Guide to Buying a Second-Hand Car in Singapore | COE and Insurance

Between record-high COEs and a surge in petrol costs, owning a car in Singapore will get even more expensive for quite some time to come. This is undoubtedly unwelcome for those who find themselves requiring a car, or who are looking to replace an ageing one.

While nothing beats the feeling of driving off in a brand new car (and that addictive new car smell), choosing a second-hand car instead will prove to be a more financially prudent choice, given the current circumstances.

Here’s our guide to buying a second-hand car in Singapore, with a focus on how to manage the finances involved.

Before you start browsing Sgcarmart’s used car listings, it's crucial to determine how much you can comfortably afford to spend on a used car in Singapore. This involves more than just the second-hand car price itself. You need to consider the total cost of ownership, which includes:

• Purchase price: The actual price of the second-hand car, which can vary greatly depending on the make, model, age, and condition.

• Certificate of Entitlement (COE): The COE is a document that allows you to own and use a car in Singapore for a period of 10 years. When buying a used car, the COE situation can vary. You might be inheriting the remaining COE duration or need to renew it, which will incur additional costs.

• Insurance: Comprehensive car insurance is essential for protecting yourself and your vehicle. The cost of insurance can vary based on factors like your driving experience, the car model, and the coverage you choose.

• Maintenance: Regular servicing and repairs are necessary to keep your car running smoothly. Older cars might require more frequent maintenance, so factor in potential repair costs.

• Depreciation: The value of your car will decrease over time. This is an important consideration for your long-term budget, especially if you plan to sell the car in the future.

Financing options are also a key consideration. Will you be taking out a bank loan or opting for in-house financing? Bank loans typically offer lower interest rates but may have stricter eligibility requirements. In-house financing, on the other hand, might be more accessible but could come with higher interest rates.

To help you get a clearer picture of the costs involved, use the LTA Expenses Calculator. This handy tool allows you to estimate the monthly expenses of owning a car, factoring in things like road tax, insurance, and fuel costs.

By carefully considering all these factors and setting a realistic budget, you can ensure that buying a second-hand car in Singapore is a financially sound decision.

Once you have a budget in mind, it's time to start researching and selecting the right car. But with so many options available, where do you even begin?

First, consider your needs and lifestyle. Do you need a small and fuel-efficient car for city driving, or a larger vehicle for family trips? Are you looking for a sporty ride or a comfortable family car?  Think about your daily commute, how often you'll be using the car, and how many passengers you need to accommodate.

When researching resale cars in Singapore, you'll come across two main categories: PARF and COE cars. Understanding the difference is crucial when buying a used car in Singapore.

• Preferential Additional Registration Fee (PARF) cars: These are relatively newer cars that are less than 10 years old. When you deregister a PARF car before its COE expires, you'll receive a PARF rebate, which can be used to offset the cost of a new car. This makes PARF cars a good option if you plan to upgrade to a new car in the future.

• COE cars: These are cars that are 10 years or older. When the COE expires, you can choose to renew it for 5 or 10 years, or deregister and scrap the car. COE cars for sale are generally cheaper than PARF cars, but you won't receive a PARF rebate when you deregister them.

Be sure to also evaluate factors like fuel efficiency, reliability, and resale value when making your decision. Remember, the used car price in Singapore can vary significantly depending on the car’s age, condition, and COE remaining.

COE – a topic that can make even the most seasoned car owner in Singapore scratch their head. It's a system that grants you the right to own and use a vehicle in Singapore for a period of 10 years. But what happens when you're buying a second-hand car in Singapore? How does the COE factor into the equation?

Firstly, it's important to understand that the COE is directly tied to the second-hand car price. A car with a longer remaining COE duration will generally command a higher price than a car with a shorter COE lifespan. This is because the buyer is essentially purchasing the right to use the car for a longer period.

Let’s break down the differences between renewing a COE and purchasing a car with an existing COE:

If the car you’re buying is less than 10 years old, you’ll inherit the remaining lease on the COE. Hence, there’s no need for you to bid for a new COE, and you simply need to acknowledge the transfer of ownership when appropriate.

You’ll also inherit any rebates your second-hand car may still be entitled to. These include rebates for the PARF, which is a significant bonus when you eventually deregister the vehicle.

But here's the catch: to be eligible, the car must be less than 10 years old and must not have been laid up. Plus, the rebate amount varies depending on the age of the car at deregistration. So, the younger the car, the higher the potential rebate! You can find the PARF rebate schedule online to see how much you could receive.

The PARF rebate is only credited when you deregister your vehicle. For reference, here’s the schedule of PARF rebates you can expect.

Source: OneMotoring

Besides PARF rebates, you might also inherit any unused road tax or rebates from schemes like those the Off-Peak Car scheme.

If the used car you have set your sights on has a registration date that’s close to 10 years, you’ll need to renew the COE to continue your ownership of the car.

Considerations for cars nearing COE expiry include:

• Ownership duration: How long do you plan to keep the car? If you're looking for a short-term option, renewing the COE for 5 years might be sufficient. However, if you intend to keep the car for longer, renewing for 10 years could be more cost-effective in the long run.

• Resale value: Cars with a shorter remaining COE generally have a lower resale value. If you plan to sell the car in the future, renewing the COE for a longer duration could help you fetch a better price.

• Cost of renewal: Renewing the COE involves paying the Prevailing Quota Premium (PQP), which can be a significant expense. Factor this cost into your budget and consider whether it's worth renewing the COE for a longer duration.

Failing to renew the COE before it expires will result in the vehicle being deregistered and scrapped, so if the COE is expiring soon, it’s a good idea to act sooner rather than later. There’s a grace period of one month after the expiry date, but at this point, you’ll be charged a late renewal fee.

COEs may be renewed for five or 10 years. A five-year renewal may be performed only once. After the five years have passed, your car will need to be deregistered and scrapped. There are no corresponding restrictions for 10-year renewals; you may do so as many times as you like.

As per the table, the amount you have to pay when renewing your COE depends on the duration of the renewal. For a 5-year renewal, you’ll need to pay 50% of the PQP, which is the moving average of the COE prices for your vehicle’s category in the last three months. Meanwhile, if there’s a 10-year renewal, you’ll incur the full PQP amount. 

Since it’s influenced by the movements in COE prices, PQP can varies monthly. You can quickly check the current PQP here.

Don't skip this step! Before sealing the deal, inspect the car thoroughly. This includes checking the exterior, interior, and mechanical aspects.

What to inspect:

• Exterior: Check for any dents, scratches, rust, or mismatched paint. Look closely at the body panels, bumpers, and lights.

• Interior: Examine the upholstery, carpets, and dashboard for wear and tear. Test all the seats, windows, and air conditioning.

• Mechanical aspects: This is where a test drive comes in handy. Pay attention to how the car handles, accelerates, and brakes. Listen for any unusual noises or vibrations.

Here's a checklist for your test drive:

• Review service history and accident records (if available)

• Check for any unusual noises or vibrations

• Test the brakes, steering, and suspension

• Inspect the tyres and lights

• Ensure all electronics are functioning properly

Pro Tip: For a more comprehensive evaluation, consider engaging professional inspection services. They can provide a detailed report on the car's condition and identify any potential issues that you might have missed.

Before you buy a second hand car in Singapore, ensure the seller has legitimate ownership and there are no outstanding loans or legal issues associated with the car. 

Familiarise yourself with the transfer of ownership process in Singapore. This typically involves submitting the necessary paperwork to the Land Transport Authority (LTA) and paying the relevant fees.  Ensure all the documents are in order to avoid any delays or complications.

All drivers in Singapore are required to be covered by an adequate motor insurance policy. This is also required before your road tax may be renewed, and as such, the policy should cover the entire road tax renewal period.

In order to be considered valid, a motor insurance policy must provide at a minimum third-party liability cover for deaths and bodily injury. This is so that any victims of traffic accidents can be covered by insurance.

There are no specific insurance policies specially catered for second-hand cars, so you can take your pick from any motor insurance policy licensed for sale in Singapore.

Having said that, it’s important to consider the following when picking a motor insurance plan to go with your second-hand car.

• While third party liability for death and bodily injury is a core requirement, this benefit doesn't apply to your and your passengers – only the victims. Which is why it’s a good idea to also have personal accident and/or hospitalisation and medical coverage for you and those who may ride in your car.

• Spare parts for older vehicles may only be available at specific workshops. To ensure all your repairs are covered, it may be worthwhile going with a plan that allows you to use a workshop of your choice, even if these plans usually cost more. 

• A second-hand car will likely not qualify for any new-for-old benefits, so don’t bother paying for any such add-ons. This benefit provides a brand new replacement in the case of total loss, but is usually only applicable to cars not older than 12 months.

The prices of second-hand cars in Singapore make buying a used vehicle an attractive option. Owning a pre-owned car can provide significant cost savings upfront and avoid the steepest depreciation rates experienced in the first few years.

However, potential drawbacks include higher maintenance costs, a limited choice of workshops for repairs, and possibly higher loan interest rates. Loan interest rates for used cars can also be higher than those for new cars.

When buying a used car, evaluate the COE status carefully. Consider how much usable COE time is left and whether the car’s price reflects its COE and market value fairly. Understand your intended ownership duration and renewal options to make optimal financial decisions. Ultimately, a balanced assessment considering one's budget and requirements is advisable when deciding between a new or used car purchase.

If you do decide to go for a used car, remember the tips and advice we've shared in this guide. With careful planning and thorough research, you can confidently navigate the second-hand car market in Singapore and drive off with a great deal!

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