Sponsored Links

To retire by age 45, start with a plan.

"Is early retirement the right financial choice?" Jim Ellis discusses long-term financial growth strategies. I have blogged a...

Past blog posts now load week by week. The old style created a problem for some as the system would load 50 blog posts each time. Hope the new style is better. Search archives in box below.

Archives

"E-book" by AK

Second "e-book".

Pageviews since Dec'09

Recent Comments

ASSI's Guest bloggers

Category A COE hits record $77,201!

Thursday, November 8, 2012

The premium in Category A, for cars below 1,600cc, surged $6,200 in the lastest bidding exercise, surpassing the previous high of $73,501 set in early August.

Easy financing is contributing to continuing demand. "Demand is still there, even as the economy slows down, and it is being propped up by cheap loans. So, as long as the monthly repayment is within the buyer's budget, he will get that new car."

(Source: The Business Times, 8 Nov 12.)

My reaction to this bit of news? This is totally mind-boggling!

Boggled at #1:
$77,201 for a certificate to own a car and a small one too.

Boggled at #2:
If monthly repayment is within budget, buy the car!

There are many rich people in Singapore. Bloomberg reported that there are 17 millionaire households out of every 100 households in Singapore in June 2012! Exact figure: 188,000 households.


I guess if buyers are able to afford a car at such astronomical prices using their own savings and if they really need the car, it is ok. If they don't need a car, why buy one?

However, if buyers are only able to afford a car because of the cheap loans available (which suggests that they have insufficient savings), it is not ok. This is especially so if they don't need a car.

Just off the top of my head, buying a $120k 1.5 litre Japanese car today and, to lose as little money per year to depreciation as possible, driving it for 10 years could see the buyer taking back only $7k at the end of the period. That is a loss of $11.3k per year or $942 per month!

In the above scenario, if the buyer draws a monthly salary of $4k, almost 25% of his monthly earned income is gone with the wind! If he really needs a car, it would be more prudent to look for a pre-owned car with a monthly depreciation of $400 or so. This would be a less destructive 10% of his monthly earned income.

People usually look at the running cost of car ownership: petrol, parking, road tax, insurance, ERP, maintenance and repairs. They sometimes forget depreciation which is a bigger than ever consideration in today's environment given the high price of the COE.

Any person thinking of buying a car in Singapore now, please think and think again.

Related posts:
1. Quick, buy a new car cheaper now!
2. A new car for $75,000?
3. Bought a new car!
4. The price of my car now.

8 comments:

AhJohn said...

Really crazy!!! I am thinking if govt charges higher oil price, will it be better? So people still can own a car, but use when necessary.

AK71 said...

Hi AhJohn,

Petrol prices here are already amongst the highest in the world. Higher and it would increase the cost of doing business as well.

In a couple of years, the number of cars going to the scrap yards should increase and if that should come during a recession, prices of COE should fall.

I feel that if public transport in Singapore is improved further and, to me, it would just be an increase in capacity and reliability, more people might be persuaded not to drive.

Frankly, as a driver, I feel that it is very stressful to drive on Singapore's roads these days. I would rather take public transport but it is overcrowded and getting unreliable.

SnOOpy168 said...

This is one trap that many had fallen into. Me included.

Rewind years back, into the early 90s when i started working. The prices of (lets say) a toyota corolla is about $40k+. I do believe that the HDB 3 rooms flat is also about the same price bracket. BUT the HDB I cannot buy yet. the 2 names to register (hint : marriage) or the 35 years old singles apartment scheme are way out of reach for me.

So, the next easy thing is the car. Walk in, present IC, sign papers and a few days later. In some cases, the downpayment is almost "not required". On hinsight, I should have gunned for a condo instead. But at $1k take home pay at that time, this is a day dream goal.

If the public transport is as effective (not necessary efficient) as in Hong Kong, there is NO NEED to own a car. Frankly, I had taken more taxi here with little trouble or fuss than in Singapore. Here the taxi ratio is far lower than in SGP, yet it is taxi waiting for people, not the other way round. No surcharge, no ERP or COE, only luggage fee (S$1ea) & tunnel fee (like road toll for tunnel crossing).

AK71 said...

Hi SnOOpy168,

Was a 3 room HDB flat in the 90s only $40k in price? In the 80s, we sold our 3 room flat in Telok Blangah for some $70k already.

I don't think you should be too hard on yourself with regards to car buying especially if you need a car. I started driving a few years after starting work too, partly because I only learned how to drive in my late 20s. ;p

To me, having a car is really a necessity. My work requires it. Of course, the convenience of having a car cannot be overstated. Once I do not have to move around as much, I would take public transport again.

However, Singapore's public transport has to improve. Buses and trains now suffer from insufficient capacity.

I still remember a ride on the MRT:
Nightmare at Bugis!

We should also improve access to the MRT stations. I was just telling my sister that Singapore should have community buses like those in Japan. These smaller buses could go into estates with narrow roads which are more than 500m from the nearest MRT station. These are estates which regular SBS feeder buses cannot penetrate.

If the government is unwilling to provide this service, I believe this to be a great business opportunity. :)

SnOOpy168 said...

$40k HDB . Yup. From this article, new 5 room at $70k. So 3 Rm should be about $42k just ball park figure. Of course, location and all those will set premium / discount to this. My aunt sold her C'weath Drive 3-rm corner flat for $21k. Rewind the clock, I gladly pay her this price plus 200% COV today. But....dream on. Now at over 80 years old, she now deeply regret that decision - as she & DIL could not get along well and had to move out. Always, a roof of our every own, to call home, is a must.

Often, in those days, we joked that certain cars are like HDB flat on 4 wheels. These day, this joke will have no bearing as a 3rm is over $300k on resale market.

http://www.asiaone.com/Business/My+Money/Property/Story/A1Story20080620-72008.html

Have a car is necessary for some. Not denying it. Had the public transport be more accessible and effective (again, not to be confused with efficiency), then there is no need for car. Oh, did I also mention that public housing estate's season parking can cost over S$200 per month.

I state this based on my experience in HK, where I am mixing mini bus, MRT and taxi ride all the time to get to places. Sure, here cost more per journey than in SG. But still far cheaper than car ownership.

AK71 said...

Hi SnOOpy168,

Wow! I have no recollection of $40k HDB flats in the 90s. I think the old timers might remember these. ;p

Yes, we should have our own home even if we are single. A friend told me it does not matter if her home is a shoebox apartment. At least it is her own place.

HDB season parking costs $90 a month. Well, at least that is how much I am paying since moving in to my sister's flat. $200 a month is too much! Or are you referring to parking in HK?

A friend in HK told me he has to pay HK$3,000 a month for a parking lot in his condo! That is about S$483 a month!

meesiam said...

Ak
Car n condo is out of reach now...Singapore dream is getting further for middle class pp. I was in US over the past few weeks guess what.. I overhead pp on the street commenting the car cost in spore ...they just find it amazing.actually i personally think it is all becos of the 'rich' sporean effect than anything else since COE market is a supply n demand stuff.

AK71 said...

Hi meesiam,

Singapore is the most expensive place on earth to own a car. Some people might say it was cheap 3 years ago. I won't say that. I would say it was only cheaper. A Mitsubishi Lancer 1.6 GLX cost $50k 3 years ago. That is still enough to buy a Mercedes Benz C class in the USA with change!

There is a lot of wealth in Singapore but how much of this conspicuous consumption now is "virtual" wealth fueled by the very low interest rates? The current situation scares me.

Monthly Popular Posts

 
 
Bloggy Award