The Heeren

Mondays to Saturdays
From 8 am to 5 pm
$2.00 for 1st hour
$1.30 for subsequent ½ hour
From 5 pm to 11 pm
$3 per entry

Sundays & Public Holidays
From 8 am to 11 pm
$3.00 for first 3 hours
$1.30 for subsequent ½ hour

All car park charges are subject to 7% GST.

Source: http://www.heeren.com.sg/information/info_transport.htm

More Gantries and Higher Rates

I am surprised that CBD gantries see increased rates from 6-8pm when the Singapore River Line gantries start operations for the same time period. The later gantries are intended to discourage motorists from using the area as a through route as reported in today's Straits Times - "The Land Transport Authority (LTA) noted that about a third of the traffic entering the area does not stop there. The vehicles are just passing through en route to somewhere else".

My opinion is that the new Singapore River Line gantries may meet their objectives and fewer vehicles will go into the business district. So why the need to increase CBD gantries' rates now? I can accept an increase in two months if the criteria of travel speed above 20km/h at least 85 percent of the time on those roads is not met.

LTA could also be more transparent with the analysis and publishes the reports. Do these reports contain proprietary information? I am sure that there will be many reactions but isn't feedback from the public helping? Maybe there is a plan to market the traffic management expertise and experience overseas ..... perhaps "LTA (Singapore) Inc." in the making....

Overtrade for a New Ride?

I have receive this request from LIM Y W for advice:

"Hi, need your help to understand the relationship between overtrade, cash rebates etc in determining if its useful to buy a car. My stituation is this

- have a car coming to 5 years
- outstanding loan is still around $50k in June. unlikely to get a trade in to full redemption value at normal circumstance.

hence,
- would it be useful for me to ask for an overtrade value to offset this process of selling off my old car?
- if I combine this with the cash rebate, would it make sense?
- for cash flow, I would also look at loans 7 years or above, and maybe even 100%

so far, current car is the longest I have held onto a car. looking to selling cos am keen on other models and people have said that if I want to sell, the best time is to do so before its 5th year. If I get the right car, I would look to holding onto it for more than 3 years, maybe even 5.

any advice?"

Let me first explain the Overtrade practice by dealers. It is introduced when the MAS regulation for a motor loan limit of up to 70% of the car price was in effect. A typical scenario was that the motorist wanted to trade in his old ride for a new one but the value of his old ride was not sufficient to match the downpayment.

Example:
Value of old ride = $10,000 (market value - outstanding loan balance)
Price of new ride = $70,000
Required downpayment = 30% x $70,000 = $21,000
Maximum loan amount = 70% x $70,000 = $49,000
Shortfall = $21,000 - $10,000 = $11,000

Overtrade amount = OT
In order to meet maximum 70% loan amount, 30% x (70,000 + OT) = 10,000 + OT
Solving the equation, OT = 15,715
Inflated price of new ride = $85,715
New downpayment = 30% x $85,715 = $25,715
Maximum loan amount = 70% x $85,715 = $60,000

Thus, the trade-in value for the old ride was increased to $25,715. The difference was that the buyer had to sign up a new motor loan of $60,000 instead of $49,000; no additional cash outlay was required.

Since MAS had relaxed the rule to allow for 100% loan, the Overtrade scheme has been used to help motorists with their current ride in negative equity. What is negative equity? See my post on "When is your Ride Breaking-Even?". The overtrade scheme is essentially carrying over the outstanding loan balance after deducting the market value of the old ride to the loan of the new ride. Thus, it is a cashflow tool but it burdens the borrower with a bigger loan.

What about Cash Rebate? See my post on "A Deep Dive into the Cash Rebate scheme". Cash rebate is essentially getting cash upfront for a loan with a higher interest rate; the cash is either used to lower the purchase price or returned to the buyer.

Back to Lim's request:
1. What is the objective of getting a new ride?
Lim: "am keen on getting other models"
Lim: "If I get the right car, I would look to holding it for more than 3 years, maybe even 5."

How do you define "right car"? If your criterion is fashionable model, then all cars will not be right after newer models are out. My definition of a right car is one that takes my passengers and I to our destinations safely with a reasonable known running cost.

In my opinion, it is a very expensive lifestyle to keep upgrading to a newer model every few years. It is fine if you can afford it but using the two schemes to facilitate that will create a long-term strain on your financial health.

2. When is the best time to sell your old ride?
Cars are made to last for more than 10 years and we should strive to utilize them for the full 10 years lifespan (limited by the COE expiry). You can use the "Financial Cost of Ownership Tool" to analyze the annual depreciation. Although your old ride has higher PARF rebate up to age of five years, you have to consider the rapid depreciation in the earlier years too. You can see clearly that the depreciation rate is decreasing over time i.e. you incur less to run your ride in the later years.

I can think of some good reasons to change your old ride:
a. Heavy fuel consumption, coupled by need to drive extensively for your job - consider green cars such as the hybrid or CNG model.
b. Need major parts replacement (eg. gear box).
c. Family size has outgrown current capacity.
d. Road worthiness is a concern.

Showroom cars are always appealing and you should always think carefully over the decision for a new ride. Consider the stakeholders in the motor business:
1. Government - new car sales will help to increase our budget surplus with the "income" from COE quota premium and vehicle taxes.
2. Dealers - they will go out of business if there is no car buyer.
3. Banks - they will go out of business if there is no borrower.

Don't step into a showroom and you will avoid being tempted to change your ride. Hope this helps.


Related posts: Cost of Ownership, When is your Ride Breaking-Even?, Costly Frequent Car Refresh?, Financial Cost of Ownership for Used Car

COE Prediction - June 2008 2nd Bidding Exercise

The fall in the last bidding exercise is attributed to the start of the school holidays - most parents are away on travel with their children. On top of that, the high oil price will dampen the demand for the bigger c.c. lower end cars.

Demand will improve if more dealers cut their selling price. However, the raising cost of living will make it harder to do so. COE quota premium usually rebound a little after falling across the board in the previous round. This is what I observe from past trend.

Prediction on June 6:
Category A: $15,000-16,000
Category B: $15,000-16,000

Verdict on June 18:
Category A: $14,101
Category B: $14,689