Transport & Motoring

Why Are Cars So Expensive In Singapore?

Image Credits: pixabay.com

A city with growing population and limited space cannot afford a massive traffic jam. This is why the Singapore government invest billions of dollars each year on public transportation. The government aims to make it reliable, inexpensive, efficient, and accessible for all. With this objective comes the restriction of private transportation. Since 1990, the Certificate of Entitlement (COE) complemented with tax and duties have been introduced to regulate car ownership and road usage.

There is no such thing as a cheap car! Even an upper middle class Singaporean will tell you that owning and maintaining a car is no easy feat!

So, why are cars so expensive in Singapore? For starters, it involves several factors.

#1: Open Market Value

You may have noticed that the price-tags of a certain car varies from country to country. These varying degrees of prices start a baseline. In our case, the baseline is the Open Market Value or OMV. The OMV will soon be boosted by the Additional Registration Fee and the Certificate of Entitlement. Imagine if we paid cars in terms of its OMV!

#2: Additional Registration Fee

As I said, your car purchase will be subjected to the ADF. ADF or Additional Registration Fee comes after the Registration Fee and the OMV. You see, it is a form of tax imposed to all cars during registration. The calculation of ARF depends heavily on the OMV of the vehicle.

Currently, the ARF is calculated as follows:

For the first $20,000, 100% of the OMV
For the next $30,000, 140% of (OMV-20000)
Above $50,000, 180% of the (OMV-50000)

Please refer to the full list at lta.gov.sg.

#3: Excise Duty And GST

People pay for additional taxes on specific goods sold within Singapore such as petrol, alcohol, and cigarettes. This tax is called Excise Duty.

The Excise Duty on cars is 20% of the OMV. Once this is calculated, a 7% GST will be added on both the OMV and the Excise Duty. It sounds confusing, right? Let me illustrate it for you!

For instance, a car has an OMV of S$49,113. It will incur and Excise Duty of S$9,822 (20% of S$49,113) and a GST of S$4,125 (7% of S$49,113 + S$9,822).

#4: Certificate Of Entitlement

Certificate of Entitlement or CEO is infamous for bumping one’s car expenses. Even Singaporeans who cannot drive would know what it means. It is a certificate that allows a car to be driven for 10 years. Essentially, COE is driven by the market’s supply and demand. COE prices can elevate during periods of high car demand and vice versa.

In 2013, the COE was a whopping S$97,889 (Category E). In today’s market, COE prices go between S$40,000 to S$50,000.

#5: Car Dealers’ Margin

It comes as no surprise that the car dealers have a portion for their own overheads. The profit they own for selling cars is called the dealers’ margin.

It could range from as little as 15% for affordable brands to as high as 50% for luxury brands.

Image Credits: pixabay.com

Your job is to calculate all these factors together. Then, ask yourself whether owning a car in Singapore is worth it or not!

Sources: 1 &2

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