Update: Do also read the updated article I wrote here in 2014: How to buy a used car in Singapore
OK, I read this article and felt I had to put in a few words of my own as it was not accurately represented.
Before I move on, those who are not familiar with the basic taxation structure for cars in Singapore should read my earlier blog post.
If you have understood the taxation structure in Singapore (I know, it’s a lot to swallow) you would realize that the author of the above article failed to take into account the minimum PARF rebate. The author also picked a car that’s way overpriced in the current market.
Here’s the facts. A savvy car buyer would have looked at all available options. And to pick a Toyota Altis at the price of $105,988… are you out of your mind?
Let’s take a Volkswagen Jetta. List price $115,800. Called VW, they have a $6,000 discount. So that brings the list price down to $109,800.
The OMV of this car is $18,500, so that gives us a $9,250 PARF rebate (50% of OMV). The straight-line depreciation of the car over 10 years is hence $109,800 – $9,250 = $100,550.
Now, that’s just the car. All taxes inclusive – GST, etc. are already priced into the list price.
Next, the loan. Assuming if you’re buying a ~$100k+ car, you should must have some cash for downpayment. A wise tip here – at least downpay the minimum PARF rebate and don’t take a full 10 year loan or you will be in serious debt in an event you need to sell your car. If you don’t even have cash for downpayment – sorry to say but Taxi is your friend for now.
So let’s say we take a 1.88% (compounded) loan over 8 years for the sum of $100,550, the interest works out to be ($100,550 x 1.88%) x 8 years = ~$15,123.
Adding that to the original sum of the car you have $100,550 + $15,123 = $115,673. The monthly repayment would be $115,673 / 8 years / 12 months = ~$1,205.
The rest is pretty straightforward… let’s use a table to add ’em up. Here’s the true month-to-month affordability of a VW Jetta 1.4 TSI as of Jan 2012. Note some variables like insurance, parking and ERP really depends on each individual’s profession and usage of the car.
| Item |
S$/mth |
| Loan installments |
$1,205 |
| Insurance @ $2,400/yr, no NCD |
$200 |
| Road tax @ $620/yr |
$52 |
| Fuel @ 20,000 km/yr, 13km/l @ $2/l |
$256 |
| Servicing @ $800/yr |
$67 |
| Parking (HDB + Office) |
$200 |
| Others (ERP, etc.) |
$100 |
| Totals |
$2,080 |
Now, that’s $2,080 for a VW Jetta. So by wise financial guidelines that you should not spend more than a third of your salary on a car, you (or your family) should take home at least $6,000 to buy a car like that…
What if you (or your family) only take home $4,000 a month? Under $1,500 a month for a car… is it achievable? Answer is… YES! Pick up a 2005 Nissan Sunny for $23,800. Bargin a little bit and bring it down to maybe $23,000… and here’s the calculations.
Actual car depreciation (2005 cars retain 55% of OMV) = $23,000 – ($13,000 x 55%) = $23,000 – $7,150 = $15,850.
Loan = $15,850 over 3 years @ 1.88%: $15,850 (principal) + $893.94 (interest) = ~$16,744. This works out to ~$465 per month.
| Item |
S$/mth |
| Loan installments |
$465 |
| Insurance @ $2,000/yr, no NCD |
$167 |
| Road tax @ $742/yr |
$62 |
| Fuel @ 20,000 km/yr, 9km/l @ $2/l |
$370 |
| Servicing @ $800/yr |
$67 |
| Parking (HDB + Office) |
$200 |
| Others (ERP, etc.) |
$100 |
| Totals |
$1,431 |
I know what some of you may be thinking – it’s just $600 more a month, why not get the Jetta. Well, $600 can kill you – that’s $7,200 a year. I eat about $600 per month on average so it really makes a lot of difference. I can either eat plain bread or have good meals or I can save that and go for a crazy vacation. It’s all about balance.
Of course on top of just plain numbers, the value of having the convenience of a car is hard to quantify – especially if you have a pregnant wife, or an old folk, or just simply need to haul that big box from Ikea.
Public busses and trains aren’t fair comparisons as they are mass public transit and may not bring you to your doorstep. Taxis on the other hand are getting relatively expensive and inconvenient – the queue, the wait, etc.
So if it doesn’t break your bank – for better quality of life you should consider a car.
At the end of the day… buy wisely, drive safely. Cheers!
– Justin