Plunging resale values - thanks to lower new car rates and the weak economy - have brought many used car prices close to their scrap value.

The best bargains lie with big premium models, which are bearing the brunt of the battered market. Often, a two-year-old model can be had for nearly half the price of a new car.

Because of the economic crunch, there have been some distress sales too. Last week, a 2006 Mazda RX8 sports car went for $55,000 - less than half the price the original owner paid for it. A new one today costs $107,000.

Motor trader Eddie Loo of Car Times said: 'The best buys are the 2005, 2006 cars. They are selling at close to their scrap values. For instance, an end-2005 BMW 740Li is going for $150,000.'

If the car was scrapped and re-exported, it would fetch around $120,000.

And consumers are wising up to the bargains. According to the Land Transport Authority, around 29,500 cars changed hands last year - the most in four years.

Mr Michael Ong, chief executive of a management consultancy company Capstone Capital, recently bought himself a 2006 BMW 730Li for $148,000. A new 7-series starts at $318,000 today.

Mr Ong, 48, said it was his first used car in 'eight to nine years'.

'I'm happy with the car. Although it's nearly three years old, it's well maintained and is like a new car,' he said. 'The price was also good - less than half the price of a new car. And it came with a one-year warranty against all defects.'

Analyst Lim Jit Soon of Nomura Singapore said used cars often make more financial sense than a new car.

'If you do the maths, buying a used car provides better value.'

He said used cars depreciate less yearly. 'The depreciation of a new car is lower only if you keep it for 10 years. But not many people keep their cars for that long. The average is five years,' he explained.

In fact, motor traders point out that low resale prices are a huge drag on new car sales - more so than weaker consumer sentiment and tighter credit. 'It is the main thing that is holding back sales,' one trader said. 'No one is willing to suffer that kind of depreciation.'

For instance, someone who bought a 2006 BMW 750Li for $380,000 must be willing to lose $200,000 on it today, the owner of a 2006 Mercedes-Benz S500L priced at $409,000 will take a $210,000 hit, and a Lexus LS460 of the same age has devalued by $170,000.

Retired motor trader Lee Chiu San said a hot topic at dinner parties today is: 'How do I sell my car?'

Two main factors contribute to the plunge in resale values: the substantial slide in COE prices in recent months, and the weakened economy. The latter has dampened demand for cars everywhere.

Motor traders said re-export prices have fallen by two-thirds from a year ago as main export markets, such as New Zealand and South Africa, have dried up.

Although buying used may seem like a win-win deal, there is one point buyers must be wary of. 'Make sure you buy from a reliable and reputable car dealer,' Mr Ong of Capstone Capital said.

'I once bought a car from a second-hand dealer and found that it had a major accident and was 'repaired' by joining the front and back of two different cars together. It was cheap, but I had to sell the car as scrap soon after.'

christan@sph.com.sg