Due to Singapore's high car costs, driven by the Certificate of Entitlement (COE) and taxes, the decision between buying a new or used car will significantly impact your finances in the long term

If you're weighing your options, this article provides a concise overview of the financial and practical factors to consider.

Is it better to buy a new or used car right now? The answer to this question requires careful consideration of several practical and financial factors.

Upfront costs

New cars come with significant initial expenses. Here’s a list of what you’re paying for when you buy a new car in Singapore:

• Standard registration fee: $140

• Open Market Value (OMV): The price paid to import a vehicle into Singapore, covering the car's purchase price, freight, insurance, and other related costs. This is determined by Singapore Customs.

• Excise duty: 20% of the OMV of the car.

• Goods and Services Tax (GST): 9% of OMS + excise duty

• COE: Bidding prices for mainstream cars have frequently exceeded S$80,000 - S$100,000 in recent years.

• Additional Registration Fee (ARF): A tax based on the OMV of the car, which can range from 100% to 320% depending on the OMV's value.

Combined, this can easily double or even triple the final cost of a new car in Singapore. 

Used cars in Singapore offer a more affordable entry point. The COE cost is spread over its remaining lifespan, and much of the ARF would have been absorbed by the previous owner. Plus, you might be eligible for COE and Preferential Additional Registration Fee (PARF) rebates. While road tax and excise duty still apply, the immediate financial burden is considerably less.

The impact of depreciation

New cars in Singapore experience rapid depreciation, with a substantial portion of their value vanishing the moment they leave the showroom, and their value declines sharply over the first three years.

Buying a used car that's around 3 to 5 years old can often be a smart financial move in Singapore, as these vehicles have already gone through their most significant depreciation, allowing for better value retention compared to buying a new car.

Interest rates of loans

If you’re financing your car purchase with a loan, you must also factor in monthly instalments, the size of the downpayment (often a significant portion of the price), and the total loan tenure, which is subject to regulations from the Monetary Authority of Singapore (MAS).

Banks and finance companies often charge marginally higher interest rates for used car loans compared to new car loans, typically due to the perceived greater risk associated with older vehicles.

As a result, while interest rates for new cars can range from around 1.99% to 2.78% per annum, you might find used car loan rates slightly higher, ranging from 2.78% to 2.98% per annum. Of course, these figures can vary between lenders and the age of the used car.

Auto insurance costs

The higher market value and potential repair or replacement costs of new cars in Singapore typically result in higher insurance premiums compared to used cars. Moreover, some insurers may require comprehensive coverage for newer vehicles, which can add to the overall expense. 

Despite these factors, the No-Claim Discount (NCD) provides a means to lower insurance costs over time, regardless of the car's age.

Technology and safety features

When considering the choice between a new car vs a used car in Singapore, one key difference lies in the available features. New cars typically come equipped with the latest technology, including sophisticated infotainment systems, advanced driver-assistance systems (ADAS), and improved fuel efficiency. 

While older used cars may lack these advancements, a used car that's only a few years old (around 3 to 5 years) can often strike a good compromise, providing a blend of modern features and affordability. 

Upkeep costs

When considering older used cars in Singapore, a major factor to keep in mind is the potential for higher maintenance costs and the need for replacing worn parts. Unlike newer used cars that might retain some of the original manufacturer’s warranty, older vehicles usually lack this protection, leaving owners to bear all repair expenses.

While certified pre-owned programmes from dealerships offer a warranty option, this added security generally comes with a higher price tag.

» Learn more: How you can buy a new car in 7 steps

» Learn more: How you can buy a second-hand used car in Singapore

This table offers a guideline for typical price differences between new and used cars in Singapore. Please note that this is not an exhaustive list of all car ownership costs, and actual amounts may vary depending on the car model, loan terms, and other factors.

* Cars with an OMV of S$20,000 and below are entitled to a maximum loan value of 70% of the car’s price, leading to a minimum downpayment of 30%.

** At an interest rate of 2.48% for both loans
*** Variable according to the borrower’s preferences, loan terms used are the maximum length available.

**** Maximum loan term on a passenger car less than 10 years old is typically calculated based on the number of months left on the COE

Source: SGCarMart

When it comes to choosing a new or used car in Singapore, there is no single right answer. It really depends on your personal financial situation, the purpose of the car, and your lifestyle. If you truly desire the latest gadgets, the new-car smell, and the full 10 years of COE, then buying new might be worth the extra cost.

But if you're trying to save money and don't mind spending some time checking things out, a used car with a shorter COE can save you a lot. Regardless of your choice, remember to conduct thorough research and understand all associated costs.