If you’re planning on buying a new vehicle in today’s car market, you can expect to pay easily over $120,000 for an “economy” model. That’s because of the skyrocketing Certificate of Entitlement (COE) and numerous taxes and fees. Buying a new car today means you’ll probably have to save up at least 50% of the total cost of the car.

Before you think about buying a new car, consider the following taxes, fees, and expenses:

Bidding For the Certificate of Entitlement (COE)

The Certificate of Entitlement (COE) gives you the right to operate a motor vehicle for a period of 10 years.  To get your COE, you’ll need to bid through the Open Bidding System, which holds two bidding exercises each month. You can bid on and obtain the COE on your own, but keep in mind that dealerships won’t give you a discount for having it already.

That’s because a majority of car buyers have the dealer bid on their behalf, adding the cost of the COE to their car loan. As for price, be expected to pay 2X – 5X a vehicle’s Open Market Value (OMV) to get it.

Here are the five COE categories:

• Category A: Cars with an engine capacity 1600CC and below
• Category B: Cars with an engine capacity 1600CC and above
• Category C: Lorries and Buses
• Category D: Motorcycles
• Category E: An “Open Category” that can be applied to all of the above

After the expiry of the initial 10-year period, you’ll get the opportunity to renew it once more for another 5 or 10 years before the vehicle is de-registered and scrapped.

Important Note: As of February 2014, engine power will factor into vehicle categorization. Any vehicle with engine power exceeding 97 Kilowatts or 130 Horsepower will automatically be placed in Category B.

Paying More Upfront Due to Tighter Car Loan Restrictions

The Monetary Authority of Singapore (MAS) recently made it harder to afford a new car by introducing tighter car loan restrictions. With these measures, you’ll need to make larger down payments and monthly repayment. That’s because MAS reduced both loan tenures and the maximum Loan-to-Value (LTV) of every car loan, meaning you can expect to pay up to 50% down.

Here’s a quick and simple version of the restrictions you’ll be facing:

• All car loan tenures are capped at 5 years
• If your vehicle’s Open Market Value (OMV) is $20,000 or less:
  • Your maximum Loan-to-Value (LTV) is 60% of the purchase price (including taxes, fees, COE)
  • Your Additional Registration Fee (ARF) is still equal to 100% of your vehicle’s OMV

• If your vehicle’s Open Market Value (OMV) is more than $20,000:
  • Your maximum Loan-to-Value (LTV) is 50% of the purchase price (including taxes, fees, COE)
  • Your Additional Registration Fee (ARF) is tiered to this formula: [100% for first $20,000], [140% on the next $30,000], and [180% on anything above $50,000]

Factoring In the Car Loan Interest Rate

When MAS reduced loan tenures from 10 to 5 years, it reduced the bank’s main source of profit as well – the interest on your car loan. That’s why car loan interest rates have risen to nearly 3%.

But searching for a competitive car loan interest rate can help reduce this cost, especially as interest rates continue to rise.

Paying for the Car’s Open Market Value (OMV)

A Car’s Open Market Value (OMV) is the value of the vehicle according to Singapore Customs and is typically higher than the Manufacturer’s Suggested Retail Price (MSRP) because freight, insurance, and other additional costs are factored in.

The OMV represents the starting point in factoring the “true cost” of your new car purchase.

Paying the Additional Registration Fee (ARF)

The Additional Registration Fee (ARF) represents the largest tax you’ll need to pay on your new car. That’s because it’s a progressive tax that ranges from 100% to 180% the value of your vehicle. It’s a tax that’s dependent on the vehicle’s OMV, as this chart illustrates:

For example:

If your vehicle’s OMV is $60,000, your ARF would be: 100% of the fist $20,000 ($20,000) + 140% of the next $30,000 ($42,000) + 180% of the remaining $10,000 ($18,000) = leading to an ARF of $80,000.

Paying the Vehicle Excise Duty

The Vehicle Excise Duty is an additional 20% tax on your vehicle’s OMV that government collects to fund road-related projects like highway maintenance and flyovers.

Paying the Goods and Services Tax (GST)

Cars aren’t exempt from the Goods and Services Tax (GST). When you buy a new car, you’ll need to pay the 7% GST on the combined value of the vehicle’s OMV and Excise Duty.

Paying the Dealer’s Gross Profit

When you buy a car from a dealer, you’ll also have to pay the dealer’s gross profit cost, which includes commissions for salesmen, overhead costs, warranties, and options.

While this “fee” varies from dealership to dealership, expect to pay around $20,000 for the dealer’s gross profit.

An Example of How Much a “Moderately” Priced New Car Costs

To give you an idea of how much a new car costs, let’s look at how much a Volkswagen with an OMV of $17,308 really costs.

Here’s an outline of the car’s total cost once you factor in every tax, fee, and expense:

Important Note: Land Transport Authority (LTA) offers a rebate of $5,000 – $20,000 when you purchase a new vehicle with carbon emissions below 160g per kilometer (CO2/km2). But you’ll still need to pay at least $5,000 ARF.