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Owning a Car in Singapore: What You Should Know and Consider

As household incomes in Singapore increase, Certificates of Entitlement (COE) premiums are expected to trend upwards too. This phenomenon is also in alignment with Singapore’s policy of zero car-growth.

Given Singapore’s compact size and a reputation for having an efficient public transportation system, this inevitably raises a pertinent question for commuters here: “Should I own a car?”.  While car ownership offers convenience and freedom, there are several factors to consider before making such a decision here.

General costs of owning a new car

When purchasing a car in Singapore, the total initial cost encompasses more than just the market value of a vehicle. There are various components one will have to consider at the same time, including the cost of the COE, registration fees, taxes, duties, and other additional expenses.To calculate how much car ownership costs in Singapore, let’s use a simple illustration here with a Mitsubishi Attrage 1.2 as example. This model is one of the cheapest cars available on the market.

Purchase Cost of Mitsubishi Attrage 1.2 (as of June 2023)
Open Market Value (OMV)S$14,399
Registration FeeS$350
Additional Registration Fee (ARF)S$14,399 (100% of OMV)
Excise Duty$2,880 (20% of OMV)
Goods and Services Tax$1,152
Certificate of EntitlementS$98,001
Vehicular Emissions Scheme-S$10,000 (A2)
Final PriceS$121,181

1. Open Market Value (OMV)

The OMV is basically the price paid when a vehicle is imported into Singapore. It is assessed by Singapore Customs and includes the purchase price, insurance, freight, and other charges related to the sale and delivery of the car to Singapore. In this example, a Mitsubishi Attrage 1.2’s OMV is S$14,399.

2. Registration fee

All new cars will have to be registered at a fee of S$350.

3. Additional Registration Fee (ARF)

The ARF is a tax that is imposed when you register a vehicle, and is calculated based on a percentage of your vehicle’s Open Market Value (OMV).

The ARF would differ depending on whether your car was registered with COE obtained from the second COE bidding exercise in February 2023 onwards, or if it does not need to bid for COEs registered on or after 15 February 2023.

Source: OneMotoring LTA

4. Excise duty

Similar to alcohol and tobacco in Singapore, the government imposes a tax on cars imported into Singapore, which is currently charged at a standard 20% of the OMV.

5. Goods and Services Tax

Although the Goods and Services Tax (GST) has been adjusted to 8% this year, the silver lining is that GST is only imposed on the OMV and Excise Duty, and not on the vehicle’s overall purchase price.

6. Certificate of Entitlement

To own a vehicle in Singapore, you first need a COE. Place a bid in the corresponding vehicle category, and a successful bid will mean you now have the right to own a vehicle for 10 years. The price of your COE depends on which category your vehicle falls under.

Read more: Certificate of Entitlement (COE): A Crash Course

7. Vehicular Emissions Scheme

The purpose of the Vehicle Emissions Scheme (VES) is to incentivise road users to choose environmentally-friendly cars. By utilising standardised testing methods to assess the pollutants emitted by vehicles, you can receive a rebate or incur a surcharge. This adjustment is then applied to the Additional Registration Fee (ARF).

All of the above factors mean owning a Mitsubishi Attrage 1.2 already adds up to a mouthwatering S$121,181 – and this is before other factors like your dealer’s margin.

8. Other expenses

Dealer’s Margin

In addition, car dealers who sell you the vehicle need to account for their own expenses and generate profits. This profit margin, known as the dealers’ margin, can vary widely. It may range from approximately 10% for more affordable brands to 50% or more for luxury car brands.

Road tax

As a car owner in Singapore, you will be responsible for paying road tax, which is typically due every 6 or 12 months. The amount of road tax is determined based on the engine capacity of your vehicle.

Is a car considered an asset or a liability?

Whether a car is considered an asset or a liability ultimately depends on various factors and your individual circumstances.

Asset

From the asset perspective, a car can be considered an asset in the following situations:

1. Personal convenience

If owning a car provides significant convenience and enhances the quality of life for you or your family, it can be viewed as an asset. This applies particularly to those who require frequent travel to remote areas or have specific mobility needs that public transportation might not fulfil adequately.

2. Business purposes

If you are an entrepreneur or someone who relies on a vehicle for business operations, such as delivery services or client visits, a car can be seen as a valuable asset. It facilitates efficient business operations and contributes to revenue generation.

3. Appreciation in value

In rare cases, certain classic or collector cars might appreciate in value over time. If the car is maintained well and belongs to a sought-after make or model, it could potentially become a valuable asset.

Liability

From the liability perspective, a car can be considered a liability due to the following reasons:

1.  High costs

Car ownership in Singapore comes with substantial expenses, and one should also consider costs like maintenance, parking fees, and fuel. The financial burden of these ongoing expenses can outweigh the perceived benefits of owning a car, making it a liability.

Read more: Owning vs Renting a Car in Singapore: A Cost Breakdown

2. Depreciation

Cars typically experience depreciation over time, meaning their value decreases. In Singapore’s context, where high COE prices exist, the rate of depreciation can be significant. This depreciation can further add to the notion that a car is a liability, especially if the resale value is substantially lower than the initial purchase price.

3. Availability of alternatives

Singapore offers an efficient and well-connected public transportation system, including MRT, buses, and taxis. Additionally, there are various alternative mobility solutions like ride-hailing services, bike-sharing schemes, and car rental services. With these options readily available, owning a car might be deemed unnecessary, making it a liability when considering associated costs and maintenance.

Read more: Guide to Car Sharing Options in Singapore

Check your financial health before purchasing a car

Before you decide to purchase a car, take some time to consider your financial health. Do you have sufficient funds for a rainy day? Your emergency funds should be about 3 to 6 months of your monthly expenses, or up to 12 months if you are self-employed or have dependents. Make sure your basic insurance needs are fulfilled before purchasing a car.

In terms of your monthly cash flow, it is crucial to prioritise setting aside a minimum of 10% of your monthly take-home income as savings. This ensures that you have enough funds for essential expenses such as meals, bills, and transportation while still maintaining a healthy savings habit.

Read more: All You Need To Know About Motor Insurance Policies in Singapore

Have Peace of Mind While Driving

Before taking the wheel of a car you own, it is crucial to possess a valid motor insurance policy that covers third-party liability for bodily injury and fatalities. In Singapore, it is mandatory for all vehicles to be insured throughout the entire road tax renewal period.

Ensure your peace of mind on the road with comprehensive motor insurance coverage. Motor insurance plays a vital role in safeguarding you against personal injury liability to third parties, covering losses or damages resulting from accidents, and mitigating costs associated with property damage.

By securing motor insurance, you can drive with confidence, knowing that you are adequately protected.

If you are in the market for comprehensive coverage, get in touch at ask@plannerbee.co. We have a dedicated team that will be able to support you in the unlikely event of an accident. This includes assisting your needs and providing assistance throughout the claims process.

Read more: What Should You Do After a Motor Accident?

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