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Cooling measures for cars: Buying pre-owned.

Wednesday, May 22, 2013

There was a big commotion with regards to how cooling measures for cars would affect the pre-owned market not too long ago. In response, from 6 April 2013, the government lifted the more stringent rules for car loans for 60 days for the purchase of pre-owned cars. The concession will end on 5 June 2013.


The Monetary Authority of Singapore stated that:

"It said it would not be possible to relieve the industry from the impact of the financing restrictions on an on-going basis.

"It said the two-month relaxation of the rules for the pre-existing used car inventory will help the industry adjust to the new conditions."

Dealers said that a period of six months would have been better.

I suspect that the pre-owned market for cars will see harder times from 6 June 2013 once the concession ends.

Why am I blogging about this?

I have a friend who is thinking of buying a pre-owned car and since he does not need to take a loan to do so, I suggested that he should wait till sometime in mid June to start shopping. Prices could possibly soften as the pool of able buyers for pre-owned cars would probably shrink by then.

Related posts:
1. Cooling measures for cars.
2. Cooling measures for cars spurned.

20 comments:

AK71 said...

As a result of MAS' measures, "property prices finally appear to be stabilising," Mr Menon said, with price increases dipping below 2 per cent last quarter compared to the previous quarter. COE premiums for cars have dropped 25 per cent since MAS' restrictions on car financing in February.

Meanwhile, Mr Menon said MAS' exchange rate-centred monetary policy remains relevant and the central bank will continue to use the exchange rate as its monetary policy tool to keep inflation in check.

He said: "Singapore's fundamentals remain sound. Fiscal prudence, financial discipline, minimising debt and living within our means will provide us policy space and buffer to weather whatever comes ahead. This is an advantage most countries do not have."


Source: MAS

la papillion said...

Hi AK,

I guess different advice for different people. For people who needs the loan, then they have to buy it before the concession ends, at a higher price of course. For people who don't need the loan but wants a smaller absolute cost to the car, then it makes sense to buy after the concession ends.

I also expect that the pre-owned car market will soften.

In a way, however, I think the people in power are reducing the inflation rate by hitting a small group of people - the car dealers. I think many of them will find it impossible to do business. In 2 months time, I'm not sure how they are going to restructure their business and adjust to the new environment.

Don't know whether to feel happy that car prices are going down or sad that the cost of doing so will cost many people their jobs.

AK71 said...

Hi LP,

I believe that the dealers will have some short term pain as they might have excess stock.

However, ultimately, it will be car owners who will have to adjust to lower prices when they try to sell their cars in the pre-owned market now. So, in this way, equilibrium will be restored.

Stronger dealers who can survive this rough patch will see business as usual. :)

Of course, you are right about potential buyers who need a loan in order to afford a car should act before the concession ends.

Sanye ◎ 三页 said...

AK,

Not too long ago I made some inquiries on pre-owned cars and did some homework just to see if its worth to get one. After some calculation I decided that it is not advantageous to get one at this time: The difference in depreciation is not big enough to offset the advantage of getting a new car. I decided to wait till the grace period is over and do the exercise again.

Oh of course I disregard the loan part of the game.

AK71 said...

Hi Sanye,

How old a car are you thinking of buying? How much in monthly depreciation do you think is acceptable to get a pre-owned car over a new one? $500 a month?

Please let me pick your brain since you have already done the research. ;p

Sanye ◎ 三页 said...

Hi AK,

Buying a pre-owned car means you can only take it as it is. You can really know the condition 100%. Plus a car entering its 3rd or 4 years will come with minor wear and tear problems. So if the difference in monthly depreciation is not big enough, its really not worth. S$500 is about the minimum.

An agent introduced a 2L Honda Civics to me. Its 3 years and 4 months old but the asking is above 80K. Since there is no 2L Civics in the new car market, I compared it with Mazda 6 and Toyota Camry. The differences in monthly depreciation worked out to be much less than 5K.

I told the agent and his comment was: "yes Sir, you can say that because you can afford to buy a new car under the new regulation." End of conversation.

AK71 said...

Hi Sanye,

Thanks for sharing this! :)

I guess what the agent is indirectly telling us is to wait until the new regulation kicks in for the used car market before going back to squeeze him. ;p

I cannot accept very high depreciation numbers for used cars especially when I remember that the depreciation for my current car bought new in 2010 is only $525 a month.

EY said...

Hi AK,

$525 a month for depreciation is a steal! My 7.5 years old Opel Tigra costs me more than that and not counting the few times I have to sent it in for servicing for various reasons!

Recently, I changed the O2 sensor which set me back by more than $900. The honk also kaput earlier this month and it cost $60.

Today, it started fuming (literally) on AYE and I had to have it tow away! Fan spoilt and water pump leaked. Mechanic said still unable to find spare parts. -.-"

And of course, he kept nagging at me that I shouldn't have bought this car. He gave me very thoughtful advice that I must consider availability of spare parts when I buy a used car so that downtime will be shorter. He had the impression that I'm doing sales and need the car badly. Haha.

Anyway, after today's incident, I was seriously calculating how much I would lose if I were to scrap my car now. If I include the repair and servicing cost since owning it in mid Jan, it will be some $20K!

Sigh...catch-22 situation. Looks like I'll be a car slave for a while more. Keeping my fingers and toes crossed that the car gets repaired by Saturday and my wallet won't pechah big time.

Endrene

AK71 said...

Hi Endrene,

Well, I paid $71k for my then new Mazda 2 in August 2010 and it has an OMV of almost $17k. The monthly depreciation, assuming I keep the car for 10 years, is not too bad. It was bought during a special sale at Mazda Motors. ;p

As for your Opel, lesson learnt indeed. Stick to practical and reliable Japanese brands in future. :)

To lose $20k for just driving the car since mid Jan this year is just too much. Why not sell it instead of scrapping it?

EY said...

Hi AK,

You are always good at snapping up value deals!

My car has been fixed and I can collect it on Saturday. The bill? $1227. My $60 horn appears really cheap in comparison.

Checking my record, I have spent a total of $2800+ on repair and servicing include this one!

Yes, really it's lesson learnt. But I often forget my lesson fast when I see something that makes my heart throb. :P

I would like to think that after fixing the various parts, my car should be giving less problems down the road. I hope I can drive it all the way till the end of its useful life. It's a really nice looking car which I'm happy to own. :)

The next one? Maybe I'll buy a Korean car. Cheaper and reliable enough. My bro drives a Chevrolet Optra and it's still serving him well after 8 years!

Endrene

AK71 said...

Hi Endrene,

Well, as long as we know what we are buying and are prepared to shoulder the consequences, we have nothing to complain about. ;)

I am happy you like your car and seem to enjoy it. This is so even as I baulk at the $2,800+ repair bill you have chalked up since purchasing it in January. Ouch. Haha..

I am now advising a friend to buy an 8 year old Mazda 3 or Nissan Sunny. There are a couple of options with depreciation of $400+ a month.

He only needs a car for the next couple of years. So, these should do the job.

EY said...

Hi AK,

You are certainly giving very good advice to your friend!

I was considering a Mazda 3 then as well. I like the grey/pewter one but I noted the fuel efficiency isn't that good. The depreciation came up to be about the same as my Opel Tigra at $6.5K to $7K a year. But I'm sure the servicing and repair costs would be way lower. :)

I have such a hefty repair bill because the parts are hard to find. The O2 sensor which I mentioned, the mechanic said it would only cost $200 if it is a Japanese car and $600+ for a BMW. I paid $900! And for the fan, it is only a compatible replacement, not Opel original but from Renault. Cost more than $500! For Japanese cars, there are those made in Taiwan options which cost as low as $100+.

This car is higher maintenance than I am. Haha. I better be learn to be frugal and cut expenses elsewhere. Sounds familiar? :P

Anyway, I became the butt of the joke when my male colleagues overheard my conversation with the mechanic. He told me he couldn't find the fan replacement and could only replace the water pump. I replied, 'Hmmm...if only fix the water pump, can I still drive my car?" One guy burst out laughing. Then my mechanic said cannot. He would try harder to find a replacement. Worst case, he'll take the fan apart and repair the motor. I suggested that I'm okay with just any fan. And the guys couldn't stop laughing. One of them suggested that I bring the box fan from my house and let the mechanic install in my car. -.-"

I must say, I need to thank that mechanic uncle for being so patient with me! Haha.

Endrene

AK71 said...

Hi Endrene,

The Mazda 6 I was driving before, I could get 12km per litre out of it. My current Mazda 2, I get 14km per litre. Not fantastic but pretty decent.

As for lower depreciation of the pre-owned cars I have found recently, I believe that credit goes to the cooling measures for cars. It might not be as easy to find a used car that depreciates at $400+ a month at the beginning of the year.

I am not a car mechanic. I only know how to fill the fuel tank, top up wiper fluid, change wiper blades and check tire pressure. So, I make sure I buy cars which are known to be reliable. ;p

Fuel consumption higher is not an issue. Car breaking down frequently is.

As for your car, I don't want to be a wet blanket but there are many other parts which have not been replaced. Crossing fingers that nothing else breaks down.

Why not find out how much you could sell it for?

EY said...

Hi AK,

Earlier this year, the Renault Megan I was considering had depreciation of $400+ a month.

Frankly, this Opel was an impulse buy. Now I have a feeling that nobody would want to take in my car unless I'm buying another one from the same dealer.

Thanks for your advice. Will keep that in mind. I definitely agree that reliability of the car is a more important consideration than fuel consumption. My car does 12km/L. Not that great too. But much better than Nissan Sunny.

My bro suggested that I go to the car forum to check out where I can find an Opel car mechanic. My husband thinks that changing to another 7.5 or 8 years old car will bring me back to square one. And unfortunately it's not the time to buy a new car now. :(

If this car becomes too difficult for me to handle, I'll either sell it away or bear the pain to scrap it, depending on how much I would potentially get back. I'll probably just take public transport to work. That would mean I'll bring work home instead of staying late in the office. Well, see how things go. No need to make any decision now, I guess.

Thanks for all the advice. Certainly helps to have different perspective for better decision making next time. Appreciate it. :)

Endrene

AK71 said...

Hi Endrene,

My very first car was a Nissan Sunny. Not a good looker and not fuel economical but extremely reliable.

Anyway, I think it would be a good time to visit the used car dealers from mid June onwards for anyone looking to buy a car (and who does not need to take a big loan). However, people thinking of selling their cars should try to do so before 6 June.

Whatever you decide to do, as long as you are happy, you can't be too wrong. ;)

hjteo said...

Hi Endrene,
Has not owned a opel before but used to have a daewoo which is a copy of opel. Parts were not as common so I got used parts from a workshop called Ang Kah Hoe which is in Pandan area. Nowadays with ebay, parts are more readily available with lower price if you are willing to wait.

Another workshop for Opel is CK Motors. I have not used them before but from mycarforum, they are recommended for opels.

Blessed day!

EY said...

Hi AK,

Yes, happiness rules me! Haha. I try to be zen about the money spent on the repair. I would like to think that I helped to keep the livelihood of the mechanic uncle in some way and the economy too. :D That uncle does honest work and his charges are very reasonable. He doesn't do continential cars though. For Jap cars, he's pretty good. If you ever need a referral, I'm most happy to give his contact. His workshop is in Sin Ming. :)

Saw a Mazda CX5 on the road today. Eyes widened and heart throbbed. Hahaha. Maybe when my pet Tigra finishes its term, I'll adopt this one as my new pet?!? :P

Hi hjteo,

Sincere thanks for sharing the info! I checked out the forum for Opel cars. CK Motors was highly recommended. I have taken down the info. For stockists, they shared that Fong Tat at Kallang/Serangoon Rd and Kian Hua at Veerasamy Rd carry parts for Opel and Renault. That mechanic uncle whom I sent my car to had also checked out these two spare parts sellers but couldn't find the original fan and in the end settled for the Renault fan. Car works fine now and I'm very relieved!

Cheers,
Endrene

AK71 said...

Hi Endrene,

Sin Ming is inconvenient for me. I prefer workshops in Ubi and Paya Lebar. This reminds me. My car is almost three years old. Time to get new tires. Sigh.

I believe you have found a comfortable angle to look at the repair bills for your car. I would have done the same. ;p

Did I tell you I won a CX-7 in a lucky draw? ;p

Musicwhiz said...

I'm just wondering when I can ever afford a car in sunny Singapore.....

AK71 said...

Hi MW,

I think you can afford one. You are probably not getting one because it does not represent value for money. ;)

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