Motorists are snapping up eight to nine-year-old cars to tide them over as they wait for certificate of entitlement (COE) prices to fall.
The sizzling demand for these cars has driven up their prices. As recently as last year, such cars would have had an annual depreciation of less than $10,000 - the cost of the car minus the scrap rebate divided by the number of years left in the COE lifespan.
Now, because these older cars cost more, their depreciation is as high as $14,000 a year. They are typically popular Japanese cars such as the Toyota Wish, Toyota Corolla, Suzuki Swift and Honda Odyssey.
Singapore Vehicle Traders Association president Michael Lim said: "The main reason for the demand is that people are waiting for COE prices to fall. So, depreciation of $9,000-$10,000 is now $12,000-$13,000. Firms like Uber are also buying up older cars to lease out to their drivers."
Mr Raymond Tang, managing director of used car trader Yong Lee Seng Motor, said that curbs on car loans have also driven consumers to buy these older vehicles.
Ironically, bigger and more luxurious cars of that age have a lower depreciation. Mr Tang said this was because even though these cars have a high scrap value, their absolute values are much higher than mass market models. So, not many can afford them.
Lawyer S. C. Phua, 43, was looking for an old Japanese car for his wife to tide her over when her Subaru Forester's COE expired in April. However, he found the cars he was eyeing all had depreciation ranging from $12,000 to $14,000.
He then spotted an advertisement for a nine-year-old Mercedes-Benz S280. At $57,500, it was close to double the price of a Honda Odyssey of the same age, but had a scrap value of $48,000.
This meant its depreciation was $9,500. So he bought it, after his mechanic gave it the all-clear.
"I didn't go looking for an S-class," he said. "But the depreciation of those Japanese cars I was looking at was astronomical."