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Why are used cars having same depreciation as brand new


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Depreciation is the difference between your buy and sell price divided by the number of years. In your example, buy 100 sell to dealer 70, over 2 years means 15k per year for the first car. Now for second car 90 assuming you drive for 10 years and scrap at 10k, would be 8k a year. Different period different depreciation. Since they are 2 different cars anyway.

 

If you want to make yourself happy, then average out the 12 years (10k per year) and tell yourself your Ave depreciation is only 10k a year for the first car.

After 10 year still need to factor in the coe cost if renew coe. Edited by Kopites
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Supercharged

After 10 year still need to factor in the coe cost.

I think Volvobrick meant 1st car and 2nd car ownership period which us 2+10
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I think Volvobrick meant 1st car and 2nd car ownership period which us 2+10

Yes. Just re-read. Thanks.

I think Volvobrick meant 1st car and 2nd car ownership period which us 2+10

Yes. Just re-read. Thanks.

I think Volvobrick meant 1st car and 2nd car ownership period which us 2+10

Yes. Just re-read. Thanks.
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I have a hypothetical question.

 

Imagine you bought a car 2 years back at 100 K. Assuming u paid coe at 60K

 

2 years later , the same brand and model has drop to 90K due to coe drop.

 

Used car dealer take in your car and you top up 20 K for the new car.

 

Do u then take the offer as it equates to per year depreciation at 10 K. Or do you need to deduct the cost that the car has depreciated, in this case 70K for trade in value.? A lost of 30K or 15 K per year?

 

Just for discussion and lets leave out the CEVs component assuming that it is neutral band.

 

Lay out all the figures.

 

Bought Car A at 100k in 2016 -> -100k cash

Sell Car A at 70k in 2018 -> -100k + 70k = -30k cash

Buy Car B at 90k in 2018 -> -30k - 90k = -120k cash

 

But don't forget you drive for 2 years liao, which is worth 20k -> -120k + 20k = -100k cash

 

Looks like a good deal if the scrap value of Car A and Car B is the same. Basically you get to refresh your car at no extra cost.

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Ok .. did not think about this point (till end of COE) ...

How to check the deregister value of the car?

 

People (friends) tell me to look for low depre when buying a car ...

Does it really matter if i plan to sell it before end of COE?

If u buying used, looking at depreciation is important to measure whether the car is pricey or not. Same car model same year diff month registration might sell at same price but have diff depreciation. Even if u intend not to drive till scrap, buying a lower dep car will minimise the loss as compared to buying higher dep car for same model same year registered.

 

If u r buying an older car like more than 5 yrs, expect a lower dep than 1st 3 yrs old car.

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Lay out all the figures.

 

Bought Car A at 100k in 2016 -> -100k cash

Sell Car A at 70k in 2018 -> -100k + 70k = -30k cash

Buy Car B at 90k in 2018 -> -30k - 90k = -120k cash

 

But don't forget you drive for 2 years liao, which is worth 20k -> -120k + 20k = -100k cash

 

Looks like a good deal if the scrap value of Car A and Car B is the same. Basically you get to refresh your car at no extra cost.

Yep this is about right. Just need to deduct the scrap value as well.

 

So if scrap value is $10k, your original depreciation is $9k pa.

 

If you make the trade, then your total cash outlay is $120k and your total depreciation over 12 years is $110k, so $9.17k.

 

It's a good trade if those are the numbers because:-

 

1. After 2 years, some items like tires, battery, etc need to be replaced, so by selling to dealer before replacement, there are some savings there.

 

2. You refresh your AD warranty. If your AD gives 3 years warranty, then you only have 1 year left if you bought in 2016. By making the trade, you refresh to 3 years and logically, warranty years are worth more than non warranty years.

 

Do note however, if you took a loan, there are frictional costs in prepaying the loan you need to take into account. This may add $2-3k to your transaction cost, which equates to $170-250 addition to your depreciation pa calculation.

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I have a hypothetical question.

 

Imagine you bought a car 2 years back at 100 K. Assuming u paid coe at 60K

 

2 years later , the same brand and model has drop to 90K due to coe drop.

 

Used car dealer take in your car and you top up 20 K for the new car.

 

Do u then take the offer as it equates to per year depreciation at 10 K. Or do you need to deduct the cost that the car has depreciated, in this case 70K for trade in value.? A lost of 30K or 15 K per year?

 

Just for discussion and lets leave out the CEVs component assuming that it is neutral band.

 

Just thinking about it again, think the decision matrix is as follows:-

 

Scenario 1: Do not make the trade

 

Depreciation = $9k p.a.

 

Scenario 2: Make the trade

 

Depreciation = ($90k cost of new car - $10k scrap)/10 + ($30k depreciation for old car -$18k planned depreciation)/10 = $9.2k p.a.

 

So in words, it means (1) I lock in $8k depreciation for the new car based on current prices but (2) I also have to recognize losses of $6k pa for 2 years because I had locked in $9k depreciation pa but realised $15k depreciation pa via the trade in. 

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Supercharged

Lay out all the figures.

 

Bought Car A at 100k in 2016 -> -100k cash

Sell Car A at 70k in 2018 -> -100k + 70k = -30k cash

Buy Car B at 90k in 2018 -> -30k - 90k = -120k cash

 

But don't forget you drive for 2 years liao, which is worth 20k -> -120k + 20k = -100k cash

 

Looks like a good deal if the scrap value of Car A and Car B is the same. Basically you get to refresh your car at no extra cost.

Ask yourself, would you buy a two year old car at $70k When the brand new same model is at $90k?

More likely is, only can sell the old cat at $60-65k only.

Then the story is not so rosy anymore.

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paying $70k is like paying brand new 2 yrs old car

but the catch is it’s not brand new and kena abused left right center liao ... lol

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Time to change the title to why used car having higher depre than brand new?  Is the demand for used car still that strong or Sgcarmart just wack in $8K depre for any cat A cars and let buyers nego.

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Ask yourself, would you buy a two year old car at $70k When the brand new same model is at $90k?

More likely is, only can sell the old cat at $60-65k only.

Then the story is not so rosy anymore.

He said dealer takes in at 70k. If it's lesser then no longer worth it.
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Bros.

 

I asked similar questions n found out the reason from the horse mouth.

 

People in the car forum will never understand cos we are used to paying full cash. Pun intended.

 

What happens is this...

 

A 2nd hand jazz 1.3 2 year old = 79,999

A brand new jazz 1.3 by kah motor = 78,999

 

Ceteris paribas, which will u choose? Leave the cevs ves aside.

 

1 month later, u notice the 2nd hand jazz sold! Amazing?

 

Simple Example.

 

This buyer came with his current car, say avante.

His loan outstanding is 30k.

He went to many used car dealers and they quoted his car only 30k.

He is dejected. If he sells, he will have no car. And the 30k proceeds will nicely repay the 30k loan.

 

He came to the jazz 1.3 used car dealer.

They told him not to worry as they will take in his avante at 50k if he buys the jazz.

This means that he has 20k cash on hand to downpay for the jazz..

 

Is he happy? Yes of coz. He changed his car.

Is the dealer happy? Yes of coz. They made a deal.

Is the bank happy? Yes of coz. The loan quantum increased.

 

 

I could have used the word overtrade. But thought that I should use case study as a better illustration

Edited by Friendstar
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Now ppl either buy brand new or those left 1 or 2 yrs while waiting for coe to crash..

Unless got big disount . Nobody buy those almost new 1 or 2 years car.

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Now ppl either buy brand new or those left 1 or 2 yrs while waiting for coe to crash..

Unless got big disount . Nobody buy those almost new 1 or 2 years car.

Market will find its equilibrium point. Some will bargain for 2 years old car at substantial discount, those who do not have enough down payment for a new car but are not negotiation savy may get chopped carrot by dealers. Net is there will always be a market because demand is higher than supply.

COE crash wise, i am not sure if thetr are still.people thinking about it.

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Supercharged

He said dealer takes in at 70k. If it's lesser then no longer worth it.

Ya. Dealer will tell us $70k sure can.

Later when we sign check, they will say, “sorry bro. You know COE just dropped. Now your car at most can fetch $60k only. I will help you to try get another $500. That’s the best. “

But we already tell our Father Mother Wife Son girl Friend boy Friend colleagues that we are changing car. Bite bullet and change lor.

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Recently heard,alot of those doing Illegal trades like Ah Long or those never pay enough Income Tax,are buying up 2nd hand almost new high end Cars,because 2nd Hands IRAS won't check so strict,so that won't get discover easily.

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Turbocharged

Bros.

 

I asked similar questions n found out the reason from the horse mouth.

 

People in the car forum will never understand cos we are used to paying full cash. Pun intended.

 

What happens is this...

 

A 2nd hand jazz 1.3 2 year old = 79,999

A brand new jazz 1.3 by kah motor = 78,999

 

Ceteris paribas, which will u choose? Leave the cevs ves aside.

 

1 month later, u notice the 2nd hand jazz sold! Amazing?

 

Simple Example.

 

This buyer came with his current car, say avante.

His loan outstanding is 30k.

He went to many used car dealers and they quoted his car only 30k.

He is dejected. If he sells, he will have no car. And the 30k proceeds will nicely repay the 30k loan.

 

He came to the jazz 1.3 used car dealer.

They told him not to worry as they will take in his avante at 50k if he buys the jazz.

This means that he has 20k cash on hand to downpay for the jazz..

 

Is he happy? Yes of coz. He changed his car.

Is the dealer happy? Yes of coz. They made a deal.

Is the bank happy? Yes of coz. The loan quantum increased.

 

 

I could have used the word overtrade. But thought that I should use case study as a better illustration

Thanks for the eye opener!! No wonder some high COE 2nd cars can still sell in current times. No dealers even willing to talk to me after I told them I'm paying full cash.
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Thanks for the eye opener!! No wonder some high COE 2nd cars can still sell in current times. No dealers even willing to talk to me after I told them I'm paying full cash.

No loan no money to earn... Dealer don't mind take in your car slightly higher so they earn your interest. Your used car next time sell they earn interest again.
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