Owning a Car in S'pore

First & Foremost, this article may be too long for you to digest all at one go. However, it's quite a comprehensive approach for serious car buyers or thinking about a car.

Buying a car in Singapore isn't cheap, especially because of the COE (Certificate of Entitlement). It's different from buying a house where the house is an asset; and its price can continue to increase due to inflation & the shortage of land in Singapore but a car is a depreciating Liability - they always say Car Prices drop by 50% straightaway once it's out of the showroom!!!

So why do everyone wants a car when it is so costly and is a big burden on your own pockets?
Many people will say that a car is for convenience or for symbol status. However, have you really calculated the costs involved and whether its worthy of the so-called "convenience" if you are barely making month's end trying to meet the car expenses!?

Let me tabulate and analyse it for you before whether you think it is really worthwhile for you. Here is an illustration of different expenses that is related to an automobile:

*The above is taken from the US site, however, the type of charges are around the same.

The rule of thumb is that your cost of ownership of your automobile as a percentage of disposable income should not be more than 30%. 

In general, buying a new car involves the following: upfront costs, fixed costs and usage costs. Let's take a look at what is the  you have to pay for your Car.

A car's costs consists of 3 types (Upfront, Fixed, Usage), and largely depend on the type of car you get & how frequent you use it etc. Therefore, I have provided the links beside each cost so you can amend it to calculate your own car expenses using this Car Ownership Calculator (click the link)!

1) Upfront costs

When buying a new car, upfront costs would be:

• Cost of car [depends on you: http://www.sgcarmart.com/main/index.php]
• COE [http://www.onemotoring.com.sg/1m/coe/coeDetail.html]
• Custom duty – 20% of OMV
• GST – 5% of custom duty + OMV
• Registration fee (RF) – $140
• Vehicle plate registration – $30

2) Fixed costs

Besides the initial outlay to acquire a vehicle, fixed costs are also incurred:

• Monthly instalments [usually car loan is 3% but Beware of Banks' "Rule of 78" ... find out more here."
• Road tax [http://cars.st701.com/articles/view/3615]
• Car insurance [Around $100, i recommend that you can go directasia.com for a car loan if you have at least 2 years' driving experience and is aged between 25 and 65.] Otherwise.. you can go for http://www.sgcarmart.com/directory/insurance.php
• Season parking [Usually $90.. can check here: http://www.hdb.gov.sg/fi10/fi10327p.nsf/w/CarPark1NewSP?OpenDocument]

These costs are payable regardless of how often you use your vehicle, or not all.

Monthly instalments and subsequent prevailing interest rates vary according to the loan amount and repayment period. As a rule of thumb, it is best to minimise borrowing and keep to the shortest repayment duration possible to avoid paying more interest.

Road tax is computed based on the vehicle’s engine capacity, and is renewed on a six-monthly or annual basis. Evidently, the more powerful your vehicle, the costlier the road tax.

Third-party motor insurance is compulsory when registering a car in Singapore. Its purpose is to ensure that innocent parties are protected in event of accidents. You may also opt for comprehensive coverage – at a higher premium, of course.

Unless you live on private property, season parking at HDB multi-storey car parks sets you back $90 a month, while parking in the central business district averages about $200 a month. Including parking charges incurred at other payable locations, it all adds up to over $300 each month!

3) Usage costs

• Electronic Road Pricing (ERP) [usually $50?]
• Parking [higher parking fees in shopping malls & CBD area: $300]
• Fuel [lets assume its $250. visit http://www.petrolwatch.com.sg/ for discounts on your petrol top-up!]
• Maintenance including tyre change, washing etc... [normally $80]

There are now more and more ERP gantries across Singapore, operation hours have been extended – even on Saturdays for Orchard Road – and toll prices have also risen over the years.

Soaring oil prices are also pushing up pump prices despite the EURO debt crisis. As the debate rages on about Man’s over reliance on oil, it seems likely that fuel prices will continue to rise in the years ahead.

Usage results in wear and tear, thus maintenance costs are inevitable. However, new cars often come with limited free servicing, often up to 50,000 km. Thereafter, maintenance costs will be wholly borne by the car owner.

To reiterate, a car's expenses largely depend on the type of car you get & how frequent you use it etc. Thus, it is only served as a guide, you would need to calculate your own car costs.

After going through all these.... To buy, or Not to buy?

With the heavy costs involved, it is advisable to think twice before committing to a vehicle.

John Chong, 24, who recently bought a Volkswagen Caddy, acknowledges that the convenience of having your own vehicle comes with its share of sacrifices.

He started moonlighting – as a private tutor – in order to pay for the vehicle more comfortably. Still, he feels that the trade-offs are worth it, as he no longer had to wake up at the crack of dawn to journey from his Tampines home to his workplace in Bukit Batok.

Likewise, Kevin Wong, 27, recently took advantage of the low COE prices and bought a Toyota Corolla Altis. Travelling from Kembangan to his office in Tuas on public transport proves too taxing for the sales executive.

“Besides, parking is free at my office, and I travel outside of ERP operation hours anyway,” he says. He also saves on season parking as he lives on landed property.

Others however, do not see the need for a car. Cassandra Fong, 30, says while she can afford a car “very comfortably”, she takes the MRT from Seng Kang to her City Hall office instead.

“Singapore is so well-connected, and I don’t have to worry about parking or getting stuck in traffic,” The globe-trotter prefers to use the money for her annual vacations instead.
“Besides”, she adds, “with so many friends that drive, why do I need my own car?”

Need or want?

Singapore’s public transport infrastructure is arguably one of the best in the world, with an expanding rail network, comprehensive bus routes and a fleet of 22,000 taxis. New towns are linked by Light Rail Transit (LRT) services, and the upcoming Circle Line looks set to cut down traveling time further.

The question then, is car ownership really a need or a want? Consider that the following – cheaper – alternatives to driving are available:

• Second-hand cars: 2% transfer fee, save on RF and ARF
• Off-peak cars: $17,000 rebate and $800 off road tax
• ‘Green’ cars: Green Vehicle Rebate – 40% off OMV,
but cost of car itself is higher
• Car-pools: rides from colleagues / family & friends
• Car-sharing: pay-as-you-use schemes offered by
NTUC Car Co-Op, City Speed etc.
• Motorcycles: costs are a fraction of a car’s


ARF – Additional Registration Fee.
Computed as 110% of the car’s OMV. Have been reduced from 130% since 2004, contributing to the lower upfront costs of car ownership today.

COE – Certificate of Entitlement
A quota system implemented to curb vehicle population. Winning bidders pay the lowest successful bid price, also known as the quota premium (QP).

OMV – Open Market Value
Price of the car, comprising of account purchase price, freight, insurance and all other charges relating to the sale and delivery of the car from country of manufacture to Singapore. This value is assessed by the Singapore Customs.

RF – Registration Fee
A fixed sum of $140 for private motor vehicles. Payable for all new cars.

Road Tax
Payable on a 6-month or annual basis, road tax varies with your vehicle capacity.

The formulas are as follows:

Engine Capacity (EC) Road Tax Formula
600 cc S$400 (flat rate)
601 cc - 1,000 cc S$400 + 0.25 x (EC - 600)
1,001 cc - 1,600 cc S$500 + 0.75 x (EC - 1,000)
1,601 cc - 3,000 cc S$950 + 1.5 x (EC - 1,600)
more than 3,000 cc S$3,050 + 2.0 x (EC - 3,000)

Source: LTA’s One Motoring website

Hope that you enjoy the article I have shared and it's useful to you. I would appreciate any constructive comments on this article below. You can approach me for any personal finance consultation but kindly email me at Rulezinvestor@gmail.com first. Have a great day!

This post is last updated at 28/11/2011.

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