Buying your first car is sure to be an exciting milestone.
However, before you actually become a proud car owner, it is important that you research these car depreciation numbers and figure out if the car you are keeping an eye on is causing a huge loss in the cost of your car.
This applies regardless of whether you are buying a new or a used car.
For those who don’t already know, car depreciation is very real: it shows you the real cost of owning and running your car on an annual basis, in addition to the cost of fuel, maintenance, and other costs that are likely to be incurred .
How to calculate the annual depreciation of your car
Here is a simple formula you can use to calculate the average annual depreciation of your car.
Annual depreciation = (total cost of the vehicle – sales value of the vehicle) / number of years of operation
Car depreciation is never constant over the 10 year life of your car.
A new car is usually written off more quickly in the first three years. So avoid selling your car unless you absolutely have to due to unforeseen circumstances.
What is the total cost of your vehicle?
To understand what adds to the total cost of your car, zoom in on the following components.
Open Market Value (OMV)
Put simply, your car’s open market value is the price paid or payable when a vehicle is imported into Singapore.
This is determined by Singapore Customs.
It includes things like the purchase price of the car, insurance, shipping, and any other costs associated with selling and delivering the car to Singapore.
ALSO READ: Singapore Used Car Buying Guide: Where To Buy And What To Check Out
Registration fee (RF)
The registration fee is a non-negotiable, flat-rate upfront tax of US $ 220 when you register a new car in Singapore. This amount is correct at the time of writing.
Additional registration fee (ARF)
The additional registration fee is a tiered tax that you must pay in advance when you register your vehicle.
The ARF ranges from 100 to 180 percent of your car’s open market value and can turn out to be a huge amount. Visit the LTA website for more information.
| The open market value of your car (OMV) | ARF rate (percentage of the OMV to be paid) |
| First S $ 20,000 | 100 percent |
| Next S $ 30,000 | 140 percent |
| Over S $ 50,000 | 180 percent |
Authorization certificate (COE)
Anyone remotely interested in owning a car would know that cars are very expensive in Singapore due to COE.
This valuable certificate is essentially a license that entitles you to own a car in Singapore for a period of 10 years.
There are five categories grouped by vehicle type and / or engine power.
ALSO READ: The Ultimate Guide to Owning a Car in Singapore
Other things to consider
The cost of a car also includes GST, excise tax, and dealer surcharge. It will be good to spend some time reading our handy guide to servicing a car in Singapore.
What is the sales value of your vehicle?
When calculating the sales value of your car, keep the following in mind.
Discount on the preferred additional registration fee (PARF)
The PARF discount applies if you deregister your car within 10 years and its COE has never been renewed.
It’s a tiered tax refund between 50 and 75 percent of the Additional Registration Fee (ARF) paid based on the market value of your car.
| Age of the car when deregistering | PARF discount |
| <5 years | 75 percent of the ARF paid |
| 5 – 6 years | 70 percent of the ARF paid |
| 6 – 7 years | 65 percent of the ARF paid |
| 7 – 8 years | 60 percent of the ARF paid |
| 8 – 9 years | 55 percent of the ARF paid |
| 9-10 years | 50 percent of the ARF paid |
| > 10 years | N / A |
COE discount
This discount is the proportionate amount of any unused COE that you may have left over at the time you de-register your car.
Use the following formula to calculate the amount of COE discount that you are eligible for:
COE discount = (quota premium paid x number of months remaining on your COE) / total no. Bought by COE months ago
The value of your body
This is the amount you get back if you scrap, sell to a used car dealer, or export your car. As a general rule of thumb, use the lowest amount as a safe guideline when calculating your auto depreciation cost.
ALSO READ: How to Scrap Your Car and How Much Money You Get Back
The resale value of your car
This is the amount you will receive when you sell your car in the used market. Many different factors can affect your car’s resale value, including:
- Your car ran out of mileage before it was sold
- Make, model and brand of your car
- Condition of your car
- How much you’ve modified your car
- Demand and supply of used cars
- And more…
Know your numbers
There’s no denying it – owning a car is expensive in Singapore.
As tedious as it is, you have to do your homework and crack those numbers when considering a large ticket item like a car.
Not only do you need to find out how much value your new car is likely to lose over the years you are likely to drive it, but you also need to know how much you can borrow when you get a car loan.
It is always a good idea to plan ahead, save, and find out if you can really comfortably afford a car before committing to buying a car.
Other car-related costs to consider include things like road tax, parking fees, car insurance, and car maintenance.
This article was first published on SingSaver.com.sg.
