In the previous post, Alvin has done a comprehensive breakdown of the car ownership costs in Singapore. It is a must read for anyone who is contemplating buying a car.

I will add on to that and try to answer two common questions car buyers ask.

1. What is the depreciation of a car? How do we calculate depreciation? Why is depreciation important?

2. How is the interest rates for vehicle loans calculated? Are car loans actually more expensive than housing loans?

Let’s start.

Depreciation is defined as a reduction in the value of an asset over time. A car in Singapore is without a doubt a depreciating asset for a very simple reason – the Certificate of Entitlement (COE).

The lifespan of a car is limited by the COE. When the COE runs out, you either renew the COE or scrap the car. For the purposes of this discussion, ...