Buy New, Used or Just Renew?
You’ve reached the end of a 10 years’ COE with your current set of wheels. Between buying a new car, a used one and renewing your current—which makes better sense?
Out with the Old, in with the New
Surely everyone would want to buy a shiny new set of wheels but this is likely the least viable option for those who cannot pay a huge down payment. With COE prices still reasonably high, forking out a sum upwards of $100,000 to get a brand new car is an option very few can afford.
There is the option to pay a 30%-40% down payment and take out a loan for the remaining amount.
Assuming you want to get a Honda Vezel 1.5 X i-VTEC and enjoy a favourable interest rate of 2.78%. Be prepared to make repayments of $995.50 a month over 7 years.
$100k x 70% = $70k loan
$70k x 2.78% = $1,946
$1,946 x 7 yrs = $13,622
$70k + $13,622 = $83,622
$83,622 / 84 mths = $995.50
|Loan Amount||Interest Rate||Monthly Instalments (7 years)||Total principal and interest paid at end of 7 years|
This table is for illustration purposes only. Please contact us at +65 6444 4400 if you need assistance on loan financing.
And the cost does not even account for other costs—maintenance, insurance, and road tax—just to name a few. Car insurance are generally higher for a new car. Older vehicles would not necessarily require as much coverage, and coverage comparable to a new vehicle is often much cheaper.
Although a used car requires a lower down payment versus a new car, it will be comparably higher than COE renewal car.
Most pre-owned car dealers will have you believe that the down payment makes up the biggest chunk of your upfront cost when buying a second-hand car.
Based on MAS Car Loan regulations, if the Open Market Value (OMV) of the used car is more than $20,000, your maximum Loan-to-Value is 60-70% – meaning you’ll have to ruck up at least 30% down payment.
But what they will not tell you upfront is that on top of the down payment you have to fork out, you will have to incur the cost of full vehicle maintenance. What you are buying relies solely on the reputation of the second-hand car dealer and unless you go to a Reliable Used Car Dealer there is no guarantee that you would NOT end up buying a lemon.
On the other hand, assuming that you have been diligent in maintaining your current car over the last 10 years, you are less likely to spend on repairs for most cases.
Pay to Renew
You have the option of paying the Prevailing Quota Premium (PQP) to renew the COE of your current car. You can either pay 50% of the PQP for 5 years, or 100%, for 10 years.
Using figures from the May 2016, the Prevailing Quota Premium (PQP) is $45,578 for Category A and $46,048 for Category B.
That means if you choose to keep your car for 5 years, this could set you back $22,789 for Category A, or $23,024 for Category B.
If you choose to keep your car for 10 more years, you’ll have to pay the full PQP for Category A and Category B respectively.
Assuming you want to keep your Category A car for 5 years and your monthly income is $5,000. You need to pay $22,789, or 50% of the Prevailing Quota Premium. With the new MAS announcement, a bank would allow you to loan up to 70% (or $15,952.30) over 7 years. Which means you have to fork up 30% (or $6,836.70) in cash and pay just about $209.20 per month with an interest rate of 3% over the next 5 years.
If your only consideration is the 30%, then the renew COE option still makes the most sense. With Speed Credit, we can finance 100% of the PQP amount. Your only consideration is the loan period which can pay it back over 7 instead of 5 years previously, for a 10 years COE renewal.
If you can’t afford a huge down payment for a new car, and if you’ve put in the time and effort to maintain your beloved car, then renewing your COE is probably the best financial move for you. You don’t run the risk of buying a lemon used car and you get to keep your familiar set of wheels.
To know more about our COE Renewal Loan Rates, please contact us at +65 6444 4400.