One common complaint I always hear in Singapore is that cars are so expensive, and it’s true. I’ve lost count the number of times I’ve seen a foreigner nearly choke in disbelief when they find out how much a Toyota Altis costs here. I’m also quite sure a large number of Singaporeans don’t realise the actual cost of cars in most other countries too, which for those of you who didn’t know is literally a fraction of what you’d be paying over here. So why are cars so expensive in Singapore? Let’s go into that.
So as a point of reference (using ballpark figures here), as of September 2021 a humble Toyota Altis costs around S$119,000 here. Compare that with the S$18,000 to S$24,000 equivalent you’d roughly expect to pay for in the US. So why such a big difference in prices? Well this is mainly down to 2 things that are added into the cost of all passenger vehicles sold in Singapore. A variety of taxes and the Certificate of entitlement or COE.
As the saying goes, the only certainties in life are death and taxes, and cars are no exception to this rule. Except that the taxes on cars in Singapore tend to be significantly higher than in most other countries. To break it down, we have the following things to consider when calculating the final cost of a car imported into Singapore:
Open Market Value (OMV)
First up is the Open Market Value or OMV. This is the basic cost of purchasing, insuring and shipping the car from the manufacturer into Singapore. This amount is usually determined by our local customs and tends to be roughly around the price you’d usually pay in most other countries for an equivalent car. This is just the starting point for us though.
Next we have include something called excise duty which is basically 20% of the OMV, followed by the Goods & Services Tax or GST that is currently at 7% of the OMV + Excise duty. Outrageous you say? Keep reading.
Before we move on, let’s just quickly add on the relatively insignificant registration fee which for cars is currently a flat rate of S$220. Perfectly fair administrative fee.
Additional Registration Fee (ARF)
Moving on, we then have to include the additional registration fee or ARF which is calculated on a sliding scale based on the OMV of the car. This is charged at 100% for the first S$20,000, 140% for the subsequent S$30,000 meaning S$20,001 to S$50,000, and 180% for any remaining value over S$50,000. This would bring the price of your S$19000 Altis to a cool S$44,462. We’re not done yet.
Certificate of Entitlement (COE)
Now it is finally time to add in the Certificate of entitlement or COE. So to put it simply, the Singapore government only allows a limited amount of new cars to be put on the road every quarter based on car population targets determined by people much smarter than me. They do so by issuing certificates of entitlement through a bidding process. So in order to register any new car, you would first have to acquire said certificate. At the time of writing this post, the COE is currently at S$47000 for cars up to 1600cc or 130bhp and S$62600 for cars above 1600cc or 130bhp. How much does that Toyota cost now?
Rebates and Surcharges
Now before you start to think that taxes is all there is, our government does offer rebates for certain types of cars, mainly those that are supposedly more environmentally friendly. On the flipside however they also impose a surcharge on cars they deem to be less environmentally friendly. This amount ranges from rebates of up to $25000 to surcharges of up to S$25000 depending on what emissions band the car falls under. Generally unless you’re buying an electric vehicle or econobox, don’t expect to get more than S$15,000 if any at all.
So with all this, we finally arrive at the basic cost of importing and registering a car in Singapore.
Up to this point, your friendly neighbourhood sales person has yet to earn their commission and cover their bosses overheads. As you can see, the price of cars in Singapore is actually very transparent and you can pretty much work out most dealer’s gross profit from it. Across the board this is usually somewhere in the range of 10-30% depending on the brand and whatever in-house options are negotiated on.
While it can be tempting to assume that your dealer’s margins are pretty generous to themselves after calculating the basic cost of the car, do not forget that they do have quite a sizeable overhead to cover as well. Apart from the brick and mortar expenses of their showroom and staff wages, they also need to cover sales commissions, workshop overheads, warranty expenses, warehousing and stockholding costs, marketing costs, administrative costs and so on.
Also keep in mind that most of the time, the prices that the dealers set are all a gamble on what they predict the subsequent COE price is going to be. So if the COE shoots up way beyond what they expect, they may even have to take a loss in order to honour their sales agreement. This is why many dealers offer a non-guaranteed COE package at a slightly lower price. So please try not to automatically assume every salesman is out to extort you, they need to eat too. Most of them actually do fair work for fair margins.
So now that I’ve explained how cars end up costing so much over here, let me just leave you here with one final thought. The prices we pay here definitely lull us into viewing cars as a luxury item. However, it is in fact car OWNERSHIP that is more of a luxury item than most cars themselves. Cars for most people around the world are merely tools for work and transportation and nothing more. So the next time you are feeling somewhat disappointed that your 80, 100, even 200 thousand dollar car isn’t as perfect as what you expected for the money you paid, perhaps just go back and have a look at the OMV to remind yourself how much the car was actually supposed to cost and maybe you’ll feel a bit better, or a lot worse.