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An Explanation On Why Cars In Singapore Are So Expensive

ARF, COE, Excise Duty & GST. These are the reasons why Singaporeans are paying the most money around the world for our cars.


In Singapore, there is no such thing as getting a good car deal that makes financial sense. A car, even a “cheap” one, is a luxury that the average Singaporeans (despite our high spending power) will struggle to afford. Even among the upper-middle class, owning a car in Singapore isn’t cheap to.

If you ever wondered why cars in Singapore are so expensive, then this article is just right for you.

Cars In Singapore: Why Are They So Expensive?

In Singapore, we are fortunate that the costs of living are still pretty manageable, especially when compared to wages, especially in the areas of housing, education and food. However, one aspect of life that is notoriously expensive is the cost of owning a car in Singapore.

The government’s position is that measures are necessary to keep the car population in check, and the mechanism they choose is economics, as opposed to other forms of non-monetary controls, such as balloting or assigning licenses after needs-based assessments.

There are 6 main factors that determine the price of a brand new car in Singapore. They are: 1) Open Market Value (OMV), 2) Additional Registration Fee (ARF), 3) Excise Duty & GST, 4) Certificate of Entitlement (COE), 5) Vehicular Emission Scheme (VES) rebate or surcharge and 6) the local dealers’ margin. We’ll explain what these costs are and how they make cars in Singapore so expensive.

#1 Open Market Value (OMV)

Think of a car’s OMV as a baseline guide to the original price of the car. If not for taxes, COE, ARF, or other forms of taxes, we could have bought the car at the OMV price. The OMV prices we see are what some people in other countries are paying for the exact same car.

Source

For example, a brand new Honda Civic has an OMV of about $20,083. Of course, in Singapore, there is no way you can pay $20,083 for a brand new Honda Civic. In fact, it is currently retailing in Singapore at around $108,999. The reason for this lies in the next 5 factors.

#2 Additional Registration Fee (ARF)

All cars in Singapore would be subjected to the ARF. The ARF is a form of tax imposed on all cars during registration. The ARF is calculated based on the OMV of the vehicle.

The ARF is calculated based on the following:

Vehicle OMV ARF Payable (%)
First $20,000 100% of OMV
Next $30,000 (i.e. between $20,001 to $50,000) 140% of OMV
Above $50,000 180% of OMV

For example, a Mercedes E200 that has an OMV of $54,869 will incur the following ARF cost.

Mercedes E200 ARF Payable
First $20,000 $20,000
Next $30,000 $42,000
Next $4,869 $8,764
Total $70,764

In the case of our Honda Civic, the ARF is $20,116.

#3 Excise Duty And GST

Excise Duty is a form of tax imposed on specific goods within a country. For example, in Singapore, we have additional taxes on goods such as alcohol, cigarettes and petrol.

The Excise Duty on cars in Singapore is 20% of OMV. Once the Excise Duty of 20% is added to the OMV, a further 7% GST will be levied on the total OMV and Excise Duty amount.

For example, a Mercedes E200 that has an OMV of $54,869 will incur an Excise Duty of $10,973 (20% of $54,869) and a GST of $4,609 (7% of $54,869 + $10,973).

In the case of a Honda Civic, with an OMV of $20,083, the Excise Duty will be $4,016 and the GST is $1,686.

#4 Certificate Of Entitlement (COE)

Even non-car owners would know about the COE. The COE is a “market-driven” certificate that allows a car to be driven on Singapore road for 10 years. COE prices can increase steeply during periods of high car demand, which in turn causes prices of cars to increase.

At the point of this update on 29 June 2021, COE prices for CAT A (car up to 1600cc and 130bhp) is $47,821 and $56,032 for CAT B (car above 1600cc or 130bhp). CAT E (open) COE price is $58,001.

Read Also: Is There Anything Wrong With The Current COE System

#5 Vehicular Emission Scheme (VES) Rebate Or Surcharge

One other factor that could either increase or reduce the cost of buying a car in Singapore is the Vehicular Emission Scheme (VES). Introduced on 1 January 2018, the VES encourages owners to buy a car that emits fewer pollutants. Depending on your vehicle’s emission, you may either have to pay a surcharge or enjoy an ARF rebate. VES rebate reduces the car’s Additional Registration Fee (ARF). VES surcharge will increase the ARF.

Source: LTA

For the Honda Civic, it falls under Band B which means there is no VES surcharge/rebate.

Read Also: Guide To Understanding Vehicle Emissions Scheme (VES) In Singapore

#6 Local Dealers’ Margin For Cars In Singapore

Last but not least, the car dealers that are selling you the car would also need to cover their own overheads and earn a profit for themselves. We call this dealers’ margin. Dealers’ margin could range from as little as about 15% for affordable brands to as high as 50% or more for luxury car brands.

To calculate what the dealers’ margin is, simply sum up the OMV, ARF, Excise Duty, GST, VES Surcharge/Rebate & COE. SGCarMart refers to this as the “basic cost.” We then compare the basic cost against the actual sales price, with the difference being the dealers’ margin.

For example, based on our calculation, a Honda Civic currently has a basic cost of $93,722 (inclusive of a $220 registration fee) with a sales price of $108,999. Hence, the dealer’s margin for the car is about 16%

How A $20,083 Honda Civic Becomes $108,999

Here is an example of how a $20,083 Honda Civic becomes $108,999 in Singapore.

OMV $20,083
ARF $20,116
Excise Duty + GST $5,702
COE (CAT A) $47,821
VES Surcharge or Rebate $0
Basic Cost (Including $220 registration fee) $93,942
Dealer’s Margin $15,277 (16%)
Final Sales Price $108,999

 

Now that you know how much more you are overpaying for a car compared to the rest of the world, perhaps it is time to reconsider the idea of whether buying a car in Singapore is really going to be worth the hard-earned money that you are going to be paying.

Read Also: 5 Cheapest Cars In Singapore That You Can Buy In 2021

This article was first published on 7 April 2016 and we have updated it with the latest information.

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