Insurance

Think Twice Before Buying a Parallel Import Car for These 3 Reasons

It's no wonder that many Singaporeans like to buy parallel import cars: by purchasing one, you can often get a significantly cheaper price than you could buying from an authorised dealership. At a glance, the parallel import Honda Vezel 1.5 lists in the range of S$98,000 to about S$102,000, while its twin the Honda HR-V 1.5 sells for about S$110,000. In Singapore, where the exorbitant cost of car ownership is no joke, it makes perfect sense to want to save wherever possible. But is the cheaper upfront price of a parallel import car worth it in the end? Before you rush to your nearest unauthorised dealer and add yet another Honda Vezel to Singapore's roads, read our list of the reasons you may want to think twice before buying a parallel import.

Beware of prepayment schemes with just any parallel importer

What many Singaporeans may not be aware of are the risks involved in buying a car from a parallel importer and the lack of consumer protection regulations that might work to mitigate these risks. In the worst case scenario, you could find yourself losing a hefty down payment and never actually laying hands on your new car if the parallel importer suddenly goes out of business. Let's dig a little deeper to understand why this is.

Lost prepayments in Singapore have soared in the last 3 and a half years compared to previous periods, with more and more consumers reporting losses when businesses they've already purchased goods or services from go bankrupt before delivering goods and services they've already collected payment for. Unfortunately for Singapore's car enthusiasts, according to the Consumers Association of Singapore (Case), the car industry accounted for S$2.74 million in reported lost prepayments since January 2014, comprising nearly 33% - by far the greatest share - of the total S$8.35 million lost. And parallel importers stand out as the most likely culprit. This is because, unlike authorised distributor dealerships, parallel importers operate in a sort of grey market space that happens to be relatively unregulated in Singapore. This leaves consumers without any kind of financial recompense or legal recourse should the parallel importer go out of business before it delivers your car - even after it has accepted your hefty deposit or down payment.

This chart shows the distribution of lost prepayments from 2014 to 2017 by industry. The most losses were reported from the auto sector.
Source: Consumers Association of Singapore

However, the good news is that there are at least some parallel importers out there that you can trust not to run away with your deposits. Under the CaseTrust-SVTA Joint Accreditation Scheme, accredited companies are required to take up a S$50,000 insurance bond to protect your deposit, to make sure your investment is protected even if the company runs into trouble, as well as other consumer-friendly policies. You can keep track of all parallel importers who have earned CaseTrust-SVTA accreditation on the OneMotoring.com website. Here's a list of all 31 accredited members as of August 2017:

CaseTrust-SVTA Accredited Members

  • Acfas Auto
  • BKW Automobile
  • Dickson Automobile
  • Jack Cars Enterprise
  • Mayfair Motoring
  • Prime Cars Credit
  • Starbright Auto
  • Think One Automobile & Trading
  • Alfa Credit
  • Car Design Motor
  • Fu Yiap Motor Trading
  • Jia Leong Trading Enterprise
  • Motor-East
  • Prime Motor & Leasing
  • Swee Seng Motors
  • Venture Cars
  • Auto Zoom Enterprise
  • Car Times Automobile
  • Good Year Automobile
  • Lake View Credit
  • Motor-Way Credit
  • Shuang Hup Credit
  • Tan Wei Auto
  • Yong Lee Seng Motor
  • Autolink Holdings
  • Chicago Associates
  • Hoe Beng Auto Trading
  • Lay Auto
  • Pang's Motor Trading
  • Sing Wang Motor & Credit
  • Tay Motor & Credit

So be vigilant before doing business with just any parallel importer. To insulate yourself from risk, try to negotiate to pay the lowest possible deposit upon signing a contract with your dealer, and make sure to ask your dealer about their refund policy for your prepayment and the expected delivery date for your new car and get it in writing. And for the greatest peace of mind, be sure to buy cars only from parallel importers that have earned accreditation from CaseTrust-SVTA, so that at the very least you can insure yourself against the risk of insolvency.

Watch out for the warranty

When you buy a car from an authorised distributor, you'll often also get a warranty that will protect you from having to pay for repairs or replacements in case there is a manufacturing defect in your new vehicle. Kah Motors, Honda's authorised distributor in Singapore, offers a 5-year warranty, which is fairly typical of industry practice. Some authorised distributors' warranties even come with a built-in servicing package, which can result in hundreds, even thousands of dollars in savings over the period that the warranty is in force. These warranties can grant new car owners substantial peace of mind, since buying a car is an expensive enough endeavor without also having to worry about affording to repair or replace defective parts.

But you can't always assume that every parallel importer will give you a warranty. Even if it does, the warranty will only be valid as long as the parallel importer is still in business. And parallel import dealerships, which are much smaller businesses than the behemoth authorised distributor dealerships, have a higher risk of going out of business. Not only that, but if you wanted to get your parallel import serviced or repaired at the authorised distributor's workshop for your car's brand, you may even be charged an additional "adoption fee" that serves to punish you for not buying your car through "official" channels. Finally, if there's a recall on your car's model, you can't necessarily trust that your parallel import dealer will replace its defective parts, even if it's legally obligated to - which is why if you are going to buy from a parallel importer, it's crucial it be a reputable one.

Access to spare parts may be spotty

Aside from tending to be cheaper than cars sold from authorised distributors, parallel imports often come in models that were not necessarily intended to be sold in the Singapore market. As a result, you may find that workshops seldom stock the appropriate spare parts for for less common car models. Should you need to get something replaced after you've accumulated a certain amount of mileage or gotten into a car accident, this can be quite problematic. So as the owner of a parallel import, you may find yourself backed into in one of two equally suboptimal corners if this kind of situation arises.

  • 1. If the workshop you are using lacks the necessary spare parts for your parallel import, you may need to wait a longer-than-usual amount of time, even weeks, for it to get those parts in stock before your car can be repaired. This outcome is particularly likely if your car insurance plan requires you to use one of your insurer's authorised workshops for repairs after an accident if you want to cost of repairs to be covered. Meanwhile, finding alternative travel arrangements to get you where you need to go while you wait is not only a huge hassle, it can also be quite expensive.
  • 2. To make sure you can get the immediate access you need to the spare parts your parallel import car requires, you could find yourself needing to pay significantly more in car insurance premiums every year just to allow yourself that flexibility to use a workshop you know stocks parts for your car. If you're looking to get the best deal on car insurance and are operating on a limited budget, your options will be restricted and you could find yourself needing to make unpleasant sacrifices in other areas of your coverage due to your need to find a plan that is appropriately flexible while landing in the right price range.

Parting Thoughts

This is not to say that buying a car from a parallel import dealer is always a bad idea. It just means that there can be more risks involved than you might face buying a car from an authorised distributor. As such, it's crucially important to do your due diligence to make sure you are protected as a consumer and prepared for any additional expense that you may incur down the line. By doing your homework before a major purchase like a new car, you can set yourself up for many years of happy driving.

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