Although the government increased a lot on the fees of vehicles first registration tax and vehicle licenses in the latest budget, but many people may still consider on buying or replacing their vehicles, to use less public transport or just to make travelling easier due to the backdrop of COVID-19. However, behind the glamorous moments of racing on the highway with family, loved ones and friends are a lot of hidden costs and red tapes.
A long list of vehicle selections, devils in the vehicle examination details, and other arrangements such as parking and insurance, are all the things that give owners a headache. Here are some of the things to note for potential buyers in this series of “I wanna be a car owner”.
1. Brand new or a used vehicle? It’s not just about prices
A new vehicle or a used vehicle? Many people will make their decision solely on price. A new vehicle costs upwards of $100,000 to $200,000, but a used vehicle of the same model could cost 30 to 50% less. If you simply want a vehicle for travel, you could get one at $20,000 or $30,000.
However, you must not simply base your decision on price, without taking into account maintenance costs, as they could be astronomical with “hidden dangers” if you buy directly from another owner, meaning the vehicle may no longer be supported by factory maintenance by the manufacturer. Many entrance-level European vehicles popular with owners may not be costly to purchase, but may easily have problems with their gearbox, which could cost tens of thousands of dollars to replace. There could also be a shortage of parts for replacement if the vehicle models are too old.
To minimise risks, you can take a look at the mileage and license cost of the used vehicles. The higher the mileage means the more the vehicles are worn out, so it’s generally safer to choose one with a lower mileage. In general, 10,000 kms per year is normal. As for license fees, if a used vehicle has just been re-licensed, then that would save you at least $3,000 or more. If not, that means the vehicles may not be in use for a while, and their functions may be affected. That’s why paying attention to the vehicle exam is also key.
Buying a new vehicle of course will guarantee a better vehicle condition. But maintenance coverage will determine whether there will be free replacement of parts, or additional checkups and repair fees will be involved. Of course, different brands define maintenance differently, some require one checkup per year, or once after 12,000 km mileage has been reached, while some could be just several thousand km. If the mileage has been exceeded a lot, you may lose the whole coverage.
On the other hand, used vehicles don’t require first registration tax. All you need is to fill out transferal details at the Transport Department after buying insurance, which can take just a couple of days. New vehicles however require first registration tax and license fee, so it can take around 3 weeks to get your vehicle after completing the licensing and insurance procedures. Some could take 3 months to half a year if the vehicle needs to be shipped to Hong Kong.
2. Petrol vs electric vs hybrid vehicles? It’s not just about cost
Hong Kong is still the land of petrol vehicles due to their favourable prices and the convenience of petrol stations. But with the government’s push for electric vehicles in recent years, including a reduction in their first registration tax, as well as the latest surge of fuel prices to over HK$18 per litre, many people have been itching to switch to electric.
A distinct benefit of going electric is the absence of pollutants, as the vehicles are driven purely by electric motors, not by complicated component engines. Most importantly, fuel costs can be saved. However, maintenance may not be as cheap, as the vehicles could involve some delicate technologies and materials. Also, electric vehicles have to be recharged, but there are only about 2,000 public stations for that in Hong Kong, and charging can take 3 to 4 hours, or up to 6 to 7. If you don’t have a charging spot at a carpark at or near your home, that could be a great inconvenience. Also, the entrance-level purchase prices for electric vehicles are also higher, at about $300,000. So it’s not for those with a tight budget.
As for hybrid vehicles that are powered by a mixture of both fuel and battery, the advantage is they can still run on fuel even when the battery is exhausted. But even though hybrid vehicles emit less pollutants than petrol ones, their prices and maintenance costs are higher.
3. Don’t fall into a trap on Vehicle examination
After you have chosen a used vehicle, the next step is the vehicle exam. Nowadays many companies will outsource their vehicle exam services for a cheaper cost at around $700 to $1,000. But beware of a staged show of “examining your own vehicle” by these companies, such as concealing some scratches, or misleading buyers about the actual mileage of the vehicles.
To avoid being scammed, buyers can find a third party as an honest broker, which will provide objective examination reports. It can cost more at about $1,300 to $1,500. But again, pay attention to the terms on the contract, to better protect yourself against unexpected events and preserve your rights to re-negotiate the price if there is any faults spotted.
No such worries if you buy a new vehicle? Just take a casual look before driving it home? These attitudes need to be ditched! When getting your vehicle, keep an eye out for every detail, including the air conditioning, or the paint at the front. If you find any faults, raise them immediately and ask to be fixed. Otherwise, you will have to bear those responsibilities yourself later.
4. Budgeting for parking! $6,000 a month is not a dream anymore!
Buying is the easy part, keeping the vehicle well is the hard bit. Hong Kong is a small but costly city, it’s not easy to find a cheap place to store your vehicle. Parking can easily be the biggest monthly expense, with private carparks costing at least $3,000. Even public ones cost $2,000, but places are limited. Some housing estates in Tsz Wan Shan or Tseung Kwan O can cost up to $4,000, while some in city centres or big estates approach $6,000, and you still have to fight for a spot. That’s why you should check for availabilities at nearby carparks before buying your vehicle.
If you plan on driving to work, but your company does not provide free parking, then you need to calculate the additional hourly cost involved. The metropolis area on Hong Kong Island can cost $4,000 a month to park, if it’s daily parking, the cost can be lower but you can be in for some trouble if you can’t find a place during morning rush hours.
5. Insurance calculations! Think carefully to save more or cut loss!
According to Hong Kong laws, you need to get a third-party coverage insurance for any vehicle on the road, which offers compensation for any third party loss of life and limb, or property, but it does not cover your own property loss. In other words, repair cost is not covered if you crash your vehicle.
Of course, you can opt for comprehensive coverage for your vehicle, meaning you will get compensation for fire or flood accidents, as well as traffic accidents or robbery. On the other hand, if you get into an accident when driving, you can also file a claim to limit your loss. Usually , you will be asked to buy a comprehensive coverage insurance, if you opt for installments to pay for your new vehicle.
For example, AXA’s Comprehensive Coverage plan covers replacement of windshields, towing, 24-hour emergency services (consultation hotline) etc, giving you a peace of mind for matters as small as getting hit on the windshield by a pebble, or large ones such as a vehicle crash.
Of course, those plans will cost more for its wide coverage. The exact costs for third-party coverage and comprehensive coverage plans will depend on insurance companies’ valuation of the vehicle’s market value, functions, driver’s years of driving, age, occupation, as well as his or her history of compensation claims and traffic rule violations, and they can vary a lot. Usually, if you extend your coverage every year, you will get a discount. For details of car insurance, check out our next article!
Understand more on AXA's coverage on vehicle by browsing here: https://car.axa.com.hk/