Buying a car can be a really painful and tedious process. There are a million and one things to do and just thinking about it can be daunting. From choosing between buying a used car or a new car to understanding the different terms behind car ownership, it’s a lot to think about. And that’s not all. There will always be an underlying fear of overpaying or buying a lemon or even making a purchase at the wrong time. So, can you imagine how much worse it is if you’re buying your first car?
To help you get on the right path, we’ve come up with a comprehensive guide of things to consider before buying your first car.
1. Tax Structure and Rebates
In Singapore, buying a car is not as simple as it sounds. There are a lot of other things to take into account. And most of these involve even more money! From the Certificate of Entitlement (COE) to Additional Registration Fees (ARF) and even the Carbon Emissions-Based Vehicular Scheme (CEVS).
All these additional taxes make the cost of car ownership extremely high. In fact, car ownership in Singapore is the highest in the world.
When you take all these additional taxes into account, the amount you have to pay usually costs as much as the car itself. But it’s important to note that most of the additional taxes are only for brand new cars.
Does this mean that you can siam these additional costs if you get a used car? Of course… not!
These taxes would have already been added to the cost of the car. So when buying your first car, it’s important to understand what you’re actually paying for.
Due to the high costs of car ownership, most Singaporeans will not be able to pay for their new cars in full. Sometimes, just hitting the 30% to 40% minimum is overwhelming. That’s why people usually rely on car loans when buying a car.
We’re sure this isn’t the first time you’ve heard of car loans. But do you know there are different types for different needs? Read more about different types of car loans here and discover important car loan tips here!
When applying for a car loan, the general rule of thumb is not to take a long-term loan. We know how tempting it is, paying lower monthly installments means that you don’t feel the pinch as much. It may sound quite amateurish, but there are so many people who fall for this. Having a long-term loan actually increases the overall cost of the car because of the interest you’ll be incurring.
Interest rates for car loans are different across the various banks as well as across the different financial service providers. The rates will also be different for a brand new car and a used car. On average, interest rates for a new car loan is about 2.6% but a used car loan can go up to 3.4%. The reason behind the different rates is pretty simple. Secondhand cars are deemed to be riskier because of the vehicle’s age.
There are many other types of financing options available, find out more here.
3. The Right Car
We all have that dream first car in our heads. For me, a simple Japanese sedan that’s within my budget is more than enough. But for some others, their dream first car is a bit more… dreamy.
Follow this three-step process to evaluate whether you’re making the right decision when choosing your first car.
Choosing the right car is really important. And you must do your due diligence by researching potential new or used cars that are within your budget. You shouldn’t be thinking of going too big too soon. Always start with a car that you and your wallet can manage.
The only way to get there is through thorough research. Doing proper research helps to protect yourself from getting scammed by sellers and ensuring you get the best ride that suits you.
5. Form VS Function
When buying your first car, it’s really easy to get carried away from its purpose. There’s a good chance you’ll stray away from the purpose of your ride and get carried away with how the car looks.
Unless you have piles of cash lying around, this isn’t the right way when buying your first car. You should always look at its function and practicality above the car’s looks. For instance, if you plan to start a family in a couple of years, a sports car won’t make any sense.
Buying a car isn’t like buying clothes, there (usually) isn’t a policy where you can exchange or return the car. So you must plan out what you need now and in the future. It shouldn’t be about your wants but always about your needs!
6. New VS Used
Choosing between a new or used car really depends on 2 things. Your budget and the COE prices. When the COE is low, it’s a good indicator that it’s a good time to buy a brand new car. But that doesn’t mean that you should sacrifice too much just to get a brand new car. If it’s more comfortable for you to get a used car, then that’s what you should do.
Don’t kill yourself trying to get a brand new car!
7. Additional Costs
The cost of car ownership doesn’t stop when you pay for your car. There’s a whole lot more to it. Let us bring you through all the additional costs of maintaining and driving a car in Singapore.
On average, you’ll be spending about $50 – $80 on petrol every week, depending on the type of car you drive. This adds up to about $300 a month and that’s the minimum you’ll be paying. And $300 is just a baseline calculation. It’ll probably cost you more!
The problem is, you can’t control the prices of petrol. The only way is for you to make spending on petrol cheaper and more rewarding. And that will happen with a good credit card! Find out what are the Best Petrol Credit Cards.
The cost of parking in Singapore is quite reasonable. But it also depends on the area. If you live in an HDB, monthly parking rates costs around $120. Which is pretty decent, something most car owners can manage. It gets trickier and more expensive if you drive to work.
If your office is in the Central Business District (CBD), it’s going to cost you a bomb. Carpark rates in the CBD can easily cost in excess of $500 and that’s at the lower end of the scale.
You’ll also have to add in parking charges in shopping malls whenever you visit them. When compared to HDB parking, the prices are a lot higher. But there are a number of malls and buildings that offer free parking, even on weekends! Check out the list here.
While there are different types of motor insurance available, the most common is comprehensive coverage. The amount you have to pay depends on certain variables. Which includes your age, claims history and surprisingly (even though not exactly publicized) your gender. Generally, car insurance for women is usually cheaper!
On average, you can expect to pay about $1,250 a year for this plan.
11. Road Tax
Before you can drive your car on the road, you’ll have to pay the road tax. The amount differs from the different types of cars but is generally not that expensive. When compared to the cost of a car, the road tax amount is pretty insignificant. However, it is an annual tax that every driver needs to pay.
If you don’t pay the road tax, you won’t be able to drive your car. But if you’re feeling like a rebel and decide to continue driving without a valid road tax, the punishment is quite heavy. You will be liable to a $1,000 fine or imprisonment of up to 3 months!
12. Maintenance and Servicing
The number of times you’ll send your car for maintenance and servicing will depend on certain variables. Every car is different and will face different issues along the way. Some factors that affect when you need to service your car vary from how much you drive to the workshop you visit.
There isn’t a way to estimate the actual costs of maintenance and servicing, but it will roughly cost a couple of hundreds a year. The cost will increase if you’re driving an older car because it’s more likely that you’ll need to replace certain parts.
Buying Your First Car
Even though it might seem like there are a lot of considerations and too much information to take in at one go, buying your first car is still a special moment. Just ask your friends and family, we’re sure they remember their very first car (and the entire process)!
We don’t disagree that it’s hard work and quite a long process. But trust us, at the end of the day it’ll all be worth it and nothing comes close to the happiness you’ll feel. Even though you can’t run away from the tedious and troublesome process before buying a car, there are some services that make the process simple and hassle-free. So, choosing where or who you buy your first car from also matters!