There are a lot of factors involved in your car’s depreciation in value – its make and model, how well-maintained it is, and the biggest of all, its age.
Especially in Singapore where cars don’t come cheap, figuring out the best time to sell your car based on its depreciation will help to maximise its value. Here’s our guide:
First things first: How to get the best price when selling your car
No matter when you decide to sell your car, the final selling price depends on a variety of factors. For instance, are you selling to a car dealer or a direct buyer? Where do you advertise your car for sale to reach those buyers who are willing to pay for a well-maintained car?
Services like Swiftquote can help to connect you with used car dealers and direct buyers to get you the highest possible quote for your car within a day. If you’re happy with the quote, simply fix an appointment to complete the sale. (Otherwise, at least you’ve got a rough benchmark of how much you can get by selling your car.)
How to calculate the annual depreciation of your car
The depreciation of your car is calculated as such:
Average annual depreciation = (Total cost of vehicle – value of selling or scrapping your car) / number of years in service of the car
This gives you an idea of how much your car has depreciated in value on average. But we all know that depreciation is not consistent throughout your car’s 10-year lifespan. In the first 3 years, a new car will likely depreciate at a higher rate (so you probably don’t want to sell your car during this period unless absolutely necessary).
With that being said, let’s now look at the depreciation curve. Our Oneshift friends plotted the average selling price of a Toyota Prius Hybrid 1.8A according to its number of years in service:
*Do take note that we have based the selling prices on prices that are advertised by car dealers, consignment agents, and direct sellers. When selling your car, you’ll likely get less than this figure should you be selling it to a car dealer as they’ll need to factor in repair costs and gain a slight profit.
With this graph, you can clearly see that you’re getting less value out of your car if you sell it in the first 3 years of purchasing it.
Especially in the first year, it’ll be difficult to sell your vehicle for a high price as consumers would rather get a brand new car for just slightly more; hence, you’ll probably have to price your car even lower to make it attractive for potential buyers. In this example, should you sell your Toyota Prius Hybrid 1.8A if it’s only a year old, the depreciation would amount to $52,000!
To decide when is the best time to sell your car, it would be when the blue line is almost parallel to the red one. And that would be between the 4th to 8th year of the car being in service.
Maximising your PARF rebate
And then there’s the Preferential Additional Registration Fee (PARF) rebate, which is the amount of money you get back when you sell your car before it hits its 10-year mark.
As a rough guide, you’ll get the maximum PARF rebate when you sell your car before its 5th year. Thereafter, the rebate decreases by 5% annually.
Here’s a calculation of the PARF rebate you’ll be getting, using the same example of the Toyota Prius Hybrid 1.8A.
PARF is a percentage of the Additional Registration Fee (ARF), which is calculated based on the Open Market Value (OMV) of your vehicle:
ARF = 100% of first $20,000 of OMV + 140% of next $30,000 + 180% of remaining amount
Take for instance a Toyota Prius Hybrid 1.8A with a OMV of $25,000. The ARF is:
(100% x $20,000) + (140% x $5,000) = $27,000
If you were to sell your new car after 5 years, you’d be getting 75% x $27,000 = $20,250 in PARF rebates; you get 5% less every year until the 10-year mark, which works out to $1,350.
Some buyers prefer older cars
For instance, young drivers with fresh licenses who might prefer an older car to “practise” their driving skills, or budget-conscious buyers who simply need a vehicle to get from point A to point B.
Furthermore, as your car gets older, it might also be a good time for you to switch cars, since car servicing and maintenance may be pricier as you’ll need to start changing several of your car’s parts. Plus, you’ll still be able to cash in on the remaining COE and PARF rebates.
Getting the most value out of your car
Whether you choose to sell your car at its 4th or 8th year mark, or even other time periods outside of these two years, it’s important to plan ahead so you’ve got ample time to decide how you want to sell it (To a used car dealer? By consignment? DIY?) and to find a buyer, especially if you’re selling it yourself on platforms like Carousell.
In the meantime, enjoy your ride!
Adapted from Oneshift.com