Why Cars Are So Expensive in Singapore: A Deep Dive

The High Cost of Car Ownership in Singapore

Singapore’s car prices are driven by a unique set of regulations and economic factors that make owning a vehicle significantly more expensive than in other parts of the world. Let’s unravel the complexities of this issue.

1. Certificate of Entitlement (COE)

At the heart of the high car prices is the Certificate of Entitlement (COE). This is a government license that allows a person to own a car for a period of ten years. The COE system was introduced to control the number of vehicles on the road and to reduce traffic congestion and pollution. The cost of the COE can range from tens of thousands to over a hundred thousand Singapore dollars, depending on market conditions. This price fluctuation creates a significant barrier to entry for many would-be car owners.

The COE prices are determined through a bidding process conducted every two weeks. This auction-based system means that prices can vary greatly, reflecting the demand and supply for vehicle ownership. During periods of high demand, COE prices can spike dramatically, further inflating the overall cost of purchasing a car.

2. Import Duties and Taxes

In addition to the COE, the cost of importing cars into Singapore is also substantial. Singapore imposes high import duties and taxes on vehicles. For example, the Additional Registration Fee (ARF) is a tiered tax system that starts at 100% of the car’s open market value (OMV) and increases with the OMV of the car. This tiered system means that more expensive cars incur higher taxes, which further drives up the cost of ownership.

The Goods and Services Tax (GST) is another tax that affects car prices. This consumption tax is applied to the total price of the vehicle, including the COE and import duties. The combination of these taxes means that car buyers in Singapore face a significantly higher price tag compared to those in other countries.

3. Car Loans and Financing

Car loans in Singapore are subject to strict regulations. The Monetary Authority of Singapore (MAS) has set limits on the amount that can be borrowed for car purchases. For new cars, the loan limit is capped at 70% of the car’s value, while for used cars, it is capped at 60%. This means that car buyers need to have a substantial down payment, which can be a significant financial burden.

Additionally, car loans come with relatively high-interest rates compared to other forms of credit. The high cost of financing adds to the overall expense of purchasing and owning a car.

4. Maintenance and Insurance Costs

Once you’ve navigated the initial costs of purchasing a car, there are ongoing expenses to consider. Maintenance and insurance costs in Singapore can also be high. Regular servicing, repairs, and insurance premiums add to the total cost of car ownership.

Insurance premiums are influenced by factors such as the car’s model, age, and the driver’s history. The cost of insurance for luxury or high-performance vehicles can be particularly steep. Maintenance costs, on the other hand, can vary depending on the type of vehicle and its service requirements.

5. Limited Parking Space

Singapore’s urban environment means that parking is at a premium. The cost of parking can add up quickly, especially in central areas or high-demand locations. Parking fees in commercial areas and residential parking charges contribute to the overall cost of car ownership.

The scarcity of parking spaces also means that owning a car may require renting additional parking spots, further increasing the financial burden.

6. Public Transportation Alternatives

Despite the high cost of car ownership, Singapore has an excellent public transportation system. The Mass Rapid Transit (MRT) system and public buses offer a convenient and cost-effective alternative to owning a car. For many residents, the efficiency and affordability of public transport make it a viable alternative to car ownership.

Conclusion

The high cost of owning a car in Singapore is a result of a complex interplay of factors, including the COE system, import duties, taxes, car loans, and ongoing maintenance and insurance costs. While these factors contribute to making car ownership expensive, the city-state’s well-developed public transportation system provides a practical alternative for many residents.

Understanding these factors helps explain why car prices in Singapore are among the highest in the world. For those considering car ownership in Singapore, it is essential to factor in these costs and explore all available options before making a decision.