REIT-TIREMENT - REIT Investing and Personal Finance

A blog about REIT investment and personal finance

Friday, March 01, 2019

Monthly Cost and Cash Outflow for Owning a Car in Singapore

After continuous posts about REITs, maybe is time to get back to personal finance topic, this time I will write for car topic. Car is an expensive item to own in Singapore, yet we could still see a lots of cars are on the road. Current COE (Certificate of Entitlement) cost is $ 26k for CAT A and $ 35k for CAT B where the highest COE record is $ 92k for CAT A and $ 96k for CAT B in January 2013.

How could one willing to pay for a "certificate" with $ 90k ?
For monthly car cost, most people would calculate by installment + petrol + parking/ERP; some savvy one would include road tax + insurance + servicing. Depreciation is normally not in the equation, this could due to the fact that down payment and scrap value are not recurring. This common way of car cost calculation is more like cash outflow instead of real cost. Now I am going to compare both monthly cash outflow and cost of owning a car.

There are a few sites which show cost breakdown for owning a car:
Seedly - Buying A Car? You Need To Be Earning At Least S$7,500 First
Dollars and Sense - Cost Of Owning A Car In Singapore Over 10 Years
Money Smart - Singapore Car Prices – Breakdown of Car Costs & How to Save Money

With reference to above, let's take Mitsubishi Attrage as working example, which is one of the cheapest sedan car, and breakdown the cost:
From Mitsubishi Official Website
Extracted from Sgcarmart
1) Cost of Car
This value should be taken after minus off Preferential Additional Registration Fee (PARF) rebate. PARF rebate is calculated based on car age at de-registration. For car that used throughout 10 years, the rebate is 50% of Additional Registration Fee (ARF). Refer One Motoring website here for more detail.

ARF value is calculated based on OMV value:
a) First $20,000 of OMV - ARF = 50%
b) Next $30,000 of OMV - ARF = 100%
c) Above $50,000 of OMV - ARF = 180%

If your car model is qualified for Vehicular Emissions Scheme (VES) rebate, then the ARF = Original ARF - VES. Do note min. ARF payment is $ 5,000 and VES surcharge would not be added to ARF.

For Mitsubishi Attrage, PARF = 50% x ARF = $ 2,500, this is what you will get when you scrap your car after 10 years. Cost of Mitsubishi Attrage = $ 59,999 - $ 2,500 = $ 57,499, which is approx. $ 479 per month.

2) Loan Interest
For Mitsubishi Attrage case, loan amount =$ 41,999. Let's take 2.78% interest rate for a tenure of 7 years, the interest cost would be $ 8,173. We would amortize this cost over 10 years based on COE period instead of 7 years loan tenure, which work out to be approx. $ 68 per month.

3) Installment
Installment is more of cash outflow instead of cost. It is the sum of loan amount + loan interest and divided into month of loan tenure. From the above, loan amount = $ 41,999, loan interest = $ 8,173. Installment = ($ 41,999+ $ 8,173)/84 = approx. $ 597.

4) Petrol
This would depends on a few factors like mileage, choice of fuel grade, car fuel consumption, credit card rebate and driving behavior. Let's assume you are running 1,500 km per month and fuel consumption at 15 km / litre. And you are pumping 95-Octane fuel at $ 2.20 / litre, with credit card rebate of 18% (OCBC U Plus), the cost is approx. $ 1.80 / litre.  So the cost = (1500/15) x 1.80 = $ 180 per month.

5) Parking & ERP
This is subjected to your house, workplace and place you visit and frequency of visit. We would take the below assumption:
HDB season parking = $ 110 per month.
ERP + Other Parking = $ 90 per month
Total = $ 200 per month

6) Road Tax
Based on example above, the road tax is $ 506 per year, approx. $ 42 per month. You could use Road Tax Calculator from Sgcarmart to calculate yours.

7) Insurance Premium
This is depends on a few factors which include your current age, your driving experience, car model, coverage and claim history.  If you have never file any claim for a year, then you would get NCD (no claim discount) in increments of 10% upon renewal, up to 50%. For calculation wise, we take an average premium of $ 1,500 pear year, $125 per month.

8) Service & Repair
You would need to get your car to service every 6 months or every 10,000 km, whichever come first. This is also depends on how comprehensive you want your routine servicing to be. Let's assume a bi-yearly maintenance at $ 200 each, and set aside $ 5,000 for any repair or part replacement throughout 10 years. Total cost would be $ 9,000 for 10 years, and approx. $ 75 per month

Now let's put into calculation with use google sheet:


As cash outflow per month do not include one time transactions like down payment & scrap value, you could notice there is difference between cash outflow and cost. If the loan tenure is shorter than COE period, then the cash outflow during and after loan tenure would be different.

I have also added calculation for COE renewal for Mitsubishi Attrage. Let's take COE renewal for 5 years is $ 13,500, service and repair cost increase by 50% to $ 1,350 per year. For Road Tax, it is more straight forward, increment of 10% per year up to 50%. So average road tax per year = (110% + 120% + 130% + 140% + 150%)/5 x $ 506 = $ 657.80. For COE renewal, cost would be higher than cash outflow because one could not get back PARF after renewal.

Never notice cost of owning car is at this high?
You could make a copy freely to calculate yourself through here, just modify the value in green cells will do. If you find anything that missing or having wrong calculation in the google sheet, please let me know. Hope this is helpful to you all.

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