With the latest COE results for Category A vehicles reaching $45,000, a more viable option is buying a used car instead of committing to a new car purchase. Here are five common mistakes to avoid before making your purchase.

Buying a used car can have several benefits, one of it being the much lower down payment required. Take this used Mazda 3 as an example. It only costs $38,000 compared to a brand new Mazda 3 that is priced at approximately $95,888. That’s a difference of $57,888!

As you can probably tell, used cars provide better value for money as most of its depreciation has already been absorbed by the previous owner (as much as 30 per cent for the first year). Furthermore, you won’t have to worry about COE bidding, which can take a few months depending on the COE package you chose. Last but not least, insurance premiums are lower for used cars, since car parts are readily available for older models.

Here are some of the common mistakes you should avoid when shopping for a used car.

Failing to check if it is a COE or PARF car

There is a huge difference between a COE and PARF car. Depending on which you choose, it will affect the car’s value when you decide to sell or scrap it.

For those unaware, a PARF car is aged below 10 years old, which makes it eligible for both COE and PARF rebates upon deregistration. The PARF rebate can be calculated via the table above. This rebate allows you to recoup the Additional Registration Fee (ARF), which was already factored into the price of the car when it was first purchased.

On the other hand, a COE car has passed the 10-year mark, and upon deregistration, you will be able to recover the unused portion of the COE. The COE rebate can be calculated using the formula below:

COE rebate = (QP paid x unused period of COE left) / 120 months (10-years of COE)

When it comes to used cars, COE cars are generally cheaper to own than PARF cars. Because of its age, buyers often have more leeway to negotiate a better price with the seller.

However, do note that COE cars, although cheaper than PARF cars, tend to incur higher maintenance costs and road tax than their PARF counterparts.

Choosing a less than ideal loan to finance your used car

In order to lower the cost of monthly repayments, car buyers typically take up a long-term car loan. While you might be paying less each month, this could add up to a higher overall cost at the end of your loan period, due to the interest incurred.

Here is an example:

Loan Amount	Interest Rate	5-Year Loan and Monthly Instalments	7-Year Loan and Monthly Instalments	Interest Paid
$40,000	2.68 per cent	$45,360 Monthly Instalment = $756	$47,504 Monthly Instalment = $566	7-years: $7,504 5-years: $5,360 Difference: $2,144

The table shows an additional $2,144 in interest if you opt for the seven-year loan. Of course, the most cost-saving option is definitely to pay the full sum of the used car in cash. However, if that is not possible, you can consider a shorter loan tenure to save some money on interests.

Remember, a car loan can affect your credit score and any future loans that you wish to apply for. These include personal loans, HDB loans and student loans. Hence, it is important to think twice before applying for any unnecessary loans to avoid bad debts or missed installments.

Lastly, you should always compare a used car dealer’s in-house loan with a typical bank loan. In some cases, a bank loan might offer you a more attractive loan package than an in-house one.

For those of you who aren’t aware, used car dealers also do earn a profit from getting customers to sign up with their loan packages. Remember to do your due diligence and compare interest rates and loan tenures before signing for a car loan.

Not asking for the Car's history and maintenance records

Does the used car you’re planning to buy come with a long list of previous owners? If yes, it might be helpful to find out a little more about the car, especially if it has a relatively low mileage.

With the maintenance records, you will be able to tell if the car has been well taken care of previously. It should also highlight any major repairs that have been made to the car.

If the dealer insists that the car is in good condition despite the many ownership changes, do ask him for the car’s maintenance records to support his claims.

If repairs were made to key parts of the car, like chassis, suspension, gearbox, engine and brakes, it could indicate a faulty component. This could have been due to poor maintenance or an accident.

To avoid incurring future repair costs, avoid vehicles with poor maintenance history and those with multiple previous owners.

Failing to go for a test drive & get a car evaluation

It is always good to go take your chosen car for a test drive, which allows you to judge the car's handling, brakes, and engine. If the dealer refuses to let you do so, there could be an underlying problem that they do not wish to reveal. In such cases, do exercise caution before committing to your purchase.

Besides that, you should also ask the dealer for a comprehensive car evaluation report. If the dealer doesn't produce one, you should insist on sending the car for one. A car evaluation is more thorough than a normal car inspection, giving car buyers a better sense of a used car’s overall condition before the purchase is completed.

The car will be evaluated according to the SAFE checklist set by CASE. After the car has been evaluated, you will receive a comprehensive report that highlights the existing condition of the car, including defects and other observations.

If repairs are in order, you can request for the dealer to fix them before you complete your purchase. You may even request for a price reduction once the repairs are completed.

Not purchasing a comprehensive car insurance plan

Just like how you would shop around for a used car, you should also look for a comprehensive car insurance plan that will protect you and your car in the event of an accident or breakdown.

Which insurance plan, you ask? Well, we highly recommend FWD Car insurance for its comprehensive coverage and ease of signing up online.

With 98.9 per cent of claims approved in 2019 and 2020*, FWD truly offers a trustworthy claim experience for their customers. In addition, their Car insurance offers a 50 per cent lifetime NCD guarantee and complimentary 24-hour roadside assistance for accidental and non-accidental breakdown.

In the event of an accident and you have to send your car for repairs, you will receive a daily transport allowance of up to $80 per day for up to 10 days while your car is at the workshop. Speaking of which, you will also get an extended workmanship defects warranty if repairs are done at one of FWD's premium car workshops across Classic (basic), Executive (mid-tier) and Prestige (upper-tier) plans.

The Executive and Prestige plans even allow you to have a courtesy car for up to three months if your vehicle is permanently lost or written off due to an accident.

If you wish to allow someone you trust to drive your car, the Executive and Prestige plans automatically cover your friends and family without you having to name them on your policy. You can also buy this as an add-on to your Classic plan.

For married couples, you have the option to add-on a Family Personal Accident insurance plan at only $53.50 per year to keep your family protected while on the road. This bundle is exclusive to FWD Car insurance customers!

Just like other Personal Accident plans, you will receive $100 daily (for up to 90 days) if you or your family member(s) are hospitalised due to an accident. It also includes a $50,000 payout in the event of death or total and permanent disability.

Remember to keep yourself protected by getting insured today! Simply log onto FWD's website to find out more about the various car insurance plans they have to offer.

Conclusion

When it comes to buying a used car, always remember to exercise due diligence by comparing prices and asking questions about the car you’re interested in.

At the end of the day, the decision to purchase a car lies in your hands, and you should not feel obligated to complete a purchase unless you are 100 per cent certain that the car is right for you.

ALSO READ: How does COE affect the resale value of used cars?

Unless you want to end up with buyer’s remorse, always remember to test drive your car and obtain its maintenance records. A car evaluation report should also be completed before the car is officially transacted.

Last but not least, do get yourself (and your car) covered by a trusted car insurance. Accidents and breakdowns can occur anytime and the last thing you want is to pay through the nose for expensive damages and repairs.

This article was first published in Motorist.