Most of us plan to own a car at some point in time in our lives. But, how easy is it to own a car in Singapore? The standard of living in Singapore is extremely high and this makes it very expensive for people to own a vehicle. According to a report published by CNN, Singapore had about 600,000 private vehicles on the road at the end of last year. With a population of 5.6 million people, Singapore wants to do everything possible to limit the congestion of cars on the roads. In an attempt to achieve this the prices of cars in Singapore are extremely high.
In a country like Singapore, the idea of owning a car is nothing less than a luxury. Even a cheap car is a luxury that every Singaporean will struggle to afford. So, why exactly is owning a car so expensive in Singapore? Let’s explore this a bit.
Open Market Value (OMV)
According to an article mentioned in Dollar and Sense, you don’t really get to buy the car in Singapore at the Open Market Value Price. On top of the OMV price, people in Singapore have to pay a series of other charges such as additional registration fee, excise duty and GST, and Certificate of Entitlement.
The OMV price people pay in Singapore is what some people pay in other countries for the vehicle. So, you see the stark difference in the expense of buying a car in Singapore versus any other country.
Additional Registration fee
The additional registration fee is a type of tax imposed on the cars during the time of registration. And in Singapore all cars are subject to ARF. The ARF is applicable over the open market value of the car. In fact the ARF is calculated based on the OMV of the vehicle. It is calculated based on 100% of OMV for the first $20,000, 140% of OMV for the next $30,000, 180% of the OMV for amount above $50,000.
Auto Insurance
When you buy a car, most people opt for a car loan. With all the additional expenses on the original market price, the price you end up paying to the bank will be a lot more than what you would be paying in other countries. Auto insurance companies already charge you an interest of 2.78% per annum for a period of 5 years or so. If your total car cost is high already, then imagine the amount you will have to pay to pay up the insurance amount.
Taxes
Excise duty is a form of tax that is a form of tax that is imposed on specific goods within a country. In a country like Singapore excise duty is applicable on petrol, alcohol, and certain other goods. The excise duty on cars in Singapore is 20% of OMV. For example, a Mazda 6 currently has a basic cost of $92,520 with a sales price of $122,888. So, the dealer’s margin for the car also adds up the overall cost of the car. Apart from these, you also have to pay up road tax.
Dealer’s Margin
The car dealers who sell you the car also need to make some profit by selling the car. They too have their own markup over the original car price. You can calculate the dealer’s margin by simply summing up the OMV, ARF, excise duty, GST, and COE. Typically, a car dealer’s margin can be as little as 15% and as high as 50%.
Certificate of Entitlement (COE)
In Singapore, you need to have a certificate of entitlement to be able to drive a car. The certificate of entitlement is market driven and allows the cars on the roads to be driven for a period of 10 years. And COE prices can increase steeply during the period of high car demand, this in turn causes prices of cars to rise. This is an additional expense for the car owner.
Now that you know the amount you have to pay much more than the rest of the world to own a car in Singapore, you might want to reconsider other alternatives to travel such as public transport. The Singapore government has done a good job to ensure high standards of public transport.
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