Thursday, March 26, 2009

Used Car versus New Car

Anonymous said...
"Hi Skxly,

Great to come across your blogs, you did a very good job on providing us the very useful infos and tools :) I'm looking for a cheaper car as my daily transport for working, i don't care whether it's used car or new car as long as it's cheaper.

I'm a new learner on buying car. Would you mind to give me opinion among 2 cars below, which one is value to buy?

Date Posted 18-Mar-2009
Ad ID CAR-28873
Expiry Date 10-Jul-2009
Make & Model Kia Picanto GL 1.1

Price S$ 13,500
Type Hatchback

Engine Capacity 1,086 CC

Transmission Manual

Additional Information Description:

* Well Maintained And Marvellous Condition
* Accident Free
* Full Original Condition

OMV S$ 7,445
Depreciation S$ 1,705 / year
Registration Date 25/04/2006
COE Expiry 24-Apr-2016
Number of Owners 1
Mileage 22,000 km

S$ 29,999
Last Updated:
05 Mar 2009
S$ 4,890 (Last updated: 04 Mar 2009)
Monthly Instalment:
Vehicle Type:
Engine Capacity:
1,086 CC

The price showned in USED CAR ad is the total price that I need to pay? Does it include the COE? I find quite confusing to read the ad.. Need separate MOV payment or it alraedy included in the price stated? If the Total price is 0k or below, i plan to pay by cash.

Otherwise, anything above 20k i need to take up loan. The new car price included COE? The ad states price is inclusive of registratration, road tax, etc.. But i dunno the registration meant for COE or not."


Well, a used car should always be cheaper than a brand new car since the valuation will fall steeply in the earlier years of usage. The other exception is when COE quota premium increases offset the depreciation.

You should check with the used car dealer about the advertisement and get the breakdown details of all payment components. One additional payment for used car is the transfer fees payable to LTA. The price $13,500 does not result in a depreciation of $1,705 over 7 years; it should be $1,397 if $13,500 is the final price you pay. I believe that $1,705 includes the loan interest, transfer fees and others.

If you buy the Picanto new, your depreciation is $2,628 per year over the 10 years. Your consideration should be centered on the condition of the used car. If it is very road worthy and free of maintenance trouble, the used one is an obvious choice from the economic perspective. You can use the tool at my blog post Total Cost of Ownership to understand how much you will have to spend on each option.

Hope this helps. Remember that you have to pay a premium to have a new car...


Anonymous said...


I hope you can help me with a very general question. Under the current market situation, is it better to get a new car vs a used car? What are the pros and cons?

skxly said...

That is indeed a very general question. I want to address the part about the current market situation - it only impacts your affordability factor if your income is affected or can potentially change over the short term. The two questions that you really need to answer are:

1. Can I comfortably afford the price and operating cost of the car over its lifespan?

2. What criteria do you have for the car? Think carefully as a car is not a small commitment.

Hope this helps.

Anonymous said...

Hi skxly,

I wish to have found your blog earlier, very informative.
I am now using the SMFinCostOfOwnershipUsedCarV12.xls to calculate the cost of owning a car.

But may I suggest to include a chart that showing the breakeven which inclusive of (c5),(c7) and (c10)?

Thank you very much.

skxly said...

Thanks for your suggestion. You may copy the data to a new MS Excel file to create the charts. There are simply too many perspectives of looking at data.

Anonymous said...

Hi, may I know if I need to pay the COE and OMV for used cars?

skxly said...

The used car dealers usually quote the price which include the paid COE and taxes. You can compute the remaining COE value from the age of the car. The OMV can be confirmed with LTA using the vehicle registration number and Identity Number of the current owner.