I often hear people in places like Australia or other countries grumble about the cost of buying a new car and how they are being “ripped off” because they believe that the manufacturers and the different levels of Government are charging too much. Often they compare their country with the US which I find odd as often they are comparing a market of 20-30 million people to one 10 times the size (at least). This will undoubtedly influence any pricing!
However, spare a thought for people living in Singapore where buying a car is excessively expensive. If you have ever visited the island city, you will understand why the Government has put in place stringent and expensive measures to control the volume of cars on their roads. It doesn’t help that every year more green land gets built on with more housing and shopping malls – the visiting of which appears to be a national pastime!
With a finite amount of space and a population of around 5.5 million, it is easy to imagine that the island could end up like Beijing: smog-bound and one big traffic jam!
So, how do you buy a car there?
Step 1 – Get a Certificate of Entitlement (COE)
This is the way to effectively buy the right to drive a car for 10 years and is linked to the car itself. There is a quota system for the buyers who will bid for the right to receive a COE and this quota system is based on the number of cars deregistered that month, any adjustments needed in the number of vehicles allowed and population growth etc. The quota number is revised every 3 months.
Vehicles are categorised 5 ways:
A for cars under 1600cc
B for cars for over 1600cc
C for goods vehicles and buses etc
D for motorcycles
E an open category
Bids are accepted each month on the 1st and 3rd Mondays and are open for two days. Bids must be a minimum of $1 – however – for categories A, B, C and E a bid deposit of $10,000 plus an admin fee of up to $10 is also required! So the minimum you will pay is $10,002 regardless of what happens next.
This is where it gets complicated. Assuming that 10 COEs come up for purchase and 20 people bid, then the Current COE Price (or CCP) is the value of the 11th highest bidder plus $1. You can increase your bid during the two day period so the price could rise substantially if the bidders are desperate for a COE! Be prepared to hand over $40-50,000 at least.
Step 2 – Take the COE and a wad of cash to the dealer!
You will need it because after you have paid for the COE you will then be forking out much more. The car will have an OMV price – the “Open Market Value” set by the dealer and/or importer and this is based on local market conditions. This will be significantly higher than a comparable price anywhere else! Remember, this is a very small market and the supply/demand ratio is skewed in a different way to most other countries. On top of the OMV price you will pay a 20% Excise tax for the importation of the vehicle. Then there is an admin fee of $140, a Good and Services Tax (GST) of 7% that is calculated on the total of the OMV and Excise Tax ( a tax on a tax) and finally an Additional Registration Fee (ARF) to get the registration plates!
A standard Toyota saloon could in effect cost you upwards of $170,000 – one that would cost no more than $20,000 in Australia or even less in the US on the road! That’s horrible considering that the exchange rate is SGD1 to 95c AUD or 70c USD!
Now add on the standard road taxes, electronic road tolling, insurances etc and the running of the vehicle becomes even more expensive.
I can understand why Singapore does this – it limits the age of most of the vehicles on the road and limits the volume, although like any city you will still end up in a traffic jam! Their public networks of trains and buses are excellent and many people use them as a single method of transportation.
What I am amazed about is that other cities around the world haven’t cottoned on to the pricing structure – perhaps they will when then want to force their citizens on to expensive public transport systems. Sadly that’s not a joke with the waste of money that many cities throw at delivering poor transport services.