How to Afford a Car in Singapore?

With cars costing upwards of S$100,000, Singapore is notorious for being the most expensive country to buy and own a car. 

Yet, it’s not like everyone is driving around in Bentleys and Lamborghinis and Porsches. No, it’s simply because cars are heavily taxed here in Singapore in a bid to control the number of vehicles on our roads, and hopefully prevent the type of hours-long traffic jams that happen in cities like Bangkok on a daily basis. 

Besides jams, managing land use is another reason for the tight controls. After all, the more vehicles there are, the more land needs to be set aside for roads and parking spaces – a challenging task on our tiny, land-scarce island.

All these mean that Singaporeans have to put up with extremely high car ownership costs, no doubt causing aspiring car owners to wonder how much they need to afford a car in Singapore.

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By far, the largest contributor to high car costs in Singapore is the Certificate of Entitlement (COE), followed closely by the Additional Registration Fee (ARF) and Open Market Value (OMV). These costs are levied when registering a new car, along with road tax and other fees. 

The COE, OMV and ARF make up the cost of the car, which is usually covered via a car loan. You are only allowed to borrow up to 60% or 70% of the car’s cost, which leaves a cash downpayment of 30% or 40%. 

Then, then are the costs of operating your vehicle, including parking charges, petrol or electricity, maintenance and servicing, and car insurance and road tax. Together with your monthly car loan payments, all these can add up to a pretty hefty sum every month. 

Let’s take a closer look at each of these components.

COE for private cars in Singapore fall under Categories A or B. You may also bid for a COE for a private car under Category E.  

COE category	Classification	Cost of COE (as at Apr 2024)
Cat A	Non-fully electric cars with engines up to 1,600cc and Maximum Power Output up to 97kW (130bhp); and fully electric cars with Maximum Power Output up to 110kW (147bhp)	S$89,000
Cat B	Non-fully electric cars with engines above 1,600cc or Maximum Power Output above 97kW (130bhp); and fully electric cars with Maximum Power Output above 110kW (147bhp)	S$101,334
Cat E	Open, all vehicles except motorcycles	S$101,002

As you can see, the COE alone adds S$90,000 to S$100,000 to the cost of purchasing your car. For most mass market cars, COE costs are the most prohibitive component in terms of affordability. 

Vehicles imported into Singapore for sale are evaluated by the Singapore Customs for their Open Market Value (OMV). This figure includes the purchase price, freight, insurance and all other charges related to the sale and delivery of the car to Singapore.

The OMV is an important value, because it impacts how much you can borrow in your car loan (more on this later). More importantly, it impacts how much you have to pay for the Additional Registration Fee (ARF), which is an added layer of taxation based on how valuable your car is. 

And yes, the OMV isn’t just for reference, it’s included in the total cost when purchasing your car. 

In any case, here’s how OMV impacts ARF, and how they both factor into the cost of owning a car. 

OMV	ARF rate	ARF payable for car with OMV of S$100,000
First S$20,000	100%	100% x S$20,000 = S$20,000
Next S$20,000 (i.e. S$20,001 to S$40,000)	140%	140% x S$20,000 = S$28,000
Next S$20,000 (i.e. S$40,001 to S$60,000)	190%	190% x S$20,000 = S$38,000
Next S$20,000 (i.e. S$60,001 to S$80,000)	250%	250% x S$20,000 = S$50,000
Above S$80,000 (i.e. S$80,001 and above)	320%	320% x S$20,000 = S$64,000

Total ARF payable = S$20,000 + S$28,000 + S$38,000 + S$50,000 + S$64,000 = S$200,000.

Therefore, for a car with an OMV of S$100,000, you have to pay the OMV of S$100,000, the ARF of S$200,000 and the COE, likely Cat B, of another S$101,334. 

You may notice that in this case, the ARF is the most expensive component. But this is an outlier. According to LTA’s report on average OMVs for cars registered in February 2024, only luxury vehicles such as the Porsche Tycan have OMVs averaging S$100,000. 

For the average driver, OMVs are much lower, which means ARFs are lower as well. COEs however, are determined by the forces of supply and demand, and so remain the most expensive component of owning a car. 

As an example, a Toyota Sienta Hybrid has an average OMV of S$27,706, and an ARF of S$30,789. However, you’d still have to contend with the cost of a Cat A COE, which is S$89,000.

COE, ARF and OMV make up the bulk of your car purchase, but those aren’t the only costs. There are other costs you’ll need to consider. 

• Downpayment
  • 30% (if OMV is less than S$20,000)
  • 40% (if OMV is equal or more than S$20,000)
• Monthly car mortgage payment
• Car insurance policy
• Petrol or electricity charges
• Road tax
• Parking
• Servicing and maintenance
• Other miscellaneous costs like accessories etc

As we have discussed above, COE costs aren’t the only component you have to consider. How much you need for your new car is also impacted by the OMV and ARF, and the more high-end the make and model, the more heavily you will be taxed. 

Therefore, it is more important to look for a car that fits into your budget while still fulfilling your transportation needs. This means calculating how much you can afford to pay for a car, and then working backwards to find car models that fit. 

Here are the steps to do so:

1. Determine how much you can spend each month on your car mortgage, as well as ongoing costs like insurance, maintenance, road tax, and etc. In doing so, mind your Total Debt Servicing Ratio (TDSR).
2. Once you have your car mortgage, use an online calculator to help you determine the maximum you can borrow, as well as your downpayment. The longest loan tenure is 7 years. 
3. Add up your car mortgage amount and downpayment. This is the upper limit for prices of cars you should be looking at. 

Step 1: Monthly budget and TDSR

When considering your car budget, bear in mind your Total Debt Servicing Ratio (TDSR). The sum total of your debt payments each month cannot exceed 55% of your gross income. 

This means that if you have any outstanding debt from loans or credit cards, you will only be able to take a smaller car mortgage. Also, if you’re planning to buy a home soon, you’ll also need to take your future home mortgage into account.

Let’s assume that after accounting for TDSR and future home mortgage needs, you work out a sum of S$800 per month for car loan payments. This does not include fuel and other running costs. 

Step 2: Total car budget you can afford

One of the easiest and clearest car loan calculators to use is this one by SG Car Mart. Using our example budget of S$800 monthly, here are the results.

So, assuming we have a monthly budget of S$800 for a 7-year car mortgage, the calculator tells us:

1. We have a total car budget of S$80,400
2. We need cash of at least S$24,100
3. Our loan amount would be S$56,300

Step 3: Looking for a suitable car

Now that you know your affordability, you can go ahead and look for a suitable vehicle. 

Unfortunately, with a monthly budget of S$800 (and S$24,100 in cash) – i.e, total budget of S$80,400 – there aren’t any new cars you can afford. This is because current COE prices already exceed your budget. 

So what now?

With sky-high car prices, you may not be able to afford a brand new car. But don’t give up yet, there are alternatives you can explore to fulfil your need for a car. Here are some ideas.

Buy a second-hand car

The high levels of car ownership in Singapore also mean there’s an active second-hand car market. And these are much more affordable, due to the steep rate of depreciation cars tend to undergo. 

You can choose from two groups of second-hand cars – PARF cars, and COE cars.

PARF cars refer to cars that are still using their original COE. This means they are less than 10 years of age, and thus statistically would have undergone less wear and tear. You will essentially take over the existing COE, and are entitled to any PARF rebates should you deregister the car before its 10 years are up. 

COE cars, on the other hand, are cars that are older than 10 years old. To continue driving the car, you must renew its COE by paying the Prevailing Quota Premium. When you eventually de-register the car, you will only receive the COE rebate. 

Consider car rental

If you really only need a car sporadically, renting a car might be a more financially prudent alternative. There are several car rental services available in Singapore, ranging from car clubs to peer-to-peer platforms, to traditional rental schemes. 

Ride sharing or ride hailing 

Alternatively, there’s always ride sharing or ride hailing. This is ideal if you only need a car occasionally. Bonus points: you don’t even have to drive the vehicle yourself! 

But if you really prefer to have a car at your disposal whenever you need it, consider signing up as a private-hire driver. You’ll need to pay rent for your vehicle, but you can pick up clients in your spare time and use your earnings to help defray the cost of car ownership.