9 Ways You Could be Losing Big Money When Buying a Used Car
- Buying a ‘new’ used car
Car depreciation is the highest for the first three to four years. Thereafter, it depreciates at a more gradual pace till it reaches the end of its COE. If you buy a used car that is into its second-year, you are bearing part of the brunt of the depreciation. It is therefore important to work out the depreciation rate of the car and determine whether you are buying it at the right time.
- Failure to identify and factor in the interest rate
Interest rates for a pre-owned car will be higher than a brand new car due to the higher risk the lending bank will need to shoulder. The higher risk comes from the limited value of the pre-owned car that the bank can recoup in the event you defaulted on your loan. Buyers should always be conscious of the higher interest rate payment.
- Not knowing there is limited or no warranty
Pre-owned car usually comes with very limited or no warranty. Limited warranties are usually provided by dealers as part of the offers. However, these warranties only cover minimal areas of the car and valid for a short period of time at most.
- Buying directly from the car owner
Some buyers (who are wary of second hand car dealers) preferred to buy the car directly from the car owner. There is a danger of doing so as the “Lemon Law” introduced in late 2012 only cover goods sold by registered businesses. Car buyers will be left in the lurch should there by any problems that cropped up after the purchase.
- Not making effort to find the best loan and insurance
Many second hand car dealers in Singapore provide in-house financing for the convenience of the buyers. It is however advisable for buyers to shop around and ask for quotes from multiple financers and insurance companies for comparison to ensure the best rate are given based on the buyer’s credit score.
- Failure to inspect the car properly
Regardless of any claims on “Accident Free” or claims on the integrity and condition of the car, buyers should do their due diligence and check on the condition of the cars they are buying. It is encouraged to send the car for an inspection (for a fee) at STA or Vicom.
- Did not compute on the right value for the car
The car depreciation rate, road tax, COE, OMV and pricing are clearly provided by the car dealers. Use the figures and compute the right price for the car you want to buy. Negotiate for the right price of the car. Do note car dealers are out to make a living as well. So be realistic about the price of the car to pay for.
- Buying the wrong car
Always research and research the car you are interested to purchase. Find out the car performance, fuel consumption, features, and other specifications. Do not make a hasty decision and go shop without a specific car model in mind.
- Failure to compute the annual cost of the car
Buyers need to determine how much they can afford so as to determine the right car for the purchase. Never ever over stretch your finance and take up a car loan that you will have difficulty in paying it. Work out the annual cost of the car ownership and determine what are the cars you can afford.