You will be surprised to hear that buying a car in Singapore is difficult for many people because they are expensive. Cars are so expensive in Singapore that an average adult with a mean net worth of more than US $300,000 would struggle to afford even the cheaper brands.
Are you interested in finding out why cars are so expensive in Singapore?
The short answer would be that the Government deliberately makes cars expensive through various charges and schemes.
Cars Are Expensive in Singapore
First, let’s get this out of the way, Singapore is one of the most prosperous countries in the world. The average net worth of a Singaporean adult is US $332,995, which gives Singapore the 12th spot among the countries with the highest mean wealth per adult. Besides, the country ranks in the 14th spot on Legatum Prosperity Index 2021. The country has a high gross domestic product (GDP), low employment, political stability, high quality of life, and more than 200,000 millionaires.
Despite its superb economic conditions, the average Singaporean struggles to afford even a basic car like Toyota Corolla or Honda Civic. There is nothing like a good car deal in Singapore, as every vehicle is expensive.
It’s not by chance that cars have ridiculous prices in Singapore, not at all! To keep the “car population” in control, the Singaporean Government has strategically made purchasing a vehicle a painful process.
Things That Make Cars So Expensive In Singapore
Let’s look at some reasons behind the high prices of cars in Singapore.
Certificate of Entitlement (COE)
The Singaporean Government is nothing less than a “dream crusher” here. Do you want to know how?
If you somehow manage to buy a car, you cannot still take it out for a ride in Singapore. It is because you have to obtain a “Certificate of Entitlement” (COE) to be able to drive any car in Singapore.
The bad news is that you cannot buy COE anywhere. To get COE, you have to bid on it, and the tenders for bids are quite expensive. Plus, the Government issues limited COE to further add to your plight. The misery does not end here, as these COE will last only for 10 years, and after that, you have to get them renewed.
Thus, COE is one reason cars are so expensive in Singapore.
Taxes & Fees
There are astounding numbers of taxes and fees that shoot up the price of even a basic car like a Toyota Corolla or Honda Civic to more than $100,000.
Let’s elaborate on it.
The first factor is OMV (Open Market Value). The Singaporean Custom determines the OMV of any car imported into Singapore. It is the actual cost of the vehicle minus all taxes and other surcharges. Generally, the OMV in Singapore is the purchasing price of the car plus freight charges, insurance, and other import charges related to the sales and delivery of a car.
The irony is, the mere OMV of any car in Singapore is, in reality, the actual price of that automobile in other countries.
Additional Registration Fee
On OMV, the Additional Registration Fee (ARF) is added. The ARF is generally added to all cars in Singapore during the registration process.
Here is the ARF structure issued by the Government.
|Next $30,000 of OMV ($20,001 to $50,000)||140%|
|Above $50,000 of OMV ($50,001 and Above)||180%|
|Above $80,000 of OMV||220%|
To understand this, let’s take an example of a car with an OMV of $55,000. The ARF payable would be:
|OMV||ARF payable ($)|
|$20,000 x 100%||20,000|
|$30,000 x 140%||42,000|
|$5,000 x 180%||9,000|
Excise Duty & GST
Other charges that make cars so expensive in Singapore are Excise duties and GST.
Excise duties are the indirect taxes imposed on sale or purchase of specific goods like cigarettes, alcohol, petrol, etc.
In Singapore, an Excise duty of 20% is added to the OMV of cars. The consumer’s misery does not end here. After the Excise duty, you have to pay an additional 7% GST on the OMV plus Excise duty amount.
So, for instance, if your dream car has an OMV of $20,000, in Singapore, you have to pay a $4,000 Excise duty on it. Then, a GST amount of $1,680.
Vehicular Emission Scheme (VES)
Another surcharge or rebate that affects any car’s price in Singapore is the Vehicular Emission Scheme (VES). Now, this is something that I applaud the Singaporean Government for. This scheme shows that Singapore takes climate change issues seriously and would discourage all those vehicles that contribute to environmental degradation.
If you buy any car that has less greenhouse gas emission, then the Singapore Government would give you an ARF rebate (up to 20%) depending on your vehicle’s emission. Similarly, you have to pay a surcharge on your ARF if your car is dangerous to the environment.
The next hurdle in your “car dream” would be the dealer margin.
Like any other business, dealers also want to maximize their profits. So, they are most likely to charge (even ridiculous) amounts as their margins. Depending on the car and its brand, a dealer margin could be as low as 10% and can go higher up to 50%.
So, the final cost of your car would include all the above charges.
In this article, we tried to figure out the answer to the question of why cars are so expensive in Singapore.
Car is a luxury for people living in one of the most prosperous countries in the world, Singapore. Due to the limited road infrastructure, the Government deliberately pushes the prices of cars up via high OMV, ARF, excise duty, GST, and Vehicular Emission Scheme. The dealers further add to the car buyers’ misery through their margins.