Financial Intelligence

The True Cost Of Singapore Car Ownership

As a kid, I wished my family had a car. So did Mom.

But Dad never caved.

As the years gone by, the whole family got used to public buses and trains.  Our “world class” transportation never failed to disappoint us during those years and it became an accepted fact that it takes an hour to get anywhere from our home.

Of course the occasional ride in someone’s car would bring us envy every now and then, but it was never a big problem for us. It became a once-in-a-blue-moon treat to go on a free ride.

However, as I grew older and people around me got their own cars, I started to see the wisdom of my father.

COE prices were ridiculous then and even now. The difficulty of finding a parking spot seems counter-intuitive to convenience. One has to be crazy to drive to work everyday if he or she works in the city, with the insane season parking rates and ERP charges during peak hours.

Now, with Uber and Grab, there’re less reasons to own an overpriced, depreciating mobility machine. Why drive when you can ride?

Yet, the most convincing reason NOT to own a car, is how much it sets you back from financial independence.

 

The Cost of Owning a Car in Singapore (What Most People Think)

Out of curiosity, I decided to do some quick research on how much it costs to own an average car in Singapore.

Basically, in short, if you’ve noticed a lot of these parked around your neighborhood since early this year (I did), then that’s probably because its one of Singapore’s best selling cars during the first half of 2017.

So how much does it cost?

According to this article, one of these would set you back approximately  $134,484 by the end of 10 years.

That’s taking into account the 40% down-payment of the value of the car including COE ($45,200), a 5-year loan at 2.78% on the remainder ($77,223), 10-year road tax ($6,820) and auto insurance ($13,000) as well as a PARF 1Preferential Additional Registration Fee – this is basically a rebate, on the excuse of a tax called Additional Registration Fee (ARF) which Singapore car owners have to pay upon purchase, that they get when the car is scrapped. rebate ($7,759) at the end of 10 years after you’ve scrapped the car. 2For more details of the breakdown, you can take a look at the article.

$134,484 over 10 years? That’s only an average of $1,120 per month, I can definitely afford that!

Every time I see one of these rolling down the streets, I can practically hear the owners exclaim it in my head.

Bear in mind, we’re not even covering maintenance fees, ERP 3Electronic Road Pricing, parking fees as well as fuel charges. However, for simplicity’s sake, let’s just leave these out of the picture.

 

The True Cost of Car Ownership in Singapore

Say if you go to work tomorrow, and your boss gets you into his office and gives you a choice. You get to have that vehicle, but you’ll have to take a $1,120 pay-cut per month – for the next 10 years. Will you do it?

Most people wouldn’t. Why would they take such a huge pay-cut for something that you didn’t sign up for to begin with? You were probably doing fine before such an offer came along.

Surprisingly, hand these people the cash, and for some reason, they’ll say, yeah they know that owning a car in Singapore is a liability… but it’s “convenient”!

Seriously, in today’s day and age, you can hire a chauffeur at will just by whipping out your smart phone. It saves you the hassle of getting to and from your car rain or shine, driving, finding a parking space and best of all, it’s pay-as-you-use! What’s not convenient??

Do they even understand what they’re talking about??

Here’s what the true cost of car ownership in Singapore is. If you think its just $134,484, boy you’re wrong.

Assuming you could’ve invested the money with a 5% p.a yield, this is how much you’re losing out.

The True Cost of Car Ownership in SingaporeThat money could’ve made you an extra $71,924 over the course of 10 years, with the interest compounded. That means those set of wheels actually cost you $206,408, an extra 53.4% in opportunity costs!

Therefore, with the purchase of a brand new car in Singapore, even if you choose not to drive it, you’re still bleeding due to the monthly upkeep. Now coupled with the potential loss of earned interest, that’s really getting screwed twice over.

However, remember all those extra fees mentioned earlier? You’ll REALLY be hemorrhaging money should you choose to drive it, because the graph doesn’t even cover ERP, maintenance, parking and fuel costs!

Still think it’s a “convenience” worthy liability?

It's a trap!
#ItsATrap

 

Make A Choice

So how much can a total investment of $206,408 make you a year if it yields 5% p.a.?

$10,320. Or $860 a month. Probably enough to give you 28 Grab / Uber rides every month4Assuming an average of $30 per ride.

So which would you choose?

Spend $206,408 to buy a hunk of steel on wheels that turns into a worthless heap of scrap metal in 10-years. Just so to experience the mentally-draining traffic jams and the frustration of parking space hunting. Remember, you’ll end up with NOTHING after that. Zero, nada. That’s like burning a whole pile of cash.

Joker burns cash
At least this Joker’s smart enough not to burn his OWN money…

Alternatively, how about buying yourself a perpetual money-making machine with only $134,484, that will finance your transportation needs, complete with a driver on demand, so you can truly relax during your commute, for the REST OF YOUR LIFE5Of course, subject to market conditions, but it is highly unlikely you’ll end up with nothing right??

Footnotes   [ + ]

1. Preferential Additional Registration Fee – this is basically a rebate, on the excuse of a tax called Additional Registration Fee (ARF) which Singapore car owners have to pay upon purchase, that they get when the car is scrapped.
2. For more details of the breakdown, you can take a look at the article.
3. Electronic Road Pricing
4. Assuming an average of $30 per ride
5. Of course, subject to market conditions, but it is highly unlikely you’ll end up with nothing right?

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