Steps in buying a used car and precautions to take in 2023

A new vehicle in Hong Kong typically costs around HKD $100,000 to $200,000, and you also have to pay the first registration tax (FRT) and vehicle license fee. Plus, new vehicles depreciate fast. That’s why even car enthusiasts like to buy used cars. But what are the steps in buying one and then registering it in your name? Today, our Kwiksure experts will answer all the above questions for you and more.

Steps for buying a new car/used car

Step 1: Choose the right car

Where do I find the right car?

To buy a used car of good value for money, naturally you have to shop around. You can make an appointment for a car inspection through an online platform, a used car center, or used car dealer.

These days using an online platform is a real breeze, and you can definitely find the right car using a used car platform. Used car websites such as 28car.com, Car1.hk and price.com.hk all have search features that allow you to filter vehicles for sale based on the make and type of the vehicle. Some of those who sell used cars on these websites are car dealers, while others are the owners themselves. Other than that, you can also try your luck on online communities such as Asiaxpat or Craigslist.

Go to a used car center, such as DCH Pre-Owned Cars’ showroom in Kowloon Bay. Some dealerships, such as BMW, also sell used cars. However, these dealerships typically have only a small number of used cars in their showroom available for selection. So, if you wish to have a test drive, it's best to contact them first to make an appointment.

We suggest that, whether or not you’re planning on buying a car from a used car dealer, you check to see if the dealers are offering the same or similar vehicles as those you see on the used car websites. If there are, this could be a case of an agent from a used car dealer pretending to be a private seller. Also, some used car dealers will adjust down the mileage on used cars (a practice commonly called “meter dialing”), "apply makeup" on used vehicles, or hide records of past breakdowns and problems, etc. Therefore, if you want to buy a car through a used car dealer, we suggest you use one with a good reputation, and they usually will offer maintenance and after-sale services as well.

So how should I choose a used car?

When choosing a used car, pay attention to the year the car was manufactured (i.e. the vehicle’s age), the number of previous owners (i.e. the number of times it has changed hands), its mileage, the expiration date of the vehicle license, and whether the car needs to be repaired, etc. Usually, the lower the numbers, the higher the vehicle’s value.

Here we’d like to make a clarification: in Hong Kong, a brand new car is called a “0-hand car”, and a vehicle with one previous owner is called a “first-hand car”, and so on. As for mileage, in Hong Kong on average a private vehicle is driven about 10,000-15,000 km a year. You should generally try to buy a used vehicle that was first sold by the authorized dealer, especially one with factory maintenance records. If necessary, you may call the authorized dealer for the odometer readings. If you are considering a parallel-import vehicle, make sure you know whether a vehicle license has been issued for it. If there are no import documents or detailed information on a vehicle, we recommend that you not consider it.

Step 2: Inspect and test-drive the vehicle

See whether the car meets your requirements in terms of look, comfort, performance and more.

What to look for when taking a test drive

Step 3: have a professional inspect the vehicle

After negotiating the price with the seller, you can have the car professionally inspected. There are two ways to do it:

1. Arrange for a car inspector to come to the used car dealer to inspect the car. Well-known local car inspection companies include Hong Kong Motor Inspection (HKMI) and International Pro Motor-verify Centre (IPMC). The car inspector will issue a written report and give an unbiased opinion. Normally the fee is about HKD $1,300, plus the parking fee for the inspector.

2. Ask the seller to go to a garage with you to have the car inspected to ensure that the car has never been involved in a serious collision. Most garages will provide car inspection services, and the fee normally ranges from HKD $700 to $1,000, depending on your relationship with the garage and the origin of the vehicle (inspection of Japanese cars generally costs less than for European cars). Similarly, after the inspection, the inspector will provide basic information such as whether the car has been in a major collision or which parts have been repaired.

Don’t make any major payments before the car inspection, but you can pay a small sum as a good-faith deposit (e.g. HKD $1000). Provided the vehicle is in good condition, the vehicle inspection can normally be completed within half a day.

Vehicle examination in Hong Kong: Requirements and Procedures

Step 4: Sign a provisional purchase contract

This provisional contract needs to specify: (1) The vehicle is not used as security for any loans, (2) the vehicle is not the subject of any outstanding car loan. Finally, before the transfer of ownership, you must make sure that all of the original owner's fines have been fully paid, otherwise it will become your responsibility to pay the fines.

In addition to the provisional purchase contract, you can also apply for a “Certificate of Clearance” for the relevant vehicle at a Licensing Office before buying the car, so as to confirm that the car carries no outstanding fines and is not subject to any license suspension. This certificate is free of charge and valid for 72 hours after issue.

Step 5: Secure car insurance

Before the official transfer of ownership, remember to ask the seller for a copy of the Vehicle Registration Document (commonly called the “Vehicle Registration Book”) so that your insurer can give you a quote and issue a temporary policy (cover note). Remember to bring the cover note with you on the day of transfer of registration, otherwise you will not be able to drive your new used car home.

Hong Kong law requires car owners to at least secure third-party auto insurance, and many insurers including Kwiksure provide online quotation services nowadays.

One other thing to note is that if you are under the age of 25 or only hold a probationary driving license (P license), because of your lack of experience, insurers will believe that your risk of accident is relatively high, so your premium is also likely to be higher. In addition, depending on the exact terms of your policy, you may need to pay varying amounts in deductibles when you make a claim. That’s why you should carefully read the terms and conditions of your policy.

You will need to produce the following documents to secure car insurance:

• A copy of the Vehicle Registration Document
• Identification documents of all named drivers (Hong Kong Identity Card or passport)
• Driving licenses of all named drivers
• Supporting documents for no-claims discount (NCD) (if applicable)

Step 6: Complete the transfer of registration (see below for transfer procedures, fees and documents required)

For all vehicles (except taxis), within 72 hours after the change of ownership, both the buyer and the seller must submit a completed and signed Notice of Transfer of Ownership of a Vehicle (Transport Department Form TD 25) to a Licensing Office of the Transport Department, as proof that both sides agree to the transaction and also to complete the transfer of ownership. The new owner of the vehicle must submit the original completed form to the Transport Department, while a copy must be submitted by the original owner.

Also, be aware that the four Licensing Offices will only be open from Monday to Friday from 9:00 am to 5:00 pm (including lunch hour). These offices are closed on Saturdays, Sundays and public holidays.

How much is the fee and what are the documents required for the transfer of registration?

Within 72 hours of the official transfer of vehicle ownership, both the buyer and the seller will need to bring the following documents in person to a Licensing Office of the Transport Department to complete the transfer of registration.

• A completed and signed Notice of Transfer of Ownership of a Vehicle (Transport Department Form TD 25)
• The original Vehicle Registration Document (aka the “Vehicle Registration Book”)
• Identity documents of both the buyer and the seller (Hong Kong ID card or passport)
• Proof of auto insurance (the cover note)
• Proof of address of the new owner (issued within the past 3 months)
• The transfer fee (by cash/EPS): HKD $250 for motorcycles and tricycles; HKD $1,000 for other vehicles (usually paid by the new owner)

Step 7: Complete the closing

Used car transactions in Hong Kong are normally completed by the buyer paying and the selling delivering at the same time. We recommend that you make a deposit by cash or promissory note to the seller before the transfer of registration is complete. After the transfer is complete, you can have a final inspection of the vehicle, and pay the balance to the seller, again by cash or promissory note. Provided the seller agrees, you can also go to the bank with the seller to settle the balance after the transfer of registration.