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Tea with AK71: Quick, buy a new car cheaper now!

Monday, August 27, 2012

It is reported that last weekend saw 5 to 20% more new cars sold in the showrooms here as COE premiums declined for the first time in months.

We probably have friends and family members who are looking to buy a car for a host of reasons. Although some might think that cars are not necessary in Singapore, many would beg to differ.

Finance manager Lionel Ng, 58, and his wife, 53, a homemaker, own a MPV vehicle which will be 10 years old in October. Yesterday, they took advantage of the lower COEs to purchase a Toyota Altis which will replace their current car.

Mr. Ng said: "The COE is still very expensive but we cannot wait anymore - I feel a car is a necessity in Singapore but right now, it's priced like a luxury item."

Ms. Evelyn Tan, 36, self-employed, upgraded her vehicle from a 3 year old Toyota Vios to a Mercedes Benz C-Class. She said: "With the trade-in and lower COE, I'm getting a very good deal on my new car." (The Straits Times, August 27, 2012).

I bought my current car about two years ago and I have not really been looking at cars or tracking their prices. A quick check online revealed the following:

1. New Toyota Altis 1.6 Classic (A) @ S$ 123,988
2. New Mercedes Benz C180 (A) @ S$ 214,888

Wow! WOW! WOW!!!!!!

I am used to driving around and would find it hard to adapt to a carless lifestyle. However, to pay so much even for a new Toyota Altis is simply mind-boggling.

If I were to buy a car now, I would look at pre-owned cars.

A 2006 registered Mercedes Benz C180 would, for example, set us back by S$60,000. This means saving S$154,888 for losing 6 years of use. This is rather simplistic, of course, as we would be buying an older car with older technology which would probably cost more to maintain with the wear and tear accumulated over 6 years. However, we would be saving ourselves some hefty depreciation.

Although I would always argue it is not a matter of affordability but a matter of value for money, consumption is always more of an emotive activity for most. So, happy, buy lor! ;)

Related posts:
1. Tea with AK71: A new car for $75,000?
2. Tea with AK71: The price of my car now.


Anonymous said...

Hi AK,

You got it at a good price!

I just sold off my 2 ½ year car several weeks ago for a small profit, or rather breakeven after deducting all expenses.

I was told this period is the first time in Singapore history that car owners can sell their cars for a profit, so I should count myself lucky. I am a blur one when it comes to cars.

Was thinking initially to get a used car as replacement while aiming for a 2014 – 2015 drop in COE. But after getting the money, I have second thoughts. Nothing feels better than cash, so I am holding on. :)

meesiam said...

do u mind to explain what is preowned car and why is value for money?

AK71 said...

Hi Happy Pork Belly,

Like with so many things in life, it is relative. ;)

If I had replaced my car just one year earlier like my mother did, I could have saved another $10,000. No kidding!

Ever since COE was introduced, there were other times when car owners could have sold their cars for a profit. This is not the first time in history it has happened.

If we know the cycle and get in and out at the right time, we could benefit but people usually do not behave like this when it comes to cars.

Everyone is waiting for COE numbers to improve in 2014-2015. Whether it would happen or not is anyone's guess but the probability is good, I agree.

If you are able to accept a carless lifestyle, the financial benefits are many. Good on you. :)

AK71 said...

Hi meesiam,

A pre-owned car is a second hand car. A new car usually suffers the highest depreciation within the first 2 years of its life.

For example, a friend bought a one year old Mazda a few years ago for $50k. Brand new, the car would have cost him $60k. He saved $10k for not buying new.

People who buy new cars all the time only to replace them within the first 2 years lose the most money.

People who buy pre-owned cars save on hefty depreciation which makes their purchases better value for money. :)

coconut said...

yap, only one time i'm "stupid" enough to buy a brand new car many years ago when still very young (good excuse haha).

now i only buy used one, can abuse and also knock here and there also never mind, so you can immagine how my car look like haha.

Sanye ◎ 三页 said...

A Mecedes C Class for S$214,888 not cheap leh. Last month I got a quote from C&C @ S$188,888 but I didn't take it. :(

SnOOpy168 said...

I liked this phrase "So, happy, buy lor! ;)"

Anyway, I think Singapore is about the only place on this globe that one can re-sell a pre-owned at a profit. Right timing required of course. Had I kept my Opel until 3 years ago, i could have sold it for a nice profit too. 20/20 hindsight.....

AK71 said...

Hi coconut,

I am still stupid enough to buy new cars all the time. Every car I have ever owned was new. :(

The last sentence of my blog post, "So, happy, buy lor!", is an escape clause for me too. ;p

It is financially prudent to buy pre-owned cars. The increased cost of maintenance, I believe, cannot be higher than the hefty depreciation seen in the initial years of a new car.

AK71 said...

Hi Sanye,

Oh, definitely not cheap. When I was looking at a new MB C180 (yes, I was considering it at one time), the price was even lower than what C&C quoted you.

In the end, I chose a new BMW 520 as Performance Motors was having a clearance sale before the launch of a new generation.

No more luxury cars for me. I was more a slave to the car. Silly thing to do. Haha...

I am used to having a car but I don't need a luxury car. :)

AK71 said...

Hi SnOOpy168,

I like it too. Escape clause. ;p

People very often mistake hindsight for foresight.

Someone told me recently he could have made so much money from buying a condo in Changi he wanted to buy years ago. He didn't buy because I said then I wouldn't do it as it was so far away from town. He then said one must have foresight...

Then, someone is now buying more properties, refusing to sell any because he is confident that Singapore's property market will stay bouyant and if there should be any price correction, it would not be more than 10% in the next few years.

Is this foresight? We won't know until a few years later. So, we need hindsight to see if a person had foresight. Even then, I believe foresight requires a large dose of luck. ;)

There is nothing certain in this world. Things could always run against our expectations. So, it is important to manage such risks.

la papillion said...

Hi AK,

I'll always buy pre-owned cars. Heck, I buy pre-owned things for most of my life, especially when it comes to gadgets. I bought a kindle (e-reader) in 2010 for 600 (pre-owned), with the original price at 750-800 sgd. Recently I bought another pre-owned kindle, this time with newer features at 370, with the original price at 450-500. My pre-owned car was 32k, with still 5 yrs more to go. Pre-owned things are the way to go!

Sigh, the only expensive pre-owned things that I bought is my flat... Lol, you win some you lose some!

AK71 said...

Hi LP,

Indeed, we win some and we lose some. ;)

I bought a pre-owned Rolex before. I sent it in to Rolex Centre for servicing and gave it to my dad as a birthday present. Cost me $5k in all. A brand new one in the same class would have cost $14k!

I hope I will be wise enough to buy a pre-owned car in future. ;p

INVS 2.0 said...

Hi Ak71,

"Ms. Evelyn Tan, 36, self-employed, upgraded her vehicle from a 3 year old Toyota Vios to a Mercedes Benz C-Class."

It is precisely such people that annoyed me when comes to cars. Why can't these greedy people keep their cars for a good 10 years? It Keep changing and changing and pushing COE prices further up. It is not as if they are driving some African cars that can't last for 10 years.

At the same time, I also feel sad for them. They can never achieve greater financial heights with this kind of instant gratification mindset.

AK71 said...

Hi INVS 2.0,

Er... quite a few brands like MB, VW and Toyota have cars made in Africa, you know? ;)

Personally, I have not owned any car for the full 10 years. I think the longest could be 5 years. My memory is a bit patchy. So, I am guilty too. ;p

Buying new cars instead of pre-owned cars and changing cars every few years instead of driving them for as many years as possible probably slows down the process of wealth accumulation. Indulging in instant gratification? Perhaps.

However, to say that such people will never achieve greater financial heights is somewhat extreme. :)

INVS 2.0 said...

Hi Ak71,

I am being sarcastic on the African definition. I know BMW E90 320i is made in Africa. Basically, they are not driving lousy cars but keep changing as if something is wrong with the durability. :)

The problem is, people are not even using their cars for 5 years. Heck, most of the premium continental buyers pay in cash and so they don't incur bank loan penalty. Some bought and sold within 1 month! But they incur massive opportunity costs.

They can upgrade if their wealth increases more than their spendings. But if their wealth stays put but not spendings, they can't achieve greater heights. It works two ways.

AK71 said...

Hi INVS 2.0,

I was wondering why not Chinese? Why African? ;p

Changing cars every few months is definitely wealth destructive.

However, everything is relative. To some, it could be like being stung by a mosquito while to others, it could be a punch to the abdomen. ;p

Live and let live, I guess. :)

INVS 2.0 said...

Hi Ak71,

Chinese cars of today is considered good. Just that local Chery authorised agent (Vortex Automobile?) is too COE-depressed to bring in the better, more credible models. :(

I already let live since the days of cheap COE are over. That is why I bought a road bicycle to make good use of the cycling paths and PCNs to travel around. :)

Wait till the next cheap COE cycle arrives...

AK71 said...

Hi INVS 2.0,

Really? Chery produces good cars? I was told not to even touch the QQ with a 5 feet pole.

I know that the Korean cars have come a long way and KIA is making more reliable cars now but cars made by them in their early years were horrible.

If the Chinese are making good cars now, does this mean that they have closed the gap with the Koreans more rapidly? Wow! I will have to give Chinese cars a chance the next time I buy a car. :)

la papillion said...

Hi INVS 2.0,

Why not consider a pre-owned car? Is it out of your consideration? There are many good bargains out there if you look around.

Having a car tremendously improved my life. It's immeasurably using money. Not sure if it'll apply to others too, but if I had known better, I wouldn't hesitate so much and just think about issues in terms of financial aspects only. Many things are not just in terms of dollars and cents :)

INVS 2.0 said...

Hi Ak71,

QQ belongs to the older generation of Chery cars, like Kia Picanto of Kia. But if you look past it, there are many new models Chery has coughed out to impress us.

For example, the Chery G6:

But realistically, the Koreans have progressed much more rapidly than the Chinese. It has surpassed Japanese and some of the budget continental models now. :)

Don't forget Hyundai too.

INVS 2.0 said...

Hi la papillion,

After some nasty experience with pre-owned cars (durability issues) with my closed ones, I don't consider them anymore. Cheaper they may be but I don't want to spend another loads of cash on repairs and replacements. :)

AK71 said...

Hi INVS 2.0,

Thanks for the update on Chery! Much appreciated.

I mentioned KIA because I bought a KIA Magentis before. It was relatively inexpensive at $50K for a 2 litre car. It was very comfortable but it had problems aplenty. The new generation KIA cars by all accounts are really impressive but their prices are also more impressive now. ;p

Anyway, by the time I look for another car, things could have improved even more. :)

Musicwhiz said...

Hi LP,

I'm sure a car would improve my life tremendously too, but I can't separate the value from the price! Haha!

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