As you start your career and begin earning some money, you may start thinking about purchasing a car. However, purchasing a car in Singapore would probably be one of the biggest financial commitments you will make. Therefore, it is important to consider some key points before buying a new car. In this article, you will learn about the 10 key factors on buying a car in Singapore that every future car owner needs to know.
1. Certificate of Entitlement (COE)
What COE Means
If you want to know how to buy a car in Singapore, you should familiarise yourself with the term “COE”. You’ve probably come across it on our local newspapers and hear it discussed among Singaporeans. So what exactly is it? Simply put, the COE is the right to own a vehicle and use the roads in Singapore for a period of 10 years. Having a COE allows you to register your vehicle, without which you cannot legally drive on the roads of Singapore.
The COE system is the government’s way of reducing the number of cars on the road. They achieve this by restricting the quantity of COEs to a limited quota. This system aims to tackle the dual issues of pollution and congestion in Singapore, thereby improving the general road conditions. And so far it seems like our country’s road policies have worked pretty well. Our road congestion levels are significantly better than many developing countries, where the cars may move at a much slower pace, especially during peak periods.
When purchasing a car in Singapore, getting your COE is quite straightforward. You do this through the COE Open Bidding System, where you first submit your bid and monitor the COE prices. COE bidding can be done at one of the COE Open Bidding exercises conducted twice every month.
If you are intending to bid for a COE for your new car, do note that you should bid for the correct category based on car engine capacity. The following table shows the different categories of COE:
When buying a car in Singapore, you absolutely need to know how the COE bidding system works.
You start by submitting your bid price or reserve price, meaning the maximum bid amount that you are prepared to pay for the COE, into the COE Open Bidding System.
Then the system will begin the bidding process. The starting bid is S$1 and the system revises the Current COE Price (CCP) upwards in S$1 increments. As long as your reserve price is equal or higher than the CCP, your bid will continue to be in the system.
The CCP will stop rising when the number of bidders who are prepared to pay more than or at the CCP equals to the COE quota or the number of COEs available. If your bid is higher than or equal to the CCP at the end of the bidding process, you will get your COE. While the bidding process is ongoing, you can revise your bid (but only upwards) subject to an administrative fee.
Sounds complex, right?
Don’t worry, to make things easier, here’s a useful chart that summarises the bidding process:
2. Open Market Value (OMV)
Another important consideration is OMV.
OMV of a vehicle is the price actually paid or payable for the vehicle when sold for export to the country of importation. The Singapore Customs determines your car’s OMV when it enters Singapore, taking into account the purchase price, freight, insurance and all other charges incidental to the sale and delivery of the car to Singapore.
Why is “OMV” important when learning about buying a car in Singapore? Knowing the value of your car’s OMV is critical as it affects both the Additional Registration Fee (ARF) and the Preferential Additional Registration Fee (PARF), which will be explained further below.
3. Registration Fees of Buying a Car in Singapore
Registration Fees are an unavoidable part when you’re considering buying a car in Singapore.
In addition to the S$220 Registration Fee (RF) you would have to pay to register your new car, there is also the ARF. The ARF is a tax imposed upon the registration of a vehicle and is calculated as a percentage of your OMV. The following is a table from LTA’s website about the ARF rates:
(1) For cars registered with COEs obtained from March 2013 tender exercises and onwards.
As you can see from the table above, the more expensive your new car and the higher the OMV, the higher the ARF amount you would have to pay.
When considering purchasing a car in Singapore, you should keep in mind the Preferential Additional Registration Fee (PARF) rebate. If you decide to deregister your vehicle before it is 10 years old, you will be entitled to a PARF rebate, which essentially reimburses you for the ARF that you paid upon registering your car.
The older your car, the lower the percentage of ARF you will receive as the PARF rebate and the less value you can get back for your car. You can calculate the PARF rebate you are entitled to based on the following table:
Taxes. Most Singaporeans feel sick when they hear this word.
Yet, taxes are an important consideration when buying a car in Singapore.
Paying your road tax is mandatory in order to drive on the Singapore roads. This is an important factor in relation to your new car. Road tax is usually payable every six months to a year and the actual amount differs according to your car’s engine capacity. Contrary to popular belief, road tax is not used to build and maintain public roads. In fact, general taxes are used for such purposes. Road tax is instead linked to the emission levels produced by each vehicle.
As seen from the table below, road taxes are thus calculated based on a vehicle’s engine capacity or power rating:
You will be charged with a special tax if you decide to purchase a diesel car in Singapore. This is on top of the road tax you have to pay. The special tax is in place to discourage individuals from buying diesel cars, which are deemed as contributing to greater levels of environmental pollution. The extent of special tax you have to pay depends on the emission standard that your car complies with. This can be seen in the table below:
Excise Duty and GST
Another important tax to consider when buying a new car in Singapore is the excise duty. This is imposed and collected by the Singapore Customs and is currently set at 20% of the OMV of the car.
Don’t forget about GST! According to the IRAS website, sellers of cars must charge GST on the sale price of the vehicle. The GST amount is calculated after deducting regulatory charges such as the RF, ARF, COE and road tax. Thus, you can expect to incur an additional 7% GST on the price of your car.
5. Car Loan for your Purchase of a Car in Singapore
Loan Period and Amount
If you are thinking of buying a car in Singapore, you need to find a way to finance your purchase. You can do this by taking out a car loan with a bank.
The current laws dictate that borrowers can pay back their car loans over a maximum of seven years. During the repayment period, the interest rate charges for car loans are relatively high. Most banks would have a monthly repayment schedule at an interest rate of approximately 2.7% per annum.
As for the maximum loan amount you can take up, current regulations prescribe limits on this, which is in turn based upon your OMV. If your OMV is higher than S$20,000, you can take a loan of up to 60% of the car’s purchase price. In such a case, you would have to provide a minimum deposit of 40% of the car’s price. If the OMV is lower than or equal to $20,000, you can take a loan of up to 70% of the car purchase price with a minimum deposit of 30%.
Total Debt Servicing Ratio (TDSR)
TDSR is a factor you should definitely bear in mind when contemplating to purchase a car in Singapore. The TDSR actually affects your home loan. In fact, the TDSR limits the amount of housing loan you can obtain by ensuring your monthly repayments for all your debts including car loans, mortgage, credit cards, personal loans, and so on do not exceed 60% of your monthly income.
Sounds complicated right? Actually, it just means that you have to consider that all your loans, including your car loans, are not too high and cannot go above 60% of your monthly income. For example, if your gross monthly income is S$10,000, then your TDSR limit is $6,000.
Thus, if you are considering buying a house in the future, you should consider taking a smaller car loan. This reduces the chance of you exceeding your TDSR and getting rejected for your housing loan application.
6. Car Insurance
Under Singapore regulations, it is compulsory for all car owners to take out car insurance to cover third party liability. The purpose of car insurance is to cover damage to other people’s property. This includes damage to other cars as well as liability for causing death or injury to third parties including passengers.
Additionally, you may want to take out a more comprehensive cover to extend your coverage to repairs to your own vehicle resulting from accident or theft. Importantly, you should also consider the amount of excess of your car insurance policy. In other words, how much you pay towards a claim for loss of or damage to your car before your insurer starts contributing. If your policy excess is too high, then you would have to bear the bulk of the costs for minor accidents. Thus, it’s best to have as low a policy excess as possible. However, this usually comes at the cost of higher premiums. Hence, you have to weigh these factors before choosing the extent of insurance coverage you want.
Various factors will affect your car insurance premiums. For example, your premiums would be higher if you are accident-prone and have little driving experience. For all those who are intending to buy luxury cars, your car insurance premiums would also be greater. This is because your expensive vehicle would be more costly to repair and replace.
7. Vehicle Registration
Bidding for Vehicle Registration Number Plate
When purchasing a car in Singapore, you may be thinking of choosing an auspicious number for your car plate. In this regard, the LTA would open the bidding up to the public for registration numbers 1 to 9999 for a particular series of letters, for example, “SLM”. Thus, if your bid for the number 8888 is successful, your car plate number would read SLM8888.
The bidding exercises are split into the main bidding exercise and the weekly bidding exercise for the remaining available numbers. You can find out about the launch of these bidding exercises when they are announced on the One Motoring website.
You may also submit up to three different car registration numbers in a single bid submission. However, you will only be awarded one registration number which is based on your order of preference. It is also noteworthy that your bid amount cannot fall below the minimum of $1,000.
8. Vehicular Emissions Scheme
The LTA and NEA launched the new Vehicular Emissions Scheme (VES) for all new cars, which took effect from 1 January 2018. This replaces the Carbon Emissions-Based Vehicle Scheme (CEVS). Thus, it is important to understand how the VES would affect your purchase of a car in Singapore.
Under the VES, you may receive rebates or may be required to pay an additional surcharge. The exact amount depends on the amount of five pollutants that your vehicle produces, namely hydrocarbons (HC), carbon monoxide (CO), nitrogen oxides (NOx), and particulate matter (PM) and carbon dioxide (CO2) emissions. The higher the levels of pollutants your car produces, the higher the surcharge you would have to pay. Conversely, the lower the number of pollutants, the more rebates that you will receive. The maximum surcharge or rebate under the VES is $20,000 (excluding taxis).
This table reflects the rebates/surcharges you might be entitled to under the VES scheme.
9. Consider all the Costs of Buying a Car in Singapore
Before you rush into buying a new car, do be aware of all the costs of owning a car. Other than the costs such as road tax and insurance fees, there are miscellaneous costs as well. This includes the cost of petrol, parking, Electronic Road Pricing and car maintenance. You have to consider this when deciding what type of car to buy and to factor these costs into your monthly expenditure.
Without knowing the exact costs, you miss out on a critical factor on purchasing a car in Singapore.
10. Negotiate on the Car’s Price
What’s the key to getting the best deal on your car? Negotiate, negotiate, negotiate! It is important not to accept the first offer on the price of a car without trying to haggle the price down. In order to negotiate effectively, you’ve got to do your research. Find out how much other car dealers are pricing the same model of your car. Then, decide on a target price which you are willing to pay for your new car.
For those who really want to get the best price and are willing to put in a bit more time, I suggest the following strategy:
Send an email to several car dealerships, asking for the price of the car you want. After receiving all the offers, call up the car dealers and give them the chance to beat the lowest price you have received. You may want to use this strategy at the end of the month. This is because that’s when car salesmen and dealers are desperate to hit their sales targets and would likely accept lower prices.
Armed with the factors on buying a car in Singapore, you can now purchase your very own car in Singapore with more confidence. If this article helped you, do share this with your friends and relatives so that they get the best deal for their car as well!