Have wheels, will travel.
Getting a car in Singapore means that you will no longer have to squeeze with people in the mrt during peak hours or run for the bus. Getting a car means that you gain independence, in that you can travel at your own convenience and do not have to rely on other people for your travel needs. With independence comes convenience. Other benefits of owning a car is that you get to save time and personalize your own schedule. You can even add in many tasks such as commuting, shopping or visiting a friend within a very short time if you have a car. Having a car opens up your world to many more opportunities since you can travel over long distances and complete more tasks in a shorter amount of time.
In order to enjoy the above benefits, you must be prepared to foot the cost of owning a car. Given that Singapore is one of the most expensive countries to live in, owning a car also comes with high costs. So, what are the things that you need to be aware of when getting a car? What factors should you consider and is it wise to get a car loan for the purchase?
Things To Take Note Of Before Getting A Car In Singapore
Before buying a car, you need to familiarize yourself with the costs that are associated with buying the car and maintaining it. Below are details about these two cost-related aspects.
1. The cost of owning a car in Singapore
Various factors constitute the cost of buying a car in Singapore. These factors include the open market value of the car, registration fees, Certificate of Entitlement charges, Additional Registration Fee, Vehicular Emissions Scheme charges, insurance and road tax, and car dealer commission. They sound like a lot of factors and seem pretty confusing. Not to worry, we have included a breakdown of each below.
Open Market Value (OMV) of the car: OMV is calculated by the Singapore Customs during the time that the car enters the country. This value comprises the car’s purchase price, shipping charges and other fees for delivering the car to Singapore.
Registration fees: A fee of $220 is charged on the car during registration.
Certificate of Entitlement (COE) charges: A person buying a car in Singapore is required to have a COE, which entitles one to registering, owning and using a car in Singapore. The COE fee varies between S$29,902 and S$37,000 depending on the type of car.
Additional Registration Fee (ARF): ARF is imposed once the car is registered. It is calculated as a percentage of the OMV of the car. Currently, any car that has an OMV value up to $20000 is subjected to a 100% OMV. Automobiles whose OMV exceeds $20000 are taxed differently on the basis of incremental OMV. Below is the ARF calculations for cars registered from March 2013 onwards.
|First $20,000 of OMV||100% of OMV|
|Next $30,000 of OMV ($20,001 to $50,000)||140% of incremental OMV|
|Remaining OMV above $50,000||180% of incremental OMV|
Vehicular Emissions Scheme (VES) charges: VES came into effect in January 2018 and is imposed as either a surcharge or a rebate on all new cars that are registered. VES is aimed at encouraging buyers to purchase environment-friendly vehicles. Depending on the band the car falls in, owners may be entitled to rebates or surcharges.
Insurance and road tax: Before you drive a car that you have purchased, it must have a valid insurance cover and a valid road tax. The cost of insuring a car that has just been purchased is approximately $1500 per year.
Car dealer’s commission: If you buy a car from a merchant, you will have to pay the merchant’s gross profit cost. This cost includes overhead costs, commissions, and warranties.
2. The cost of maintaining the car
The cost of having a car does not end at buying the car and paying for the compulsory requirements such an insurance and road tax. There are several additional expenses that you have to pay for over the period that you use the car. The additional expenses include insurance and road tax, which you have to pay for on a yearly basis, continuously. The various costs of maintaining a car in Singapore are detailed below.
Insurance and road tax: Insurance and road tax are not one-time costs. In addition to the amount that you are required to pay for insurance and road tax before you use your new car for the first time, you have to submit additional payments each year. A 1600cc car will cost you around S$740 a year in road tax. Additionally, you have to part with S$1500 each year for car insurance.
Electronic Road Pricing (ERP) charges, parking fees and fuel costs: Everyone in Singapore is probably familiar with the ERP, the tall blue and white gantry that draws money every time you drive through it. When you buy a car in Singapore, you are expected to use it regularly, especially when you drive into town. On average, drivers pay an ERP fee of $20 per month.
For residents’ first parking lot, season parking at HDB costs $80 per month for surface carparks and $110 per month for sheltered carparks. For residents’ second car or for non-residents, season parking at HDB costs $90 and $120 per month at non-sheltered and sheltered carparks respectively. Condos and private properties may have their own set of parking charges.
Driving your car around will also incur other parking fees and on average, drivers in Singapore pay a parking fee of $80 per month. As regards fuel costs, you will require about S$2600 per year for fuel.
Maintenance/servicing: The cost of servicing a car is not quite straightforward since it depends on how often you use the car and the environment in which you use the vehicle. However, you may require approximately S$500 or more per year to service a small car.
Why A Car Loan May Be Necessary
As noted above, owning a car in Singapore can be quite expensive given the charges that you have to pay in addition to the cost of the car. The same applies to the cost of maintaining or servicing the car. The high cost may prohibit you from buying a car. However, if you are employed or you have a business that guarantees you regular income, you can think about getting a car loan as a way of financing a car purchase.
Getting a loan doesn’t sound like a fantastic idea. It’s like a liability but depending on how the car owner uses the car, it can be seen as an asset instead.
A car loan can help you get the car you’ve always wanted as long as you can pay for its cost in monthly installments. This means that when you take a car loan, you will have your preferred car and at the same time avoid the burden of having to make a lump sum payment for the vehicle. Making the full payment for a car is nearly impossible for average Singaporeans. Getting a car loan just means that you get to buy a car but spread out your payment instead.
Before you consider taking a car loan, it is important that you understand the laws that govern car loans in Singapore. For example, the law states that an individual can only borrow an amount equal to not more than 70% of the price of the car. Furthermore, if the car that you intend to buy cost the vehicle dealer an amount that exceeds S$20,000, the loan amount will be capped at 60%. This means that although you can borrow funds to buy your car, you will still need to have some cash that you will use as downpayment for the vehicle. For instance, if you are buying a car worth S$100,000, you will need to have at least S$30,000 in cash to cater for the car’s downpayment.
Depending on your income, there will be a loan limit which will determine the type of car you can afford. One should go for a car that they can comfortably pay over a given period of time. In other words, you should be able to comfortably settle your car loan over the stated period without compromising your ability to continue meeting other needs and saving and investing. AP Credit offers easy and convenient online loan application for both Singaporeans and PRs. If you are looking for a car loan of have any questions about it, feel free to contact our friendly consultants today! Alternatively, you can also fill in our loan application form and one of our loan officers will get back to you.