What If My Car Is Worth Less Than I Owe – As your car approaches its tenth year, you may realize that you’ve reached the stage where you need to decide which path to take next.
You can keep your beloved car and renew its COE so you can still drive it for the next 5 to 10 years, or ditch your 10-year-old car and buy another one to create new and exciting memories .
What If My Car Is Worth Less Than I Owe
Each of these methods may have certain advantages and disadvantages, taking into account factors such as cash discounts, depreciation and costs. Let’s take a look at some of them to help you choose the one that’s best for you
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First, you need to know that you can get 2 cash rebates when you sell your car. Existing Additional Registration Fee (PARF) and Certificate of Entitlement (COE) Waivers and the Age of Your Vehicle These cash rebates will be refunded to the owner at check-out, ranging from $6,000 to $20,000!
If you’re buying a second car, the good news is that you can use these discounts to offset its cost. Assuming your down payment on your existing car is $20,000 and your new car is $100,000, your “real” cost is $80,000. If you include new car discounts, your car price will be even lower
However, if you choose to renew your vehicle’s COE, your cash discount will be forfeited. After deductions are made, you should consider these deductions as part of your car’s COE renewal fee. Therefore, you must remember to add this lost rebate on top of the PQP you need to pay to renew your COE to get the “true” cost.
Still not sure what exactly a PARF or COE discount is? Click here to know better as this is very important for all car owners
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Another thing to consider before your car’s tenth anniversary is out-of-pocket costs. Unlike buying a new car, when you renew your COE, you must pay the prevailing quota premium (PQP), which is the running average of your COE scores over the past 3 months. The main difference between COE and PQP is that PQP prices are less volatile than COE prices. This means you don’t have to worry about your PQP increasing rapidly when you plan to update your COE, or your PQP suddenly decreasing after you update your COE.
One of the main benefits of renewing your COE is that you have the option to renew for 5 or 10 years. If you renew for five years, you only pay half the PQP! So, if your PQP is $40,000, you’ll only be able to withdraw $20,000 by the time you accumulate it to five years.
When you buy a new car or a second car that’s less than 10 years old, you can only bid on a new 10-year COE or pay off the vehicle’s existing value. Unless you’re buying a used car that’s less than two to three years old, you’ll typically have to pay more money up front.
The third factor to consider is the maintenance component. We all know that a 10-year-old car will show considerable wear and tear over time. Although COE updates may seem relatively cheap compared to buying a car, you still need to consider regular service and more expensive maintenance to keep your car in good condition for the next 5 to 10 years. Some examples include regular engine oil changes, expensive replacement parts and more regular shop inspections. The downside is that you don’t get any warranty, but the upside is that if the car is in relatively good condition, you won’t have to worry about these extra costs again and again!
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In contrast, if you buy a second car, especially if it has warranty or lemon law protection, maintenance costs are less important. This is because if you notice a breakdown or problem with your car, you can claim the cost of repairs. Keep in mind that warranties come with certain terms and conditions, so be sure to read them carefully to understand what parts are covered by the warranty to ensure you don’t run into any issues with future claims.
This is a reminder that buying a car or renewing your COE is more than just a lump sum. Factors like inspections, service and maintenance should be considered when making your decision.
Click here to learn how to better protect yourself 4 Lemon Law Facts Every Driver Should Know!
Fourth, depreciation also affects your decision. Depreciation on a vehicle is calculated based on the value of the vehicle minus the minimum PARF and then divided by the remaining months. Confusing isn’t it?
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Depreciation, or how much your car loses value each year, is considered by many to be a key factor in comparing different cars. As a rule of thumb, the lower the depreciation on a car, the higher the value of the car.
When you buy a car, the depreciation rate is usually high. This is because there are more costs involved such as COE, PARF, bodywork, and even the profit margin of the dealer you purchase from. Note that some vehicles less than two years old may appear cheaper, with a lower initial cost, but may have higher depreciation than similar models with additional COE expiration dates.
However, if you’re looking for a vehicle with lower depreciation, there’s some good news. Cars with rebuilt COEs typically have the lowest depreciation rates in town! This is because when you renew your COE, your vehicle is considered paid in full, so only the PQP and forfeited PARF will depreciate over the next 5 or 10 years.
Another quick tip! Renewing a car’s COE for 10 years will generally result in lower depreciation than renewing it for 5 years because you can amortize the cost over twice as long.
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Today in Singapore, you can get loans for renewing your COE and buying a car, with repayment terms ranging from five to seven years. That’s a very tempting offer, isn’t it? But wait. Before you decide to take out a loan, let’s consider a few things.
The advantage of a loan is that you don’t have to take a lump sum. When you buy a car, you can get a bank loan for 60 to 70 percent of the car’s value, with monthly payments for up to seven years. But the disadvantage is that you have to pay interest to the bank. This interest amount will become an additional cost to your vehicle.
One major advantage of renewing your COE compared to buying a car is that you get 100% financing. Since you can get the full loan, you can renew your COE for 10 years with just $1,000 up front, which will be paid off in seven years. However, just like buying a car, you are also affected by interest rates, which can increase the cost of updating your COE.
Want to get a loan to renew your car’s COE? Click here to compare the lowest interest rates in town!
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If you’re still interested in buying a used car, he’s just launched a used car listings page! This bidding platform is the first of its kind because we connect you directly with sellers for all the benefits and affordability you won’t find anywhere else. So start your search now!
Armed with this information, you will be able to make a fair comparison with any vehicle you are shortlisted for purchase.
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Automotive News January 4, 2024 COE First Solicitation Results for January 2024: COE started the year like a quiet dragon, with Cat A down $20,000 to $65,010 and Cat B down $25,000 to $85,010 , Cat E dropped $12,000 to $106,388.
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Automotive News January 17, 2024 January 2024 COE Tender 2 Results: Automotive COEs roar like a dragon awakening. The content team brings you industry-leading vehicle reviews, news and research tips to help you find your perfect car.
Car finance companies are great at this
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