Friday, December 4, 2009

How do I know? Cos I am a driver too.

Hi guys, sorry for the long lapse in not updating our blog. Really busy with our work especially me in the transition in my new work and also the moving out of our tenant. (Yes, I can don need to wear my shirt in the house liao haha...)

Anyway today's chapter as suggested by the title is a conclusion to a 6 months affair to pursue the elusive title of a local car driver in Singapore. Slogging long hours just so i can make the car payments, petrol, insurance etc etc. Is it worth it? Yes! Let me elaborate...

When we came from our honeymoon in August, I became a Tampinesian after my many years as a Chua Chu Kangian...travelling to church every week became a real problem after a while as church is in wild wild west. A typical sunday would result me in a cab fare of $27... (Ya i know i BIN TUA, cannot take the journey with our dear friend Mr. T already...) Especially after driving the hot Peugeot 307 Convertible during my wedding day, my body yearns for the intial thrust of a horsepowered engine from a stopline.

So there begins my journey of becoming a driver. Intially, I would spend hours every week looking at the internet for second hand cars website working out the math. Wats COE? OMV? Depreciation etc etc... In that process I learned that second hand cars are the most economical in the long run as a car WILL always be a depreciating asset.

Here are the fruits of my research and hopefully will assist you in your pursuit for your ride...

Before I go on, let me explain COE and OMV and PARF

PARF
PARF Car
In general, all new cars come with an Open Market Value (OMV). This is the original cost of production of the vehicle. If the vehicle is de-registered within 10 years from its first registration date, the registered owner will be entitled to a Preferential Additional Registration Fee (PARF) Rebate. This is normally a percentage of the OMV. This is how the term ‘PARF Car’ comes about. (This means how much you getting back when you scrap the car)

COE
Certificate of Entitlement (COE). Each month, a certain number of COE's are released for bidding and if successful, the vehicle entitlement is valid for 10 years from the date of registration of the vehicle.

OMV
OMV is in layman terms, simply means how much does it cost to bring your vehicle into SG WITHOUT TOUCHING THE ROAD, which means how much ur vehicle is valued.

In non layman terms, the amount dictated is based on the price actually paid or payable for the goods when sold for export to the country of importation. This price is assessed by the Singapore Customs, which includes purchase price, freight, insurance and all other charges incidental to the sale and delivery of the motorcycle/car to Singapore.

With that in place let's go!!


1. All car bodies depreciate over a 5 year peroid irregardless of the make or brand. This means at the end of 5 years, the vehicle is only worth its paper value (COE + OMV). Thus, when you buy a brand new vehicle, you are actually making a huge loss in the first 3 years.

2. Lower COE may not be a good thing if you want to buy a 1st hand car. Lower COE will only be a good thing if you buy a car and you intend to drive it at least for 5 years before scrapping. The reason is because lower COE cars do not have much appeal in the second hand car market. For example if 2 cars has the same mileage, same OMV and same cost but the COE differs, I would actually choose the car with the Higher COE. This is because at the end of 5 years, a higher COE will mean a higher paper value for me. I will explain it later...so leave it as this first..

3. Off peak car (OPC) is highly recommended if you just need to drive your vehicle on the weekends and on weekdays night. The government actually gives you a rebate of $17,000 from your ride. It actually first deduct your COE, thereafter it will deduct your OMV. If your COE and OMV combined is less than $17,000, it will not deduct the value of the car body. Through my research on the internet, I saw OPC vehicles with $0 Coe and $0 OMV. This is really bad as at the end of 5 years the car is worth next to nothing....I assumed the person probably bought this OPC car during the $2 COE peroid and the total COE + OMV is less than $17,000 thus the paper value is $0. Bad move, and i anticipate this car has no resale value and its true, after 6 months its still unsold..

Now let me explain how all the numbers work out to help you choose the best buy:

For example, a brand new Hyundai Avante today cost $51,999.

Breakdown of Car price:
COE: $17,189 (10 years)
OMV: $14,999
Car Body: $20,000 (5 years)

From here, we can tell that the depreciation every year for the car is $4,000 ($20,000 divide by 5 years)

The depreciation for COE is linear too. Thus the depreciaiton for the avante is $1,719 per year. ($17,189 divide by 10 years)

The PARF value for the vehicle is as follows:


So let's assume you are interested in a 3 year old Avante, what is a fair value?

Carbody Value: $8,000 ($20,000 - $12,000 ($4,000 times 3 years))
COE Value: $12,032 ($17,189 - $5,157 ($1,719 times 3 years))
PARF: $11,714 (110% times $14,199 (OMV) times 75% (<5 years)

Total Value= $31,746
Thus, fair value of a 3 year old Avante with the stated OMV and COE would be $31,746

A fair mileage for a used vehicle is 20,000km per year.

With all this into consideration, you can now decide whether a vehicle is fairly priced or not.

*Daniel Chia Smiles at |11:16 AM| *

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