Singapore is one of the best places in Asia to drive a car because of the excellent condition of the roads. You will experience the ease in driving, along with the convenience of not waiting in line for a public transport. If you are in a rush, you can simply hop into your car and drive away. Then, you should get to your destination in no time.
But people are wondering if long-term car rental services in Singapore offices offer more benefits to those who wish to own a vehicle. After all, buying a car comes with heftier expenses as compared with what a business offers, right? Thus, the question as to whether it is more practical to approach a corporate car rental or to purchase a car comes to mind when it comes to deciding on the most cost-effective transportation solution.
Buying a Car – Know the Costs
In Singapore, striking the best car deal is not exactly an easy thing to do. Even cheaper models of cars can still cost a lot, even for the average person in Singapore with a high spending power. Car rental services offer much lower prices for the vehicles available for rent in terms of the upfront fee, maintenance, and other items involved with driving a car. There are many things that impact a car’s final price here in Singapore. These main factors include the open market value, Certificate of Entitlement, Additional Registration Fee, and the Excise Duty and the GST. Lastly, there is the local car dealer’s margin that adds up to the overall cost of the car.
Let us start with the Open market Value of the vehicle. Basically, the OMV is the baseline guide to the car’s original price. If it is just this price that we need to settle, there seems to be no problem at all with buying a car because it is relatively reasonable. As an example, the OMV of an Audi A4 is around $32,000. If you go to a European country, you may be lucky enough to get this same car model at the exact same price.
However, this is not the price tag of the Audi in Singapore. The retail price in showrooms is about $161,000. Why the huge rise on the price? Well, this has something to do with a number of other factors involved with a car ownership in the country. Cars sold in Singapore are all subject to the Additional Registration Fee or ARF. This tax is imposed on every car in the country upon registration. The OMV of the car is taken into account when calculating the ARF. For a Mercedes E200 with an OMV of $49,113, the ARF may be about $60,578. This significantly increases the cost of the car, making it tougher for the average Singaporean to pay it in cash.
But it does not stop there. There is the excise duty and the GST added to the car’s price. A form of tax that is imposed by the government on some goods in the country, the Excise Duty of a car is at 20% of the OMV. When you include the 30% excise duty to the car’s OMV, along with the GST at 7%, then that surely increases the car’s total cost. For a sedan with a $49,113 OMV, the excise duty is around $9,822 and the GST is at $4,125. Add these figures to the OMV, and you are probably beginning to realize why the price you see in the showroom is nowhere close to the open market value of the vehicle.
The Certificate of Entitlement is a type of paperwork you need to obtain before you drive the car. This certificate is market-driven, which allows you to drive the car on Singapore’s road for duration of 10 years. As for the price that comes with this certificate, it depends on the period when there is a higher demand on car usage. Thus, the price varies and may go about $40,000 to as much as $50,000.
Finally, you need to factor in the car dealer’s margin to the cost of the vehicle. This refers to the price that dealers charge to make sure they make a profit from the sales, along with covering their overheads in the business. The dealer’s margin may be at 15% on a minimum, particularly if you are shopping for a cheaper brand of vehicle. But if you are opting for luxury cars, then the dealer’s margin may go up to 50%- or even higher.
The best way for you to determine the dealer’s margin is by adding the cost of the OMV, Excise Duty, COE, GST, and the ARF. Once you get the sum, compare the cost against the car’s sales price, and the difference will then point you towards the dealer’s margin. Thus, if you have a $92,520 basic cost for a Mazda 6, and it is being sold for $122,888; this brings us to a 33% dealer’s margin for this vehicle.
Additional Expenses to Think About
It is difficult to buy a car in cash without getting a little help from a bank or even licensed money lender in Singapore. This is why most people take out a car loan or personal loan, so they can afford to buy the car of their dreams. But even with a car loan, this does not make your expenses anywhere cheaper. You are still supposed to prepare the down payment for the vehicle, which may be at $40,800 for a car priced at $101,999. This means that you need to borrow $61,999 from a bank, so you can drive this car. With a car loan that goes for a period of 5 years, the interest rate may be at 2.78% per annum. Thus, the total loaned amount including the interest is now at $69,706. This now increases the total price of the vehicle at $110,506 once you include the loaned amount to it.
Aside from making loan payments, there is the road tax you need to settle. The projected cost of the road tax for a car that costs that much is at $7,440. But this payment should be good for 10 years. In Singapore, you can get a rebate or your money back when you choose to let go of the car before the 10-year period. This is what we call the COE and the PARF rebates, so some Singaporeans decide to let go of their vehicle prior to the end of the 10th year. The remainder of the paid COE will be refunded to you once you have scrapped the car before the 10 years period is over. On the other hand, nothing will be returned to you when you finished the COE tenure.
Lastly, there is the auto insurance that car owners need to pay for, which adds up to their expenses. There are some people who only choose the basic car insurance, but it is not exactly the smartest thing to do because of the lack of coverage for theft, fire, and damages to the car. Also, damages to car of another driver and injury or death to other parties. The medical expenses incurred from an accident are also included in comprehensive auto insurance. This is why if you want optimum protection and even less hassles in the long run, a comprehensive insurance is essential for every car owner. After all, you can never tell when accidents on the road will arise.
Now, as for the projected cost of auto insurance, it may be at $13,000 per year. This is why once you add up all the costs including the COE, car loan instalment payments, insurance, and ARF, you will realize that it is very expensive to buy a car, drive it, and keep it well maintained. Hence, renting a car in Singapore appears as a more attractive option for some people because of the low upfront and upkeep fees involved with it.