4 things to consider before buying a used car

Between January 2015 and January 2016, used car sales in Singapore increased by 34.4%. This reflects a current trend in the automobile industry, where used cars have become a hot commodity, given the rising cost of new cars: the price difference between a new and a five-year-old Toyota Corolla Altis can be as wide as $50,088.

Apart from the lower purchase price, the process of buying a used car is faster than that of a new one. Drivers who are less particular about maintaining a car’s exterior are happy to save on costs by buying second-hand cars with minor cosmetic damage.

Despite the financial upside, buying a used car comes with certain risk factors too. Some of these are trickier to identify, especially for those unfamiliar with the used car market.

If you’re in the market for a used car, here are four main considerations to bear in mind.

1. Budget

Before thinking about the car, define a budget to guide your search. This should include factors like your monthly income, available savings, estimated annual maintenance fees, and the current Certificate of Entitlement (COE) pricing.

Based on these considerations, find the loans available, establish a practical installment plan, and buffer for other vehicular necessities like road tax. Remember to compare insurance policies at this stage too.

Your planned budget will help you prioritize what you’re looking for in a used car. After you have shortlisted your options, research the open market value (OMV), Preferential Additional Registration Fee (PARF), COE rebate entitlements, and the price range of the cars you are considering. This information helps you to define the value of each car and equips you with negotiating power.

This research also enables you to identify which sellers are pricing too high or too low. Pro tip: if a price looks too good to be true, there’s probably something undesirable about their used car, such as the mileage or the overall condition of the car.

1. Car Condition

Most used car buyers cite cost savings as their reason for not buying new. However, if a used car is in poor condition and prone to breaking down, a large portion of your cost savings will be spent on repairs. For example, if the used car’s purchase price was $50,000 but repairs over its lifespan add up to $10,000, the buyer has saved $10,000 less than he expected.

This is why it’s important to get a vehicle inspection and history report done before you finalize your choice of used car. To ensure a thorough inspection and an objective report, conduct a third-party inspection at a credible workshop/center such as VICOM or Automobile Association of Singapore (AAS). This helps assess the value of your car and determines how the projected cost of repairs impacts your cost savings.

The best way to understand the car’s condition is to conduct a test drive. The things to look out for when test-driving a used car vary significantly from the things to look out for when test-driving a new car; some of which include transmission concerns (engagement, lurching, clutch, and gear slipping) and vibrations.

When testing transmission, drive multiple vehicles of the same model to get a sense of healthy transmission, which will help you identify transmission issues. Schedule your test drive when the engine is cold (e.g. in the morning), because some models’ transmission issues are known to only arise when the engine is starting up.

On top of helping you assess the condition of the car, a test drive gives you a sense of your comfort levels in managing the car. While research into specs and reviews can be helpful in shaping your expectations, driving the car will give you a realistic picture of the deal you’re getting into.

1. The credibility of the seller

Untrustworthy sellers or dealers can leave you with a faulty, misrepresented product or – even worse – no product at all. Here are some ways to protect your interests.

Firstly, figure out if the seller is the owner of the car or a dealer. If the car is on consignment, ensure the owner is aware of and approves this sale in case the dealer intends on completing the financial transaction, but has no authority to transfer ownership of the vehicle.

Secondly, mitigate the likelihood of being scammed by having the Land Transport Authority (LTA) facilitate an immediate transfer of ownership upon completing the sale transaction. Set up the transaction with the seller at LTA’s office, and only transfer payment after an LTA official instantly transfers ownership of the vehicle upon the seller’s receipt of payment.

1. Insurance

Once you have chosen your car, compare insurance policies that provide coverage adequate to safeguard it. Since road conditions are uncertain and volatile, even the most experienced driver may encounter fender benders and other accidents.

Your car insurance policy should meet the following minimum requirements:

• Sufficient coverage for you – medical expenses, towing costs if your car is damaged and unsafe to drive
• Third-party coverage – medical expenses for passengers, coverage for another driver, coverage if you’re legally responsible for someone’s death and injury, family protection for surviving children
• Repairs guarantees and car replacement – a list of credible and authorized workshops or, better yet, entitlement to any workshop of your choice, and new car replacement under 12 months old

Without the hassle of going through an agent, car owners can buy FWD’s Car insurance online, eliminating agent fees and simplifying the purchase process. You can even get a quote in less than a minute, how convenient is that?

Conclusion

When choosing a used car, remember to do your due diligence to avoid getting short-changed or even scammed. Besides thoroughly checking the condition of the car before you commit, compare insurance policies so that you get the best safeguard against accidents and other unforeseen situations on the roads.