What’s the True Cost of Car Ownership in Singapore?


Let it be said that buying a car in Singapore is about the worst possible investment decision you can make. Not only does it depreciate in value 10% each year, but also at the end of those 10 years, you have no choice but to take the Preferential Additional Registration Fee (PARF) rebate and register a new car – or scrap it!

That’s unless you really love your car and want to spend another S$60,000 to S$100,000+ on renewing the Certificate of Entitlement (COE) for another 10 years. And that’s not even counting the 10% increase in road tax you’ll need to pay every year – up to a maximum of 150% on your 15th year of ownership.

But for some Singaporeans, a car is a necessary purchase – whether it’s for driving the kids to school or needed to maintain “face” value. Either way, it’s an expense that’s always much higher than anticipated.

The car – Mercedes-Benz E-200 AVANTGARDE

To demonstrate the true cost of a car in Singapore, we’ll look at the total cost of ownership for Singapore’s best selling car of 2014 – the Mercedes-Benz E-Class.

According to the Mercedes-Benz package pricelist for 12 to 22 January 2015, the overall cost for the Mercedes-Benz E-200 AVANTGARDE model is S$264,888.

The package price is inclusive of the following:

  • Certificate of Entitlement (COE)
  • Open Market Value (OMV)
  • Additional Registration Fee (ARF)
  • Fees and Taxes (Registration fee, Duty Fee, GST, Dealer Gross Profit, etc.)
  • First year of the Road Tax

The buyer

The car buyer is a 30-year old Singaporean male professional who is working in the financial sector. He also has had a license for two years and has been saving up for a new car for several years.

The True Cost of Buying a Car

#1 Your car loan down payment

If your vehicle’s OMV is S$20,000 or less, you can qualify for a maximum Loan-to-Value (LTV) of 60% of the car’s purchase price, meaning you’ll need to make a down payment of 40%

If your vehicle’s OMV is above S$20,000, you can qualify for a maximum LTV of 50% of the car’s purchase price, meaning you’ll need to make a down payment of 50%.

In this case, because the Mercedes-Benz E-200 AVANTGARDE has an OMV above S$20,000 – you’ll need to make a down payment of 50%.

So 50% of the car’s S$264,888 purchase price comes up to…

Down payment amount = S$132,612

#2 The overall cost of your car loan

Because of recent car loan restrictions imposed by the Monetary Authority of Singapore (MAS), all loan tenures are capped at five years, which means you’ll need to make higher monthly repayments.

So if you end up taking out a five-year car loan at 2.28% p.a. to finance the remaining S$132,612 you owe on your car, the overall cost of your car loan will come out to…

Overall Cost of Your Car Loan = S$147,543 (S$132,612 + S$15,099 in interest)

#3 The overall cost of your auto insurance

The cost of your car insurance can be quite variable over the lifetime of your policy as driving experience, policy amendments and accidents have an effect on your premiums.

However, let’s assume that you are a safe driver and your insurer gives you a 10% No-Claim Discount (NCD) after every year you drive without incident (up to the maximum 50%).

Based on an initial car insurance annual premium of S$3,600 (excess S$1,000) for a comprehensive policy, your overall insurance premiums over 10 years will be…

Overall cost of your auto insurance = S$24,520 (factoring NCD)

#4 The overall cost of paying the road tax

The road tax is calculated based on your car’s engine capacity. The higher your engine capacity, the higher your road tax will be.

The Mercedes-Benz E-200 AVANTGARDE has an engine capacity of 1991cc. So according to the Land Transport Authority (LTA), here is how you factor the road tax:

S$950 + 1.5 (1,911 – 1,600) X 0.782 = a road tax of S$1,108

Based on an annual road tax of S$1,108, your overall road taxes payable would be…

Overall cost of paying the road tax = S$9,972 (minus first year’s road tax paid by dealer)

#5 The overall cost of petrol

According to LTA, the average Singaporean drives about 19,000km a year. If the Mercedes-Benz E-200 AVANTGARDE has an average fuel consumption rate of 16.7km per liter of petrol and the current cost of a liter of 98UL petrol is about S$1.95, the cost of petrol for 2015 will be about S$2,220.

Of course, the cost of petrol can rise and fall and you can drive more or less than 19,000km a year.

But if you maintain about 19,000km a year and petrol rises about 3% each year due to inflation, you’re looking at an overall cost of petrol that is…

Overall cost of petrol = S$26,213

The overall cost of maintenance

Every vehicle needs regular maintenance to keep it running long enough to last the entire 10-year period of ownership. That means taking your car to the dealer to conduct regular oil changes, tyre rotations, and other maintenance every 6 months.

Depending on the service requested, the average cost of taking your car in for services could easily exceed S$300 per trip. However, Mercedes-Benz offers a Star Care+ maintenance plan that costs S$1,064 for three service visits during an 18-month period.

If you purchase this maintenance plan and replace all of your tyres every four years for about S$1,200, your overall cost of maintenance (barring any major mechanical maintenance issues) will be about…

Overall cost of maintenance = $9,850 (keep in mind this cost is highly variable as it is dependent on the rising cost of services and mechanical reliability of your car)

What’s the total cost?

If you tally up every lifetime expense listed above, the grand amount you would have to pay for that Mercedes-Benz E-200 AVANTGARDE would be about S$350,710. That’s almost S$100,000 more than what you paid for it!

However, if there’s one thing you should take away from this article, it’s this – the overall cost of ownership is even more expensive than what you see above.

That’s because there are so many factors out there that can increase the overall cost of your car purchase such as:

  • Vehicle accidents/Traffic fines
  • Rising parking costs
  • Rising ERP rates
  • Rising taxes (e.g. road tax)
  • Rising cost of services (especially maintenance)

Of course, owning a car doesn’t need to be any more expensive that it already is. Make sure you catch up on our article 5 Ways to Reduce Petrol Costs in 2015 to save more money. And don’t forget to compare auto insurance policies so you can find a policy that will save you money and provide the coverage you need.

What do you think?