The cost of car ownership in Singapore is renowned to be the most expensive in the world. To put it into
perspective, for every 1 Honda Jazz that you buy in Singapore, you can buy 3 in
the UK. The reason why Singapore has such high cost for car ownership is because
of our small size. Due to limited space, our government wants to maintain the vehicle population
at levels supportable by road infrastructure. It wouldn’t be nice to be caught
in a Jarkataliked traffic jam where being in traffic for four hours is not
unusual. For this post, my purpose is to find out if it is still worth owning a car in Singapore as compared to taking a taxi for all my commute? I have excluded the comparison of other mode of transport such as Bus or MRT which of course would be cheaper but might be less comfortable and convenient.
To answer my question, I will
first have to find out all the different components that make up the car prices in
Singapore, then its financing cost followed by all its day to day running expenses. Next I
will calculate the average price of taking a Taxi based on the same mileage per
year to make apple to apple comparison. And as the running expenses of car also depends heavily on one's personal lifestyle, my
calculation will be based on two extreme situation that will have a huge difference in the cost people who work in CBD
and people who are not.
The Car Model that I am going to
use for my calculation is a Honda Jazz 1.5 CVT (Honda Jazz) as this is an average family car that is not considered
no expensive as compared to the others. Also my calculation is for a
period of 10 years as that is when the Certificate of Entitlement (COE)
expire.
Cost of Car
The components that make up the
cost of car in Singapore includes:
 Open Market Value (OMV)
 Goods and Service Tax (GST) and Excise Duty
 Registration Fee
 Additional Registration Fee (ARF). If the car is deregistered before its 10^{th} year, a PARF Rebate that is based on the ARF paid will be returned
 Vehicle Emission Tax/Rebate
 Certificate of Entitlement (COE)
Each of the components will be
explained in more details and the cost for each component for a Honda Jazz is reflected on each component header.
Open Market Value (OMV): S$16,869
The OMV is the cost of the car
that includes its purchase price, freight, insurance and all other charges to
deliver it from the country of manufacture to Singapore. This cost is assessed
by the Singapore Custom.
GST and Excise Duty: S$4,791
When the vehicle is imported into Singapore,
the two taxes that need to be paid is:
 20% Excise Duty on the OMV
 7% GST on the OMV and Excise Duty
Registration Fee: S$220
Upon registration of vehicle,
this fee will be collected to cover the costs of registering the vehicle
Additional Registration Fee (ARF): S$16,869
The ARF is another tax that is imposed on the
registration of the car and is based on the car’s OMV. From table 1,
you can see that the ARF effectively inflate the cost of the car by at least 100% of its
OMV.
As the OMV of Honda Jazz is less than $20,000, its ARF is 100% of its OMV.
As the OMV of Honda Jazz is less than $20,000, its ARF is 100% of its OMV.
Table 1: ARF Rate (Source: LTA)
Vehicle
OMV

ARF
Rate

First
S$20,000

100%

Next
S$30,000

140%

(i.e.
S$20,001 to S$50,000)


Above
S$50,000

180%

Vehicular Emissions Scheme (VES): S$0
Depending on how clean or
polluting the car is, a rebate/tax ranging from $0 to $20,000 can be offset or
levied on the ARF (subject to a minimum ARF payable of $5,000). The VES is a
tax that is based on the vehicle’s emission of 5 pollutants. If you are
interested to know, they are hydrocarbons (HC), carbon monoxide (CO), nitrogen
oxides (NOX) particulate matter (PM) and Carbon Dioxide (CO_{2}). In
this case, the Honda Jazz is assessed to be neither clean nor
polluting, therefore there is no additional rebate given or tax incurred.
Certificate of Entitlement (COE): S$35,000
With a COE, it gives you the right to own a
vehicle for 10 years and this is used by our government to control the car
population in Singapore through bimonthly competitive bidding. So if there are
more cars deregistered in Singapore, there will be more supply of COE which
might results in lower COE price and vice versa. The Honda Jazz is under COE’s
CAT A as it has an engine capacity (cc) of less than 1600cc. At the
latest bidding (18 July 18), the COE premium is $32,700. I will round this up
to $35,000 for simplicity calculation.
Total
To sum up the above cost
components, a Honda Jazz cost price in Singapore is S$73,749. However, car dealers who are selling the car also needs to make a profit. Therefore the list price based on COE of $35,000 is $96,000.
Total Purchase cost: S$96,000
Financing Cost: S$14,112
Right at this stage, the cost of
a car is $96,000 even before you even start driving. In order to purchase it, we might need help from the bank to finance this purchase. This will incur
additional finance cost.
As Singapore government does not
want us to be over leveraged, they have set a limit on how much car loan we can take.
 For car with OMV below $20,001, maximum loan value will be 70% of the car price
 For car with OMV above $20,000, the maximum loan value will be 60% of the car price
Furthermore, the maximum loan term allowed is 7 years. As such, the down payment will be
$28,800 with the remaining $67,200 being financed by a bank loan. Based on an
interest rate of 3%, the total interest paid for 7 years will be $14,11 (The monthly principal and interest repayment is $968).
Preferential Additional Registration Fee (PARF) Rebate: S$8,435
At the end of the car 10th year, we can decide to deregister the car or renew its COE. If
the car is deregistered, a PARF rebate that is computed based on the age of the
car at deregistration (as shown in table 2) will be paid back. This scheme is to
encourage timely replacement of cars on Singapore road to ensure better road
safety and cleaner environment.
Table 2: PARF Rebate (Source: LTA)
Age at Deregistration

PARF Rebate


Not exceeding 5 years

75% of ARF paid


Above 5 but not exceeding 6 years

70% of ARF paid


Above 6 but not exceeding 7 years

65% of ARF paid


Above 7 but not exceeding 8 years

60% of ARF paid


Above 8 but not exceeding 9 years

55% of ARF paid


Above 9 but not exceeding 10 years

50% of ARF paid


Above 10 years

Nil

Assuming the Honda Jazz is
deregistered at the last day of it 10^{th} year, the PARF rebate will
be 50% of its $16,869 ARF paid previously. Therefore the rebate will be
$8,435.
Car Running Expenses
There are other cost that will be
incurred on a daily/yearly basis such as:
·
Road Tax
·
Fuel
·
Parking Fees
·
ERP
·
vehicle maintenance
·
Insurance
Road Tax: S$683/year
Road tax needs to be paid
biannually and this is dependent on the engine capacity (EC) of the car. The
formula for calculating road tax is as follow:
Table 3: Road Tax Rate (Source: LTA)
Engine Capacity (EC) in cc

6Monthly Road Tax Formula

EC < 600

S$200
x 0.782

600
< EC < 1,000

[S$200
+ S$0.125(EC  600)] x 0.782

1,000
< EC < 1,600

[S$250
+ S$0.375(EC  1,000)] x 0.782

1,600
< EC < 3,000

[S$475
+ S$0.75(EC  1,600)] x 0.782

EC
> 3,000

[S$1,525 +
S$1(EC  3000)] x 0.782

A Honda Jazz has an EC of 1,498. As
such, the yearly road tax is:
[S$250 +
S$0.375(1,498  1,000)] x 0.782 x 2 times = $683/year
Fuel Cost: $2,318/year
In order to calculate the cost of
fuel, we will first need to know the yearly average mileage of a car and its
fuel consumption. In Singapore, the average passenger car travels 18,000km per
year. The fuel consumption of a Honda Jazz is 5.6L/100km. Therefore the total
fuel consumption per year is 1008L. Based on current petrol price of $2.30/L,
this works out to be $2,318 per year.
Parking: S$3,564/year or S$6,564/year
If you are staying in a
HDB, the monthly season parking cost will be $110/mth. Furthermore if you work
in the Central Business District (CBD), the season parking charges can be more
than $350/mth. Otherwise it may just cost well over $100/month.
I will also assume that some may be out during the weekend and therefore have to park at various location. The estimate for weekend parking is $20/weekend and this comes up to $87/mth.
Annual Parking (non CBD) = ($110/mth + $100/mth + $87/mth) x 12 mths = $3,564
Annual Parking (in CBD) = ($110/mth + $350/mth + $87/mth) x 12 mths = $6,564
ERP: S$364/year or S$1,716/year
For people working in CBD, their ERP charges can be as high as $6/weekday. This
translate to $1,560/year.
There are also ERP charges on
every Saturday and I will assume a cost of $3/Saturday which equals to
$156/year.
I will also make assumption that those
who are not working in the CBD may want to travel twice every week during the
evening into CBD for leisure purposes such as having dinner. This will be
$2/weekday or $$208/year.
For people not working in CBD, I will assume every 2 weekdays they have to travel to city to meet up with
friends for dinner at $2/weekday. This will cost $208/year.
A new ERP system will be
introduced in 2020 that has island wide coverage and charged based on distance
travelled. This might result in higher ERP charges in the future.
Annual ERP (non CBD) = $208/year + $156/year = $364
Annual ERP (in CBD) = $1,560/year + $156/year = $1,716
Maintenance: S$650
Cars in Singapore are required to
go for biennially inspection when it reached 3 years of age to ensure it is
roadworthy. Therefore regular maintenance is to be done before the inspection.
In Singapore, vehicle maintenance cost can range from $500 to $800 per year. We
will take the average of the two.
Insurance: S$1,800/year
Vehicle insurance is compulsory
in Singapore. Based on vehicle insurance quote found
online, an average coverage will cost around $1,800/year. If you are a safe
driver and does not make any claim for a year or more, you are entitled to a
NoClaim Discount (NCD) and it can be as high as 50% if you did not claim for
more than 5 years. For my calculation, I will exclude the NCD.
Table 4: NoClaim Discount Rate (Source: AIG) 
Other miscellaneous: $300/year
There may be other occasional
unexpected expenses such as fines or major repair. For this I will budget an additional $300/year.
Cost of Car Ownership
For all the running expenses, I have included an annual inflation of 3%.
This is based on Singapore 's private road transport inflation for the past 10
years. Next the cash flow is discounted by 2.2%, which is Singapore current 10 year
risk free rate.
The net present value (NPV) of owning a car in Singapore for 10
years are estimated to be $195k for people not working in CBD (Table 5) and $239k for people working in CBD (Table 6). This works out to be $20k and $24k per year respectively.
Table 5: Cost of Car Ownership Net Present Value(Not working in CBD) 
Table 6: Cost of Car Ownership Net Present Value(Working in CBD) 
Total Cost of Car Ownership : S$20,000/year or $24,000/year
Cost of Taking Taxi
Now lets compare this cost with the cost of taking a taxi. The calculation will also be based on an annual mileage of 18,000km which we have used to calculate the cost of owning a car.
The table below is the breakdown of the Taxi Fare of ComfortDelgro, Singapore largest land Transport Company.
Table 7: Comfort Taxi Metered Fare Structure (Source: ComfortDelgro)
Metered
Fare


Taxi
Components

Price

Remarks

Flag
Down fare

$3.20 to
$3.90

For first 1km. Depending on vehicle
type

Distance
Fare

$0.22

Every 400m thereafter or less up to
10km
Every 350m thereafter or less after 10km Every 45 seconds of waiting or less 
Booking
Fee

$2.30 to
$3.30

Depending on day and time

Peak
Period Surcharge

25% or
50%

Depending on day and time

With an annual mileage of 18,000km, this means the daily mileage will be 49km, enough to travel from Pasir Ris in the East to Tuas in the West. Next I will assume the commuter to take 4 trips per day, therefore each trip will be about 12km. The daily Taxi fare is calculated as follow:
Flag down fare: $15.60 per day
I will use the higher flag down
fare of $3.90
$3.90 x 4 trips = $15.60
Distance Fare: $27.70 per day
First 1km is already included in flag down
fare.
I will take that the distance fare will jump $0.22 for every 350m traveled.
Next 11km = $0.22 x 11km / 350m x
4 trips = $27.70
Booking Fee: $13.20 per day
For every trip that I make, I will book a cab for convenience sake instead of having to queue at the taxi stand.
I will use the higher booking fee of $3.30.
$3.30 x 4 trips = $13.20
Peak Period Surcharge: $8.70 per day
The peak period surcharge is
based on the day and time when taking the Taxi. I will assume that 3 trips will
incur a surcharge of 25% and 1 trip will incur a surcharge of 50%.
Each distance fare cost $6.90
$6.90 x 25% x 3 trips = $5.20
$6.90 x 50% x 1 trips = $3.45
Total: $8.70
Total Cost of Taking Taxi
By summing up all the taxi fare charges, the daily cost of 4 trips with a total distance of 48km came up to S$65.20 per day or $23,798 per year. This is excluding ERP charges which passengers have to pay if their taxi goes through any ERP.
To determine if the above assumption
is reliable, I compared it with Comfortdelgro app estimated price from Bedok to
raffles place which is about 12.8km. The price came to between $14 and $18 per
trip. My price estimate is therefore within the range.
After accounting for inflation and discount rate, the total present cost for taking Taxi will be $246,540 for 10 years, or around $25,000 per year.
Table 8: Cost of taking taxi net present value 
Total Cost of Taking Taxi: $65.20 per day or $25,000 per year
Cost of Car Ownership vs Cost of taking Taxi
To make comparison between the cost of car ownership and cost of taking taxi, first I have to remove the ERP charges from the cost of car ownership as the calculation for cost of taking taxi does not include it. After adjustment, the cost per year for each mode of transport is shown in table 9. The result has shown that car ownership is cheaper than taking Taxi. This is assuming that you are a heavy Taxi user that requires a daily trips of 4 which cover 48km/day.
Table 9: Summary of cost of Car and Taxi
Transport
mode

Cost Per Year ($)

Car (Not
working in CBD)

19,160

Car
(Working in CBD)

22,201

Taxi (4
trips per day)

24,654

What if 'm just a moderate commuter that does not need to travel 4 trips a day?
Not everyone will need to take 4 taxi trips per day. For example, we may just need to:
 Take 2 trips per day during weekdays to and from work
 Take 3 trips per day on Saturday, Sunday and Public Holiday (PH)
with the above profile, let me calculate the annual taxi cost.
In a year, there are 249 weekdays and 116 Saturday/Sunday and PH
Therefore the total trips made per year would be:
249 weekdays
x 2 trips + 116 weekends x 3 trips = 846 trips per year
As calculated previously, each
trip cost about $16.30, therefore total cost per year is:
846 trips per year x $16.30 per
trip = $13,790 per year
For a moderate commuter, the cost per year for taking Taxi is significantly lower at around $14,000. This is cheaper than owning a car which cost $19,000 per year.
If i'm a moderate commuter, does this mean I should not get a car?
If you are a moderate commuter, taking taxi will cost less than owning a car. However, this might not be the case if COE were to drop drastically.
I will adjust my car ownership cost model taking into account:
 COE drops to $10,000
 Cost of fuel based on annual mileage of a moderate commuter of 10,152km (846 trips x 12km per trip)
The result is as follow:
Table 10: Moderate commuter cost of car ownership net present value (Not working in CBD) 
Table 11: Moderate commuter cost of car ownership net present value (Working in CBD) 
The models show that the cost of car ownership per year will be less than $15,000 if you don't travel often to CBD or $18,000 if you do. The cost is only slightly more expensive than taking a taxi of $14,000 per year. Therefore if COE were to drop to $10,000 or below, buying a car might be a better option as the cost of car ownership and cost of taking taxi will converge greatly.
Will COE drop to below $10,000?
This is possible as shown in Table 12, COE has dropped to below $10,000 (represented by green line below the black line) during 2008 and 2009 period when the financial crisis hits.
However, it is to note that during that period, the annual vehicle growth rate allowed is 1.5%. Now it has been revised to 0%, meaning that future supply of COE will shrink greatly. Furthermore, the COE quota starts to drop in 2010 to 2015. Assuming every car owner did not renew their COE after the 10th year, this means that we could possibly see a significant drop in COE supply in 2020 to 2025. Therefore COE prices is expected to rise unless we see another major crisis like the 2007 financial crisis.
In the near term, a monthly 3,328 COEs will be up for bidding for Category A from August to October 2018 period. This is 16% higher than last quarter quota and may be due to the exit of Uber. However, it is expected that there won't be significant changes in COE price as demand for cars are still high. This can be seen from the most recent bidding when total bids spiked after the previous round where COE dropped to $25,000, causing COE price to be back at the $32,700 level.
Will COE drop to below $10,000?
This is possible as shown in Table 12, COE has dropped to below $10,000 (represented by green line below the black line) during 2008 and 2009 period when the financial crisis hits.
However, it is to note that during that period, the annual vehicle growth rate allowed is 1.5%. Now it has been revised to 0%, meaning that future supply of COE will shrink greatly. Furthermore, the COE quota starts to drop in 2010 to 2015. Assuming every car owner did not renew their COE after the 10th year, this means that we could possibly see a significant drop in COE supply in 2020 to 2025. Therefore COE prices is expected to rise unless we see another major crisis like the 2007 financial crisis.
In the near term, a monthly 3,328 COEs will be up for bidding for Category A from August to October 2018 period. This is 16% higher than last quarter quota and may be due to the exit of Uber. However, it is expected that there won't be significant changes in COE price as demand for cars are still high. This can be seen from the most recent bidding when total bids spiked after the previous round where COE dropped to $25,000, causing COE price to be back at the $32,700 level.
Table 12: COE Quotas, Bids Received and Prices (Source: SGCharts)
Personally, I dislike driving especially in Singapore. This is because firstly, your full concentration has to be on the wheel and unlike taking the public transport, you can just relax and do your own stuff. Secondly, as Singapore is a small place, the density of cars are quite high which increase the stress of driving. Lastly, you always need to find a parking space and sometimes this may take up quite a bit of your time. If I were to just take a taxi, this wouldn’t be an issue. However, if COE were to drop to below $10,000, I will seriously consider buying a car and the biggest motivation would be if I have my own family as their comfort will outweigh the other consideration.
For potential car buyers, hopefully my above analysis can help you make an informed decision and lets cross our finger to hope for a drop in COE prices!
For potential car buyers, hopefully my above analysis can help you make an informed decision and lets cross our finger to hope for a drop in COE prices!