Monday, July 10, 2017

Diesel or Petrol? Analysis based on BMW 2 Series Gran Tourer (Singapore Market)

Diesel or Petrol?

If you are in Singapore and caught in a dilemma of the alluring new cars powered by diesel, or the safe haven of a petrol engine, I hope this analysis helps you make the call.
As everyone know that the usual concerns with diesel-powered cars, is that the pre-conceived myths that diesel-powered cars have lower resale value, sound like a taxi or truck, high maintenance, and heavy road tax. To further deter you to even give a glance at a diesel-powered car, the Singapore government has slapped a heavier penalty onto the rebate/surcharge scheme during the point of purchase (VEHS), formerly known as CEVS.
I am writing this based on the BMW 2 Series Gran Tourer, in the context of Singapore market, to help you better understand the pros and cons of diesel-powered cars.

To start off with the analysis, we must first debunk the pre-conceived myths.

Myth #1
Diesel-powered cars have lower resale value
This is true to a certain extent, however, by the economics of the automotive resale market, resale cars in Singapore are largely valued based on the current list price, age of the vehicle and depreciation. 

Example: If the BMW Gran Tourer 216d is sold at $150,000 today, the annual depreciation (excluding interest on loans and PARF rebate) is $15,000. For a 2 year old version of the same car, the resale car should value should be around $110,000 today. 

What about the condition of car, engine type, open-market value or COE pegged to the car?
The condition of the car should serve as negotiation factor to save a few hundred. 
The engine type is never a negotiation factor. 
The open-market value should be an important consideration, should you decide to scrap the car after 10 years, as diesel-powered cars enjoy good rebates under the current CEVS, which will be offset from the ARF, giving you lesser back as PARF value.

Example: BMW Gran Tourer 216d has an OMV of $31,305, with the current CEVS, this car enjoys a $10,000 rebate on purchase, however, upon scrapping the car, you need to "return" this rebate back to the government, in terms of offset from the PARF value, $25,827 for the 216d, which you get back $12,914 when you scrap the car.

The PARF value does not affect the resale value of the car, but it should be considered by potential buyers, to avoid the unexpected upset at the end of 10 years.
COE pegged to the car does not affect the resale value of the car, as the resale value is based on current COE.

Example: If the COE of the car is $100,000, but the current COE is $50,000 for the same tier. You will be losing $50,000 upfront in your selling price already. As mentioned earlier, the resale price is based on current list price. The logic is who will pay you more for the higher COE pegged to the car, when you can pay lower COE and get a brand new car.

Myth #2
Diesel engine sounds like a taxi or truck
Yes, diesel-powered cars does have the "clatter" like a taxi or truck. Fortunately, sound insulation of most diesel-powered cars have been done up to eliminate the "clatter" from within the cabin. Nevertheless, the "clatter" is extremely prominent when you are outside the car. However, in Singapore, where it is either crazy heat or rain, every car on the road has their windows closed. So no one can hear your "clatter" as well. The only time when people will "stare" at your "clatter", is when you are stationary at the carpark or waiting for someone. If you are worried that you sound like a taxi, then fret not, since most taxi in Singapore has moved to petrol and petrol-electric hybrids. Even private hire cars are mainly petrol-powered cars. Hence, only the older generation can relate "clatter" to the Toyota Crown.

Myth #3
High maintenance
Diesel engines are so common globally, even being majority in some countries, that prices of maintenance has come down for the diesel engines. Technology of diesel engines are so advanced that they are built to last. Although not a fair comparison, when was the last time you encounter a more that 10-years old commercial truck, bus, trailer or diesel-powered taxi fail on the road due to engine fault? You probably see more petrol-powered cars fail in Singapore, due to engine fault. Then again, with only a lifespan of 10 years for most cars in Singapore, you will never really have to worry about the engine.

Myth #4
Heavy road tax
In Singapore, diesel-powered cars are taxed heavier than petrol variants. Generally, the difference is 2 times for the diesel. You can utilize the road tax calculator to assist you.

Example: BMW Gran Tourer 216d will be subjected to $1182 per annum, in terms of road tax. The petrol variant BMW Gran Tourer 216i will only be subjected to $684. The difference is $498 per annum, or $4980 over 10 years.

So why a diesel over petrol?

Benefit #1
Better fuel consumption
Diesel engines are typically more frugal, in terms of fuel consumption.

Example: BMW Gran Tourer 216d consumes 4.1L/100km, while the petrol variant consume 5.5L/100km.

Benefit #2
Fuel savings
Diesel price in Singapore are cheaper than petrol. Hence, the same volume costs lesser with diesel.

Example: Diesel at SPC costs $1.39 per litre, while RON95 petrol costs $2.07 per litre (as of 9th July, 2017).

Benefit #3
Torque, more torque
Torque is the pulling force of the car. Diesel engines provide more torque, hence giving trucks and heavy vehicles more "pull" power.

Example: BMW Gran Tourer 216d churns out 270Nm@1750rpm, while the 216i petrol variant does 180Nm@1200rpm. Even the 218i petrol variant does only 220Nm@1250rpm. All three engines being 3 cylinders, 1.5 turbocharged.

Diesel-powered cars are hence more eager at the lights or low-speed overtaking, however, they loose out to petrol variants once it reaches highway speed.

So when should you consider a diesel-powered car?
  • You should seriously consider a diesel-powered car before the new VEHS kick-in in January 2018. With the new scheme, cars with diesel engines are slapped with a surcharge.

Example: BMW Gran Tourer 216d enjoys a rebate of $10,000 until end of 2017, while next year the same car is subjected to a surcharge of $20,000. This difference of $30,000 is bound to affect the sticker price significantly.
  • If your mileage is high. your fuel savings will surpass the additional road tax of a diesel engine. The higher the mileage, the more the savings. Idling also increases fuel consumption as well. Unfortunately, in Singapore, many drivers like to keep their engines running under the hot sun. Hence, the more fuel consumed translates to eventual fuel costs as well.
Example: For a BMW Gran Tourer 216d driver clocking 1500 Km a month, the driver will be paying $85 for diesel. However, if it is a 216i petrol variant, the driver will be paying $127 for petrol. The difference of $42 per month already outweighs the additional road tax of $41.50.

Try your own calculations:

What about the environment?
Yes, diesel engines have recently been deemed as emitting more nitrogen oxide and PM2.5 particulates which are harmful to human health, compared to the high carbon dioxide and carbon monoxide of a petrol engine. The nitrogen oxide levels can be significantly reduced with technology that incorporates AdBlue or urea (not applicable on the Singapore version of BMW Gran Tourer 216d). The main pollutants from diesel globally are contributed by heavy commercial vehicles which are non Euro-5 or Euro-6 standards. For the BMW Gran Tourer 216d, it is running on Euro-5 standard, hence contribute significantly lower pollution. However, that does not negate the particulate emission. So is a petrol engine better for the environment? No. Since the carbon dioxide and carbon monoxide accelerate the greenhouse-effect, thus snowballing a slew of natural disasters.
So there is no better solution to safe the environment, than to go on hybrids or electric cars powered by alternative green energy.

Note that I am not an advocate for BMW, diesel or petrol-powered vehicles. I am also not an economist or automotive professional who scrutinizes every single parameter to make a professional judgement. My analysis is purely based on an end-user car buyer perspective. I love my environment and so does my wallet. I hope that this shed some light into what makes more dollar sense when deciding between a diesel or petrol-powered car. 
Last but not least, for the sake of our future world, go green and get a solar-powered vehicle, or ditch the car and go for pedals, whenever possible.

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