The premium in Category A, for cars below 1,600cc, surged $6,200 in the lastest bidding exercise, surpassing the previous high of $73,501 set in early August.
Easy financing is contributing to continuing demand. "Demand is still there, even as the economy slows down, and it is being propped up by cheap loans. So, as long as the monthly repayment is within the buyer's budget, he will get that new car."
(Source: The Business Times, 8 Nov 12.)
My reaction to this bit of news? This is totally mind-boggling!
Boggled at #1:
$77,201 for a certificate to own a car and a small one too.
Boggled at #2:
If monthly repayment is within budget, buy the car!
There are many rich people in Singapore. Bloomberg reported that there are 17 millionaire households out of every 100 households in Singapore in June 2012! Exact figure: 188,000 households.
I guess if buyers are able to afford a car at such astronomical prices using their own savings and if they really need the car, it is ok. If they don't need a car, why buy one?
However, if buyers are only able to afford a car because of the cheap loans available (which suggests that they have insufficient savings), it is not ok. This is especially so if they don't need a car.
Just off the top of my head, buying a $120k 1.5 litre Japanese car today and, to lose as little money per year to depreciation as possible, driving it for 10 years could see the buyer taking back only $7k at the end of the period. That is a loss of $11.3k per year or $942 per month!
In the above scenario, if the buyer draws a monthly salary of $4k, almost 25% of his monthly earned income is gone with the wind! If he really needs a car, it would be more prudent to look for a pre-owned car with a monthly depreciation of $400 or so. This would be a less destructive 10% of his monthly earned income.
People usually look at the running cost of car ownership: petrol, parking, road tax, insurance, ERP, maintenance and repairs. They sometimes forget depreciation which is a bigger than ever consideration in today's environment given the high price of the COE.
Any person thinking of buying a car in Singapore now, please think and think again.
1. Quick, buy a new car cheaper now!
2. A new car for $75,000?
3. Bought a new car!
4. The price of my car now.