Why Is Owning a Car in Singapore Extremely Expensive?

by Suchitra Sharatchandran2 months ago
Picture Why Is Owning a Car in Singapore Extremely Expensive?

Singapore is currently one of the most expensive places in the world to buy a car, and people from other nations are often shocked by the cost of car ownership there. Due to traffic congestion, the Singaporean government has taken several measures to reduce the number of automobiles on the road, including raising the cost of car ownership and maintaining access to affordable, effective alternatives.

1 A Certificate of Entitlement (COE) is required for new car buyers, and the fee is added to the sticker price of the vehicle.

Certificate of Entitlement
Certificate of Entitlement. Image source: Roots.gov.sg

In Singapore, one needs a permit to own a car known as the Certificate of Entitlement (COE), which often cost as much as the automobile itself, if not more. Prospective buyers must first bid for the COE before they are permitted to buy a car. On top of that, additional taxes are included, which implies that the total cost of COE is more than the car’s open market value.

Singapore uses a Vehicle Quota System (VQS) to decide how many COEs can be made available to the public. The VQS calculates the quota based on several factors, such as the number of vehicles taken off the road, the expiration of existing COEs, the permitted rate of growth, and the type of vehicle, among others.

The need for COE and making it so expensive is part of the Singapore government’s plan for a “car-lite” Singapore, As space constraints challenge city planners. Roads occupy 12% of Singapore’s total land area. Given the land constraints and competing needs, there is little scope for further road network expansion.

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With the quota system and COE, Singapore is able to strictly regulate the number of vehicles on the road to prevent overloading its infrastructure and manage traffic. COEs are put up for bid after they are made available, and the highest bid wins. When there is a lot of demand, a COE can cost a lot of money – often more than the car’s OMV. However, due to the unpredictability of the process, the overall cost of the car can vary highly.

2 Six factors make up the price of a car in Singapore.

Audi Centre Singapore
Audi Centre Singapore. Image credit: Jordan Tan/shutterstock.com

The price of a brand-new car in Singapore is based on six criteria. Open Market Value (OMV), Certificate of Entitlement (COE), Additional Registration Fee (ARF), Vehicular Emission Scheme (VES) rebate or surcharge, Excise Duty and GST, and Local Dealers’ Margin.

OMV serves as a benchmark for the car’s initial purchase price. The OMV value for a car in Singapore is the total cost of a similar car that people in other nations pay. The ARF, which is a form of tax that a car owner must pay during the registration, apply to all vehicles in Singapore. Based on the vehicle’s OMV, the ARF is calculated.

In Singapore, the excise duty on automobiles is 20% of OMV. A further 7% GST will be added to the total OMV and Excise Duty amount. The COE is a “market-driven” license that permits a car owner right to register, own, and drive a car in Singapore for ten years. When there is a high demand for cars, COE prices increase significantly, which in turn raises the cost of cars.

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The VES is another factor that could influence how much it costs to buy a car in Singapore. Depending on the emission level of the car, you may have to pay an extra fee or qualify for an ARF rebate. VES rebate lowers the ARF, whereas the VES surcharge will increase the ARF.

Lastly, the auto dealers selling the car charge an amount to cover their overhead costs and earn a profit. This is known as the dealers’ margin. Dealer margins could be as low as 10% for cheaper models to 50% or more for luxury automakers. To calculate the dealer’s margin, add the OMV, ARF, GST, Excise Duty, COE, and VES Surcharge/Rebate together.  

3 The government of Singapore has implemented a weekend car initiative to reduce the high cost of automobile ownership for Singaporeans.

Red plate car Singapore
“Red plate” car Singapore. Image credit: Dr. David Sing/shutterstock.com

Singapore’s weekend car scheme has been dubbed the “red plate” since weekend cars have a special red-colored registration plate. The Weekend Car (WEC) scheme was first used in the early 1990s in an effort to reduce heavy traffic.

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This scheme provides car buyers a full refund of the net ARF, COE, and import duty up to a maximum of $15,000 in savings. Additionally, they are only required to pay 30% of the road tax compared to a normal car of equivalent capacity.

But what really counts is the driving hours. Those who registered the car or own one under the weekend scheme would be allowed to drive the car between 7 p.m. and 7 a.m. on weekdays, after 3 p.m. on Saturday, and all day on Sundays and holidays. WEC drivers would need to pay $20 for a day license to drive during hours that are restricted.

4 Cost of a car in Singapore versus the US

Toyota Corolla
Toyota Corolla. Image credit: Otomobil/shutterstock.com

According to a local financial website called Value Champion, the cost of owning a small car in the city-state is approximately USD 90,430, or 125,000 Singapore dollars. According to Budget Direct, a car might cost five times as much in Singapore as it would the US.

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According to Inside EVs, Singapore is the most expensive nation in the world to buy a Tesla, while the US offers the lowest prices for electric vehicles. In both the US and Singapore, Toyota is the most popular automaker. However, it costs far more in Singapore than in the US, with a Corolla costing over USD 100,000 more in Singapore. That is around USD 156,000.  The cost of a Corolla in the US is around USD 29,000. It’s hardly surprising that Singapore remains the most costly country in which to purchase a Toyota Corolla, given that with the same amount, you can purchase a magnificent Mercedes-Benz CLS 63 AMG 4MATIC or half of an SLS AMG Coupe in the USA.

In Singapore, the top-of-the-line Audi automobile is four times more expensive than in the US.

5 Compared to other countries, car ownership in Singapore is low; however, Singapore has the world’s best public transportation systems.

singapore public transportation bus
Singapore public transportation bus. Image credit: Towfiqu ahamed barbhuiya/shutterstock.com

According to Budget Direct 2019 Data, the car ownership rate in Singapore was approximately 11%, while in the US, it was approximately 80%, and a little less than 50% in Europe. Due to stringent regulations and high taxes, the car ownership rate in Singapore is relatively low compared to its neighboring countries. Most Singaporeans prefer public transportation, which is among the best in the world.

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When compared to other major cities across the world, Singapore has one of the best and most affordable public transportation networks. Singapore topped the list for public transportation affordability and placed high on efficiency and safety. Singapore has built a world-class public transportation system that is both economical and accessible as well as effective, convenient, and sustainable.

The Mass Rapid Transit (MRT) system is the quickest and most economical way to get about the city. The LRT (Light Rail Transit) system, a smaller network of trains, serves as a feeder service that enables commuters to disembark closer to home. Singapore’s public bus system is the most affordable means of transportation, with a vast network of routes spanning most of the city. Moreover, all public buses have full air conditioning. Taxis are a very convenient and comfortable way to go around Singapore (particularly for reaching locations that are difficult to reach by train or bus), and they have relatively low fares compared to those of other developed nations.

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