Tips on Buying and Financing a CAR (in Singapore)

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#1
Carried by THE BUSINESS TIMES, Singapore, on Monday, 15-July-2013
http://www.btinvest.com.sg/personal_fina...-20130715/

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HERE are useful tips if you're thinking about buying a car.
First is the most radical: Don't.
After all, do you really need a car? Without one, you are less likely to get lost, especially when all taxi drivers know their way around the city better than you.
The government is also making a big push to get people to take public transportation, and ours is probably the best in the world.
Making use of it seems sensible. Public transport reduces traffic congestion and pollution, and it's cheap.
Even if you prefer taxis, it could still cost less than owning a car.
Alas, some people, like my wife, simply can't be convinced.
They want a car, they need a car, and they might even love their car!
So don't waste time telling them it's not a necessity; you won't win.
For these hard-core car lovers and all the wealthy people out there who like to save money, here are some tips for finding the best deal in the world's most expensive city to own a car.

Do your research
The most important tip is: Do your research. You'll be surprised to learn it doesn't take much.
First, identify the 168 car models in Singapore.
Second, find the major cost components for each of them, like the certificate of entitlement (COE), additional registration fee (ARF), open market value (OMV) and all that.
Then, find the dealer's selling price for each of those 168 car models.
Finally, take the selling price and subtract the above costs to get the dealer's profit for each car model.
Now, was that so bad? With this information, you'll know how low you can go in negotiating with the dealer.
OK. I can hear you saying: "Impossible! No one has time to do all that!"
Well, surprise. It's easy and takes very little time since the work has already been done. I'll show you how in a minute.

Car costs: The Big Five
First, here is a primer on the five major costs of buying a car. In descending order, they are the COE, ARF, customs duty, OMV and GST.
Here is how each works:
1) The COE is the certificate of entitlement, which is based on a clever Dutch auction scheme that we use to bid for cars every two weeks. At the moment, COEs are around $73,000 for small cars (engine size 1,600cc and below) and $77,000 for large cars (engine size above 1,600cc).
2) The ARF is the additional registration fee, which has been changed so that it is now graduated according to the car's value. It is part of the tsunami of rule changes introduced on Feb 25 to reduce demand for cars. (See related article below.)
3) The OMV is the open market value and is the value of the car sold by the manufacturer. This represents all costs paid to get the car made and shipped to Singapore.
4) The customs duty is 20 per cent of the OMV.
5) The Goods and Services Tax (GST) is 7 per cent times the OMV + custom's duty.

Assembling the data
So much for preliminaries.
Now, on to assembling data for each of the five cost components, for each of the 168 makes and models sold in Singapore and then comparing all that information to each dealer's selling price.
The problem is it will take two lifetimes to pull it all together, and possibly longer since dealers won't tell you much.
Now - drum roll - the solution! It's the Land Transport Authority's (LTA) online site: www.OneMotoring.com.sg
It is probably the most useful website in Singapore for anyone looking to buy a car.
The information is easy to find but once there, you have to drill down to get what you need.
You do it like this: from OneMotoring.com, go to "Information & Guidelines", then "Buy a New Vehicle", then "Car Cost", and scroll down the page to click on "Detailed breakdown of car costs".
http://www.onemotoring.com.sg/publish/on...Update.pdf
Bingo. The information is there in a 11-page pdf file.
Print it out to study at your leisure.
It contains everything you could ever want to know about each dealer's car costs and selling prices.
You will see the five cost components listed individually and then summed up in a column called "Total Basic Cost" for each of the 168 car makes and models.
The table shows the most recent data, from May, for 10 popular models.
Take, for example, the best-selling car model in Singapore: Toyota's Corolla Altis.
The most recent data from May shows it is a 1,600cc car with a Total Basic Cost of just under S$98,000.
That is the sum of the five basic cost components listed above.
The last two columns tell each dealer's average selling price with and without COE.
With COE, this car sells for just under S$121,000.
Whoa. How can that be since the cost components add up to only S$98,000?
Does it mean the dealer is making a gross profit of S$121,000 minus S$98,000, that is S$23,000?
Yes, that is more or less correct, although the S$23,000 also includes the dealer's overheads plus a few minor costs.

Dealing with dealers
This super-valuable information serves as a benchmark for how far you can go in negotiating a lower price with dealers.
Of course, it's not nice to squeeze the dealer too much.
Leave them a reasonable profit, like S$500 or so. (Okay, leave more if you're feeling generous.)
Once you buy a car, don't forget you also have to pay a few yearly costs of ownership like number plates, road tax, car insurance, maintenance and petrol.
It all adds up. For me, at least, total car costs exceed even the most expensive public transport alternative, which is daily taxi fare.
By the way, another reason not to feel guilty about squeezing the dealer's profit margin is that they get additional income from a sale.
For example, most dealers recommend where you should buy car insurance and get a car loan.
Dealers benefit, sometimes with a rebate, when they bring a new customer to the insurance company or bank.
While this looks like a conflict of interest, customers may also benefit if the bank and insurer are able to offer a lower rate for bulk sales through a dealer.
It is not certain this happens, however, so shop around to see if the dealer really is steering you to the cheapest insurance and lowest loan rate in town.
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#2
let me relate an encounter when I went to a used car showroom yesterday afternoon to check out a used car.

I felt that my 9 year old car might be giving way soon and was checking out a LS460 priced below 100k.

A very friendly and elderly sale person (oops, if he's reading this, he would know), anyway, there was another LS460 parked nearby, priced nearly 20k above this car I was looking at. Price was 20k above because only 1 owner and mileage was low. There was a word "SOLD" on the windscreen. I asked this saleman, wow, so easy to sell a large car eh?

To my dismay, he shook his head and told me, the interested buyer placed a 1K deposit 2 weeks ago and has yet to come to collect his car. Likely this deposit would be forfeited. I probe further out of curiosity. He told me that this buyer has a GS300 but the saleman's boss was unable to match his asking price. Thus, he cannot raise the money to come up with 50% downpayment of this LS460.

IMO, this is dangerous behaviour. Drive a GS300 still under loan and contemplating to jump to a bigger loan. Loan is only one consideration. Tax for 4.6L and 3.0L different. So is insurance and petrol consumption plus maintenance.
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#3
(26-07-2013, 08:33 PM)AlphaQuant Wrote: Of course, it's not nice to squeeze the dealer too much.
Leave them a reasonable profit, like S$500 or so. (Okay, leave more if you're feeling generous.

Is this reasonably possible in the first place? They can always refuse to deal and you have to walk away. Colleague experienced this before; based on the OMV, COE etc, he worked out a fair value for the vehicle. But the dealer was pricing almost 10k above. When asked, dealer said, that was the 'market' price.

It seems 'market price' is based on what people is willing to pay versus what is the value of the asset.... sounds familiar?
You can count on the greed of man for the next recession to happen.
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#4
Same for almost everything. There is a price that people is willing to pay for an item, no matter how cheap it cost to produce. So if I am the seller, of coz I will want to sell at the best possible price to maximize my profit.

To lower the price once will result in many such demands in the future. Don't think it is good at long run.
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#5
sound like paying above NTA, Tongue 10K is a very high premium! Big Grin
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#6
(27-07-2013, 03:37 AM)LionFlyer Wrote:
(26-07-2013, 08:33 PM)Larry Haverkamp Wrote: Of course, it's not nice to squeeze the dealer too much.
Leave them a reasonable profit, like S$500 or so. (Okay, leave more if you're feeling generous).

Is this reasonably possible in the first place?

I paid Borneo Motors $1k profit for my current car, so $500 is not unimaginable (but cruel).

If the profit margin is too fat, u can actually import the car on your own. When I last researched (many years ago), it was doable. You would have acquired the know-how of a parallel-import business in the process as well.

Few people would go to this extreme, and would pay a premium for local support. Unfortunately, not many bother to find out how much they're charged for it.
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#7
Any car expert can offer some advice ?

have an old Lexus es300 going to be scrapped in 1 month

is it better to scrape myself or g through a dealer....any dealer to recommend?
not intending to. Get a new car
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#8
(28-07-2013, 11:44 AM)littlecupid Wrote: Any car expert can offer some advice ?

have an old Lexus es300 going to be scrapped in 1 month

is it better to scrape myself or g through a dealer....any dealer to recommend?
not intending to. Get a new car

self scrap, just go to www.onemotoring.com, there's a few steps to follow... drive to any of the authorised scrapyards.
http://www.onemotoring.com.sg/publish/on...ister.html

Smile
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#9
I bought my car in Jan 2004 for S$72.6K. As the prices are still steep, I will be switching to public transport. I am scrapping the car this month to recoup a portion of the COE and motor insurance since I will be out of Singapore till 1 Jan 2014.
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#10
(27-07-2013, 03:37 AM)LionFlyer Wrote:
(26-07-2013, 08:33 PM)AlphaQuant Wrote: Of course, it's not nice to squeeze the dealer too much.
Leave them a reasonable profit, like S$500 or so. (Okay, leave more if you're feeling generous.

Is this reasonably possible in the first place? They can always refuse to deal and you have to walk away. Colleague experienced this before; based on the OMV, COE etc, he worked out a fair value for the vehicle. But the dealer was pricing almost 10k above. When asked, dealer said, that was the 'market' price.

It seems 'market price' is based on what people is willing to pay versus what is the value of the asset.... sounds familiar?

This is where information is power. The dealer can walk away from one or two but cannot walk away from the mass. The more general public is aware of their profit margin, the better they can decide on what is considered a reasonable price to pay. That is the only component buyer can have some influence over.
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