If you live in Singapore and have been considering buying a car, you may have asked yourself the question, “Why are cars so expensive in Singapore?” The answer to this question can be complex, and there are many factors that contribute to the high cost of cars in Singapore.
In this blog post, we will explore the top reasons why cars are so expensive in Singapore and what you can do to help offset the cost.
An Explanation Of Why Cars In Singapore Are So Expensive
With a population of over 5.9 million people, Singapore is known to be one of the most expensive cities in the world. The cost of living is high and the cost of owning a car is even higher.
The cost of owning and maintaining a car in Singapore is among the highest in the world, which is why many Singapore are unable to afford one.
With these high costs and regulations, it is no surprise why it is so hard to own a car in Singapore.
Here are the top reasons why cars are so expensive in Singapore.
1. Taxes Involved
One of the biggest reasons why cars are so expensive in Singapore is the taxes involved. Singapore has a very strict policy when it comes to car ownership and this is reflected in the high costs associated with owning a car.
Cars are taxed based on their open market value (OMV), or their original purchase price, plus registration fees, excise duties, additional registration fees (ARF), and certificate of entitlement (COE) premiums.
2. Sales Margin
Sales margin is one of the main reasons why cars are so expensive in Singapore. It’s essentially a tax on the sale of a car and contributes to the overall cost.
This tax is applied by both car dealers and distributors, which accounts for a large portion of the costs associated with buying a car in Singapore.
Additionally, this tax is often higher than what you might expect to pay in other countries, making cars even more expensive in Singapore.
This tax also applies to electric cars and hybrids, making them even more expensive in comparison to petrol-powered vehicles.
The sales margin is just one of the many taxes involved in purchasing a car in Singapore and it’s important to understand why it’s in place if you’re planning on buying a car in Singapore.
3. Certificate of Entitlement (COE)
One of the biggest reasons why cars are so expensive in Singapore is due to the Certificate of Entitlement (COE). This certificate is required for all vehicles in Singapore and is obtained through a government auction.
- The COE is a quota system that controls the number of cars in Singapore, which also contributes to why cars are so expensive in Singapore. For example, an OMV of S$30,000 could easily cost up to S$50,000 after all the taxes and fees have been added.
The amount of COE available for bidding is determined by the Land Transport Authority and the cost of a COE is affected by supply and demand.
The COE price can range from around S$30,000 to over S$100,000, depending on the type of vehicle.
This additional cost is factored into the purchase price of a car, making it more expensive than in other countries.
To find out how much taxes and fees you will be paying for a particular car, you can use the Singapore Car Import Tax Calculator or the Singapore Car Tax Calculator.
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4. Rebates and Surcharges
Rebates and surcharges can significantly affect the cost of owning a car in Singapore. As a result, they are an important factor when looking into why cars in Singapore are so expensive.
In order to be able to purchase a car, one must first pay a registration fee. Depending on the type of car, the registration fee can range from a few hundred to a few thousand dollars.
Rebates and surcharges are just some of the factors that contribute to why cars in Singapore are so expensive. Taxes, registration fees, and GST all play a part in increasing the cost of owning a car in Singapore.
5. Additional Registration Fee (ARF)
Aside from this, there is also an additional registration fee (ARF) that needs to be paid when you purchase a car.
This fee depends on the Open Market Value (OMV) of the car as well as the type of vehicle and can range from about S$2,000 to S$30,000.
This fee is paid only once when purchasing a new car and is used to finance road construction and maintenance.
6. Registration Fee
When it comes to why are cars so expensive in Singapore, the registration fee is also an important factor to consider. This fee covers the administrative costs of registering a vehicle in Singapore.
Depending on the engine size and type of vehicle, this fee can range from SGD $50 to SGD $200.
- Furthermore, if the car is imported from overseas, the fee can be even higher.
For cars registered for the first time, there is also an Additional Registration Fee (ARF) that is based on the Open Market Value (OMV) of the car.
7. Open Market Value (OMV)
The OMV is the cost of the car minus any depreciation. The ARF is calculated as a percentage of the OMV. For cars up to 2000cc, the rate is usually 100% while for cars over 2000cc, the rate can be even higher.
Therefore, when it comes to why are cars so expensive in Singapore, the registration fee is an important factor to consider.
Not only does it add to the overall cost of owning a car in Singapore but it also affects the price of imported cars as well.
8. Excise Duty
Another factor that contributes to the high cost of cars in Singapore is excise duty. This is a tax levied on the sale of goods or services, and cars are no exception.
The amount of excise duty imposed depends on the type of vehicle, with luxury cars having a higher rate than regular cars.
For example, a luxury car can be subject to an excise duty of up to 100%, while a regular car may only have an excise duty of up to 20%.
9. High Insurance Premiums
One of the major reasons why cars are so expensive in Singapore is the high insurance premiums. Insurance premiums in Singapore tend to be much higher than those in other countries, with the cost of insurance varying depending on the type of car and the age of the driver.
For example, younger drivers tend to have higher insurance costs than older drivers, as they are seen as more of a risk.
Additionally, luxury cars also come with higher insurance premiums, as they are more expensive to repair and replace.
This contributes significantly to the overall cost of owning a car in Singapore, making it harder for many people to afford one.
10. Expensive Car Parts
One of the reasons why cars are so expensive in Singapore is the cost of car parts. Singapore is an expensive place to live and this includes the cost of car parts.
When you are looking to purchase a car, the cost of the parts will play an important factor in the overall price.
The cost of car parts is higher than in other countries due to the fact that they are imported into Singapore. This means that they are subject to taxes and fees, which make them more expensive.
For example, if you were looking to buy a new engine for your car, it would be much more expensive in Singapore compared to if you bought it in another country.
Additionally, when buying used parts for your car, you can expect to pay much more for them than you would for new parts.
Car owners in Singapore also have to pay for servicing and repairs which adds additional costs to owning a car.
This makes it even harder for people to afford cars in Singapore, as it’s not only the initial price of the car that’s expensive but also the cost of maintaining it.
Is it Expensive to Own a Car in Singapore?
Owning a car in Singapore can be an expensive endeavor. From the taxes and fees associated with car ownership to the high cost of car parts, there are many factors that contribute to why cars in Singapore are so expensive.
Singapore has a car policy that requires a Certificate of Entitlement (COE) for every vehicle purchased, which adds a hefty sum to the price of a car.
- Singapore has an open market value (OMV) system, where taxes are based on the value of a car. This means that a car purchased for S$50,000 may end up costing S$80,000 after taxes.
- Singapore imposes an excise duty on cars, which can add significantly to the total cost of ownership.
- Electric cars are especially expensive in Singapore due to their higher-than-average registration fees and rebates.
As of 2021, the most expensive car in Singapore is the Porsche 911 Turbo S Cabriolet, with a starting price of S$1.4 million.
Altogether, these factors contribute to why cars are so expensive in Singapore and make it difficult for people to own a car in the country.
Summary: Why Cars Are Expensive in Singapore
It’s no secret that cars in Singapore are expensive. The cost of owning a car in Singapore can be high, with taxes and fees, Certificate of Entitlement (COE) premiums, registration fees, insurance premiums, and parts all contributing to the high cost.
Many of these costs are unique to Singapore, with the government’s vehicle quota system (COE) having an outsized influence on prices.
Overall, it is estimated that a car in Singapore is around twice as expensive as a similar car in other developed countries.
While the reasons why cars are so expensive in Singapore are complex, understanding the unique taxes and fees involved can help explain why this is the case.
Ultimately, buying a car in Singapore is a significant investment, but one that may well be worth it in the long run.