Costs You Did Not Expect When Getting A New / Used Car And How Car Loans Can Help You (2019 Update)

Having a car seems great.

It brings convenience and prestige. It means that you get to drive comfortable around Singapore and not have to squeeze with the crowd on MRTs and buses, shuffling with all the people and standing through peak hours. Getting a car means that one gets to travel to different places conveniently and comfortably with independence.

While having a car brings so many benefits, getting a car in Singapore however, is not very cost-friendly. As compared to other countries such as Malaysia where almost every household has their own cars, less than 20% of Singaporeans actually own a vehicle in Singapore.

With COE (Certificate of Entitlement), taxes, parking fees, petrol, insurance and more, just buying a new car in Singapore costs at least $100,000.

The alternative that some people choose to take it getting a second-hand car due to the lower cost. Although second-hand cars can lower the cost by 40-70%, it may still require the individual to get a car loan for the car. Unless you have at least $35,000 lying around to make the full payment of the car (not considering the monthly expenses), most Singaporeans actually take on a car loan in order to drive the vehicle home.



What Are The Things That An Individual Should Consider Before Buying A Car?


Before buying a car, there are several things that you should consider. For example, you should buy a car that you can comfortably afford. This will help ensure that you don’t strain yourself financially. Other than the actual cost of the car, you will also have to factor in monthly recurring costs for maintenance, petrol, parking and insurance. There are expenses that you have to incur monthly or yearly to keep your car in good shape over the time that you are using it. You should be in a position to comfortably pay for the maintenance of your car. Below are some of the costs of owning a car in Singapore and ensuring that the car is well-serviced and operational all the time.


1. Costs of Buying A Car

Several factors determine the final cost of the car that you buy. There is the actual price of the car as bought from its manufacturer; then there are additional taxes that the government will charge you for owning the car. You also have to pay a fee that will cater for the commission or profit that the dealer who sells you the car will get. These costs are detailed next.

The car’s Open Market Value (OMV) – The OMV of a car is arrived at by Singapore Customs upon inspecting the vehicle when it is brought into the country. OMV includes the purchase price of the car plus shipping charges that make it possible for the car to be delivered.

Registration charges – Some S$220 is charged as the vehicle’s registration fee.

Charges for Certificate of Entitlement (COE) – If you purchase a vehicle in Singapore, it is mandatory to have a COE. This is the document that enables you to have a car registered in your name and to own and use the car. The fee that you will have to pay ranges from S$29,902 to S$37,000 for different types of cars.

Additional registration charges – There is an additional charge called Additional Registration Fee. This fee is charged when a car is registered, and is a proportion of the car’s OMV. Presently, cars with an OMV value that is less than or equal to S$20,000 are charged as 100% of OMV. For cars whose value exceeds $20,000, the charge is imposed differently as the OMV increases.

VES (Vehicular Emissions Scheme) charges – In January 2018, Singapore started surcharging or offering VES rebates on all registered cars. Thus, older cars are surcharged while there is a rebate for new cars. The aim of VES is to promote the buying of vehicles that are environment-friendly such as green vehicles,

Initial Insurance cover plus road tax – Even after paying for all the aforementioned charges, you still cannot drive your car if it does not have a valid insurance cover as well as an up-to-date road tax. Therefore, you must pay for these two items.

Commission for the car dealer – As is the case in any business, a merchant must get a share of the buyer’s money for providing a service or product. Therefore, a car dealer will get some money to cater for warranties, overhead costs, and of course profit.


2. Car Servicing / Maintenance Costs

Getting a car doesn’t mean that the deal is all done after paying for the car. In addition to paying for the costs above in order to own a car, there are other charges that you will have cater for to keep your car running. Monthly expenses that need to keep in mind. These charges include subsequent fuel, insurance cover, road tax and costs of servicing the car. More details about these charges are provided below.

Fuel cost – You have to fuel your car in order to use it. Fuel consumption varies depending on the type of car and how you use it. For a small car, you are likely to spend at least S$2,600 a year on fuel.

Road tax and insurance cover – Adding on to the payments that you make before you start using your new car, you have to submit further payments over the period that you use the car. It will cost you S$740 and S$1,500 for road tax and insurance respectively per year for a 1.6 liter engine car.

ERP (Electronic Road Pricing) charges – It is expected that you will use your car regularly once you have purchased it. The government will collect from you a monthly ERP levy of about S$20.

Servicing/maintenance costs – You also need to service your car regularly to keep it in tip-top condition. This is especially important if you intend to sell your car in a few years to purchase newer or better car models. For instance, you will have to check tyres for pressure and punctures, clean the spark plug, top up oil and windshield washer fluid, and keep the car clean among other servicing and maintenance practices. One probably needs to visit the car doctor once every three months or when the car has traveled 5,000km, whichever that comes first.



The Cost of A Car and How Getting A Car Loan Can Help You




Other than the actual cost of the car, there are many other costs a buyer needs to take note of.

If you combine all the charges mentioned above, what comes out clearly is that it is relatively expensive to buy, use and maintain a car. For instance, after factoring in charges such as OMV, dealer’s commission, registration fees, ARF, COE, excise duty and others, a car such as a Toyota Corolla Altis costs about S$102,876. To have such an amount in cash, you must probably be earning a really high income, won the lottery or like most people, saved your income for quite some time. However, if you cannot get the lump sum amount to pay for a car, the other alternative that you have is to get a car loan.

Loans often paint a negative image on people. However, taking a car loan simply means that it is possible for you own a car without the hassle of having to make one huge payment for the vehicle. You can start driving as you pay for the vehicle in installments. This is especially helpful if you urgently need a car for your work. Imagine staying in Jurong West but having to take the train all the way to Changi Airport for work every single day. It takes a lot of time and a toll on the person’s physical health. Getting a car can help to solve the problem.

Given that a host of factors determine the cost of owning a car as well as the amounts that you will spend on running and servicing the vehicle, you should think about buying a car that you can comfortably pay for. This in turn means that you should take a car loan that you can comfortably repay.

One of the considerations that you should have in mind when taking a car loan in Singapore is how car loans work. The law stipulates that you can only take a car loan that is equivalent to up to 70% of the value of the vehicle that you are buying. This means that if a car is being sold for S$100,000, you should be prepared to pay at least S$30,000 from your pocket or sources other the car loan. You can then use the car loan to settle the balance and get hold of your preferred car. If you have any questions about car loans or require any form of financial help, speak to us. Credit Matters have professional financial consultants here to help you.