Why you should only buy Used Cars in Singapore (except for one exception)

Two pieces of housekeeping before we get into this topic. The first thing is that there will always be folks who will buy new cars and there's nothing wrong with that. I have bought several new cars myself. Secondly, the case for used cars is nothing new or nothing unique to Singapore. What is unique to Singapore however are two factors that make used cars absolute no-brainers

Yes, that's a used car

The first one is the obvious one. The sheer quantum at which car prices operate mean that what would a $10,000 saving in say the US or UK, would be a$30-40,000 saving here. Do note that new car pricing doesn't equate to Depreciation and figuring out Depreciation in Singapore is a whole different beast (refer to my article on understanding Singapore Car pricing), but Used does equate to substantial savings just because cars in Singapore cost a minimum of 3X more than Europe and the USA.

The counter-argument against used cars in the developed world is usually that the savings on car pricing are often more than made up in the cost of repairs, maintenance and general upkeep of used cars, particularly those out of the warranty period. Here again, the sheer quantum of saving is what makes the case for used cars in Singapore. I'll just use the example of one famous spare part, that is often the archilles heel of used high end cars, Air Suspension, the likes of which you get on the Mercedes S Class and BMW 7 Series. In the USA, while a new 7 Series may start at about $80,0o00, you could probably get a used 7-8 year old one for about $15,000. It looks very attractive till you realise that if the air suspension fails, the cost of replacing the part and the labour will probably run you in for close to $5,000,a third of the purchase price of the car, completely throwing your economics out of the window.

In Singapore however, the 7 Series, that I own, was S$450,000 (US$320,000) when new. I procured it for S$92,000, not an insubstantial amount. That said, even if the Air Suspension fails, US$5000 (S$6500) will not completely my economics for the car, for if I can afford a $90,000 car, I can afford a proportionate repair. But the case goes further than this, as labour costs in Singapore are often significantly cheaper than what you would encounter in workshops in the US and UK. Why? Because a significant portion of Singapore's Blue Collar work is done by day workers, Malaysians riding in from the city of Johor Bahru everyday, to enjoy higher wages compared to Malaysia, but still significantly cheaper than the cost of typical developed world labour. Singapore has this unique balance of local and foreign labour which deserves separate study but this is one implication at least for automotive purposes.

However this is not the second Unique thing I mentioned at the top of the article. The Second Unique thing is that most Singapore registered cars only stay in Singapore for the entirety of their registered lives which is less than 10 years. Note that Singapore is probably the most developed city in the world ( I remember going to Monte Carlo and thinking how shabby it looked compared to Singapore. I had this Monaco dream in my head as most Petrol heads do) with roads good enough to run a F1 race on (as they do every year), and remarkably low traffic density (another story. The less I talk about Los Angeles, the better) due to the prohibitive pricing of cars. The result is that used cars are in remarkably good condition, their suspension and engines in great shape, their seats often barely used beyond the drivers seat and the average level of upkeep being high since most cars have had a warranty and free servicing thrown in by the dealer for the majority of their lives.

Growing up in India, a used car was well used and in Singapore frankly they are not. If you have an ick factor towards used cars, there's nothing I can do, but if you look at it objectively, a$200 detailing and perhaps a $2000 max in preventative maintenance is all you need to have a used car indistinguishable from one that is new.

Now to be clear, a car out of warranty period will require more wear and tear parts to be replaced. You do need to budget for this. But again looking at the differences in Quantum between new and used, it is an easy calculation.

Should you ever buy a New Car?

The answer is yes, you can. But only if COE (all terms explained here) comes down to a level which is significantly lower than the moving average of the previous few years. In this case, you can have the reasonable expectation that COE will eventually correct back to a higher price, increasing the equivalent new car price of your car and hence its value. However do not rely or wait for COE to come down. Predicting COE is harder than predicting Bitcoin and much like the crypto industry often defies gravity. This point is just to illustrate that some very specific circumstances, a new car can be justified.