Price to pay

It costs a fortune to own a car in Singapore

 
Last Updated: Sunday 28 June 2015

Price to pay

Before buying a car in Singapore, it is mandatory to first buy a right to own a car. The "Certificate of Entitlement" system introduced in 1994 requires would-be car owners to bid for the right to buy a vehicle. The prospective owner will first have to buy the certificate. The price varies, but in early 1994 it was as high as US. This is paid over and above the price of the car.

The certificate is valid for 10 years from the date of registration of the vehicle, which fall under the appropriate category of small, medium-sized or large cars. Upon expiration of the certificate, it can be revalidated for another 10 years by paying a fee. Otherwise, the vehicle will have to be de-registered.

The certificate is given to each engine category for every car de-registered from that category in the previous year. A quarter of these "replacement" certificates fall in the open category, which can be used to register any car. This helps in maintaining a constant number of vehicles. A buyer submits the bid application during an open period and is required to remit 50 per cent of the bid amount as deposit. If the application is successful, the buyer only needs to pay the lowest successful bid price or the quota premium. Bids for specified number of cars is conducted monthly.

There is provision for an extra Certificate of Entitlement. This is calculated at about 3 per cent of the car population at the end of the previous year. The percentage is based on the planned growth of car population and other factors such as unused motorcycle certificates. This allows about 3 per cent annual growth in the vehicles number. Some concession is given to the taxis as they are considered part of public transport, but no kind of unrestricted growth is allowed.

The list of penalties for owning a car is endless. Car owners wishing to register must pay a 45 per cent import duty on the car's open market value; a registration fee of US $1,000 for a private car and US $5,000 for a company registered car; and, an additional fee of 150 per cent of the open market value. In addition, they pay annual road taxes based on the engine capacity of their vehicles. The road tax of company registered cars is twice as high as for private cars. For diesel vehicles, the tax is six times the road tax of equivalent petrol vehicles.

Further, to encourage people to replace their old cars with new and more efficient models, a Preferential Additional Registration Fee system was introduced as early as 1975. This scheme serves as an incentive to car owners to scrap their cars before they are 10 years old. This system was introduced when car owners, facing the prospect of paying high prices for new cars, tended to keep cars on the roads as long as possible. This was viewed as pushing old cars beyond their safety limits, leading to increased pollution levels and traffic congestion due to car breakdowns. The scheme is used to offset the additional registration fee of a new car. If a person does not wish to register a new car, the benefit can be transferred on payment of US $10.

Private car owners who replace their cars within 10 years are given these benefits so that they can use to offset the registration fees they have to pay for new cars. For cars registered on or after November 1, 1990, this benefit varies according to the age and time of de-registration of the vehicle.

The additional registration fee serves as a deterrent to car buyers by making a new car more expensive to purchase. The import duty, registration fees and additional registration fee put together amount to 200 per cent of a vehicle's open market value. The additional fee can be eliminated if the owner has an old car that he will replace. Road tax is also very high and is paid according to the engine size. No wonder, buying a car is seen as a very "painful" one-time investment in Singapore.

To be a little soft, the government in 1991 decided to allow more people to own private cars without adding to the traffic congestion during peak hours. Called the Weekend Car scheme, cars registered under the scheme enjoyed substantial tax concessions, including a 70 per cent reduction in road tax and a tax rebate up to a maximum of US $15,000 on registration. Weekend cars could only be driven between 7 pm to 7 am during the week, after 3 pm on Saturdays, and all day long on Sundays and public holidays. They can also be driven outside those hours but owners have to display a Special Day License. Each "weekend car" owner is given five "free day" licenses per year and can buy additional ones at US $20 each.

A Road Pricing Scheme was introduced in June 1995 as another experiment to control traffic jams on expressways. Motorists on a stretch of an expressway pay US $1 to use it between 7.30 am and 8.30 am on weekdays. It was expected that some motorists would change their travel times, use other routes or give up using the expressway. But a study found that after the pilot pricing scheme began, traffic was lighter than usual and moving more smoothly than before. It also cut traffic during operation hours by 10-15 per cent.

Then there is the Park-and-Ride scheme introduced in August 1990. Motorists leave their cars at a carpark, then ride the mrt to work. They pay US $72 for a set, which includes US $30 for the season parking ticket and US $42 for a transit link fare card (can be used for mrt and buses). This made better economic sense. Then to prevent illegal parking, certificates were introduced in 1994 to control overnight parking of heavy vehicles such as trucks and tankers. Their owners are required to obtain a certificate. This forces factory owners to park heavy vehicles on their own premises rather than a public place.

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