and maintenance
The price of the car is split into two parts: downpayment and monthly instalments. The downpayment is the sum you pay upfront to the seller, and the remainder of the price is paid back in instalments, normally covered by a bank loan. You can borrow up to 70% of the car's price. The more you borrow, the lower your downpayment can be, but it also means the more interest rate you will end up paying in total. If you have the money, it's a good idea to pay more upfront, so you minimize your loan and your monthly instalment. This saves you money in the long run. However, ultimately it's still most likely that you'll have to take out a loan to manage the total payment. You may want to get advice from your bank on how big a loan you can manage, depending on your income and expenses. Remember that whatever you borrow will have to be paid off over the coming months, which means an added strain on expenses that will stick with you for quite a while, so be prepared for that. Basically, you have two big considerations when budgeting for the car price: how much are you willing to part with at one go for downpayment, and how much extra expense are you willing to take per month for the instalments?
Finally, the price of the car is not the only thing you have to budget for. Even after you've bought the car, there will be maintenance costs to look out for. Depending on the condition of the car you've bought, there may be some servicing and touch-ups to do. There'll also be added expenses like petrol, insurance and road tax that you have to be prepared for, and these are costs over time that come with owning a car—you'll have to pay them for as long as you're driving. Budgeting for a car will require planning not just for the actual payment, but possibly for years after. You should only purchase if you're sure your income can handle the extra expenditure.
2. Source for Cars
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There are generally two ways you can get a used-car: through used-car dealers or buying from the owners themselves (direct sellers). Both have their pros and cons, and it's up to you to assess which is better for you. Used-car dealers are likely to charge higher than direct sellers, as they will repair and do up the used cars to showroom condition before selling. Used cars purchased under dealers usually come with a six to 12 month warranty period. On top of that, buyers are protected by Lemon Law which enables them to require the dealer to repair, replace, reduce the price of the goods or perform a refund if the purchased cars are found to be defective.
However, if your main concern is price, purchasing through direct sellers will get you prices that are much cheaper than what dealers offer. Plus, direct sellers have the advantage of knowing their car very well, so you can get information about its accident history and condition directly from them.
One way to enjoy the low prices of direct buying, while still having the convenience and assurance of a professional dealer, is to go through a consignment agent! A consignment agent is a third party who knows the car industry and can offer you package deals that are normally offered by dealers. They will link you up to insurance and loan companies and also help you handle all the tedious paperwork. At the same time, they can connect you to direct sellers who have listed cars with them at lower prices that you won't find at any dealer. On top of all this, a consignment agent can advise you on the paperwork and procedures to ensure the whole process is a breeze!
3. Choose Your Car
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Once you know where you want to look, it's time to think about the kind of car you want to find. You probably have some idea of what kind of speed, size and colour you're looking for. Here are some additional things to consider that you might not have thought of!
Asian or continental? Singaporeans looking for cars usually choose between Japanese/Korean models or continental (European) models. Usually, continental cars are more expensive, both in terms of price and maintenance, because they are taxed higher for import, and the parts are harder to obtain in Singapore. However, they are more luxurious, more attractive-looking and are said to handle better on the road. Japanese/Korean cars are also a good choice—they are cheaper but still reliable, and maintenance is easier because parts are easily available. Asian cars also tend to have lower road tax, because their engine capacities are normally lower. In the end, the choice is up to you—if you have a bit more cash to spare and want the premium driving experience, a continental car would be a good choice. But, if you prefer a more budget-friendly, functional car to get around, a Japanese/Korean car is for you.
PARF or COE? A COE car is a car that has had its COE renewed, meaning that it has already passed the first 10 years of use. A PARF car is a car still on its first COE, so it has not been used for more than 10 years. PARF cars can be more expensive because they are newer, but if you de-register the car before its COE is up, you will be entitled to the "Preferential Additional Registration Fee" rebate sum on top of the normal COE rebate. Plus, note that a COE car has to pay an additional road tax that can go up to an extra 50% if your car is over 14 years old! Buying a PARF car might be more expensive at first, but it may save you more money in the long run, especially if you intend to de-register early.
When you've decided the kind of car you want, be sure to shop around the market and take a good look at the options before choosing. It's important to make sure you know what's available so there'll be no regrets.
4. Strike a Bargain
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Finally finding the perfect car can be exciting, especially after a long search, but don't hand over your money just yet! Prices are normally negotiable when it comes to used cars, so sellers' initial offers are probably higher than the actual price they're willing to sell for. Negotiation may be an intimidating idea if you're not used to it, or if you don't know what to expect. Here are some tips for striking a bargain that's good for both you and the seller.
Do market research. Looking around the market will tell you what the average price is and whether your seller's offer is unreasonable. After checking out the general prices and knowing what to expect, you won't be as easily pressured. Make it clear that you've done your background research and stay firm during negotiations so you won't fall prey to any tricks. Note that it may take several offers and counter-offers to come to a conclusion that's both you and the seller can agree on—be patient during the bargaining process.
Negotiate for a package deal. In addition to price bargaining, you can also try to get a package deal! Many dealers offer packages where you get a discount for applying for their in-house financing or insurance along with buying their car. This could be a good way to save money in these other areas, plus get everything wrapped up quickly and conveniently in one go. If you're dealing with direct buyers, you can get these packages by going through consignment agents, who also liaise with banks and insurance companies to bring you these discounts!
Do a trade-in. Instead of paying the full cost of the car you want and selling/scrapping your own, trade your car for a new one! If your car is worth less than the one you're trading for, you'll probably have to pay the remainder, but the price will still be greatly reduced. And if you're thinking of downgrading to a newer but less valuable car, you might even be able to get it by trading alone, with no additional cost! If you don't want to go through the extra hassle of selling your current car, or aren't confident of getting a good price for it, this might be a good option. Once again, this is mostly something offered by dealers, but for direct buyers, this can be possible with the help of a consignment agent.
5. Get Your Loan and Insurance
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Now that you've found your car, it's time to prepare for the transaction! Before getting to the actual sale, you need a loan, and adequate insurance coverage. A loan can be applied for from your own personal bank. Insurance, however, you'll need to source for from a private insurance firm. Much like with the car itself, you should go around various insurance providers to get quotes, as prices vary from agency to agency. Looking at all your options is always a good way to find the lowest price, and to make sure that you won't regret your choice.
6. Complete the Transaction
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For the actual transaction, you'll sign a sales agreement. Your deposit should be made after the sales agreement is signed, and this will seal the transaction. Backing out at this point without a good reason is likely to lose you your deposit, so consider carefully before you get to this stage! Be sure to obtain some kind of receipt from the seller after this as proof of payment.
After the transaction, there's the transference of ownership, which involves both you and the seller going to the LTA to fill in the appropriate forms. Bring along your identification, road tax registration, and proof of insurance. Once that's done, then the car belongs to you!
The paperwork may sound very tedious and complicated, but it needs to be done right. If the agreements aren't handled properly, you will end up with complications down the road if you encounter fines or defects in the car. In the worst case scenario, if the paperwork has been incorrectly done, you might find that the ownership has not transferred to you even after you've been paying for months.
One way to keep yourself safe is to get a third party with experience in these matters to help you handle the paperwork. If you're buying from a dealership, the dealers would have done this paperwork many times before and be able to help you settle. If you're transacting with a private seller, get the help of a consignment agent! Our agents have handled hundreds of transactions, and they'll be able to provide you with the assistance you need so that paperwork isn't a hassle!
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