SINGAPORE — Not long after getting his driving licence, car enthusiast Mohammad Izzraimy Mohammad Isham made an “impulsive” purchase — a second-hand Honda Civic for around S$28,800.
SINGAPORE — Not long after getting his driving licence, car enthusiast Mohammad Izzraimy Mohammad Isham made an “impulsive” purchase — a second-hand Honda CivicCertificate of Entitlement premiums, which form a bulk of a new car's price tag, has been skyrocketing and breaking new records in recent months.
Dealers meanwhile try to make it easier for buyers to afford more costly cars by offering more perks such as longer warranty, or lower down payment amounts In his first year as a car owner in 2021, Mr Izzraimy estimated that he could spend up to 60 per cent of his income on car-related costs, due to the high usage linked to his sense of novelty of finally having his own set of wheels.
The logistics professional, who declined to give his full name, said he saw the purchase as necessary to bring his wife and future child around in a more comfortable and convenient manner. Premiums for Certificate of Entitlement , which form a big chunk of a car’s final price tag, have beenthis year at various bidding exercises. Besides pushing up car-owning costs, the upward trend also indicates an increasing demand for cars.
This has prompted calls to carve out a separate COE category for such cars or to put a cap on its population, to which the Government has said it would continue to monitor the impact of such cars on the premiums. Prices leapt by 5.09 per cent from the previous high of S$144,640 to S$152,000 for the Open category, which can be used for any type of vehicles except motorcycles.
After adding the prevailing COE of S$99,499 for its category, the cost would jump more than 265 per cent to S$137,010. Rising interest rates — which would bump up refinancing costs — as well as higher pump prices make the price of owning a car all the more prohibitive. Financial advisors who spoke to TODAY generally advised capping car expenses to under 15 per cent of one’s monthly income or lower.
Managing editor and co-founder of personal finance site Dollars & Sense, Mr Timothy Ho, suggested a cap of 10 per cent of one’s monthly salary or a year’s worth of one’s income for car-related expenses. “In reality, many Singaporeans buy cars for both reasons in some mixture,” said the associate professor from the Singapore University of Social Sciences .
“For existing car owners, purchasing a new car is largely consequent on being accustomed to the convenience and practicality of car-ownership,” he said.Transport economist Walter Theseira said that people usually own cars for two broad reasons: For a faster and more convenient means of transportation; or they enjoy driving or believe certain cars “provide a certain social status”.
“Sometimes if around midnight you suddenly find yourself needing to rush to hospital because your kids are sick, you won’t want to be waiting for a cab or going around finding a car-sharing vehicle,” said the father of two. “If I were to take taxis or PHV, it would amount to around S$1,300, though I would be at the mercy of the car availability, or lack thereof.”Mr Nur Syahiran told TODAY that he managed to get by for about a year with just public transport when he had his first child.
He said that when one goes for a business meeting, chances are the other party would have already done a background check on the person. “This is especially true in this current high-COE climate. The luxury segment is typically less price-sensitive when it comes to COE changes,” he added. "This is reflected in this statistics, that the income for Singaporeans in general, the median or above seems to be increasing," he said, who added that such individuals would be more willing to pay for save time on travelling.As COE premiums soar, the market is reacting in various ways to allow people to own — or at least effectively own — their cars in ways that seem more manageable.
Chief operating officer of CarTimes Group, Mr Benjamin Loo, said his firm has to offer higher prices to these owners, which would naturally cut into the company's margins. Mr Izzraimy added that he typically earns around S$10 a trip, which goes to offsetting his car-related expenses.Ryde said on its website:"We advise our drivers to adhere strictly to LTA regulations. Carpool drivers may accept up to two pick-ups along the way for each trip."
The issue was also brought up in Parliament in May, when Leader of Opposition Pritam Singh asked if the Government was looking into loopholes in the car loan curbs “because it is not uncommon to hear of dealerships offering 100 per cent loans and things of that nature”. Another way for Singaporeans to enjoy the benefits of having their own car without a heavy upfront outlay is via car leasing.“We’ve seen an increase for long-term leases, as COE trended upwards in the past few months,” he said.
Mr Chan of Sgcarmart said that the platform does not have specific figures to indicate demand for car leasing. Another perk for consumers, according to the websites of some of the car dealers offering such arrangements, is that the amount paid through lease-to-own does not count towards an individual’s total debt servicing ratio, a threshold of a borrower’s monthly income set by MAS to encourage prudent borrowing.
They should also be clear about what the transaction and lease entail, such as the requirement to make repairs to the vehicle which may come with higher costs.As the Government continues its push for a car-lite society in land-scarce Singapore, it is inevitable that many would not be able to fulfil their dreams of owning a car, some experts noted.
Improving such connectivity could go a long way in improving travelling experience and disincentivise residents there from turning to private cars, he said.
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