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 (US$21,000).
Certificate of Entitlement premiums, which form a bulk of a new car's price tag, have been skyrocketing and breaking new records in recent months.
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.
Car enthusiast Mohammad Izzraimy Mohammad Ishamare decided to own a car despite the increasingly prohibitive costs of having one. While the private car population had declined slightly — from about 535,200 in 2012 to 532,300 in 2022 — the number of private-hire cars grew significantly over the same period: From under 15,000 to about 72,600.
Category B premiums for large cars or fully electric cars with output over 110kW saw premiums jump from the previous high of S$140,889 in the last bidding exercise to S$146,002. A Honda Jazz, a Category A car, had an average OMV of S$22,315. Inclusive of various surcharges, its basic cost without COE amounted to S$37,511.
Mr Syahiran Masli, 33, bought a 13-year-old Mitsubishi Lancer in October last year for slightly under S$90,000.The car owners who spoke to TODAY generally spent up to 30 per cent of their monthly income on car-related expenses, which would typically include monthly instalments for car loans, electronic road pricing and parking charges, petrol as well as other outlays for insurance, road tax as well as maintenance and repairs.
However, the project manager said he used about nine months’ worth of savings to pay in cash the full price of S$90,000 for his 13-year-old Mercedes.To encourage prudent borrowing and spending, the Monetary Authority of Singapore has limited car loan tenures to seven years, with a downpayment of 30 to 40 per cent required depending on the car value.
“But that might not be the best thing to do as you might need to spend more for certain months due to unforeseen circumstances,” he added. However, he said it ultimately depends on the individual’s circumstances and their financial commitments, such as existing debt and money allocated for family members, among others.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”, said transport economist Walter Theseira.
Similarly, Mr Desmond Chan, deputy editor at online car portal and marketplace Sgcarmart, said existing car owners make up “a large proportion” of car buyers. He added: “We’re seeing demand on the rise. We sold over 3,000 cars in Singapore during our financial year 2023 and are on track to see numbers grow for financial year 2024.”Mr Amos Wong, general manager of Autolink Holdings, said that prices of second-hand cars are also rising as existing car owners know that a new car of a similar model now can fetch a much higher price than when they bought it a few years ago.
But as his business recovered after the COVID-19 pandemic, it made more sense to buy his own car, he said, which he did sometime in April 2022. Similarly, Mr Ben Tan the project manager, who lives in Pasir Ris, uses his car mainly to travel for work and for leisure sports activity.Associate Professor Nitin Pangarkar from the National University of Singapore Business School said that one cannot discount the “face” factor behind some Singaporeans wanting to own a car.
He said that owning certain cars also gives one membership to some enthusiast groups and exclusive clubs, which provides invaluable business networking opportunities. “The fact is that luxury car brands in Singapore continue to do well, even though today, mass market brands often have similar levels of safety, equipment, quality, and features,” he said.
Some dealers like Mr Tang of Yong Lee Seng would advise their clients who already have a car to trade in their cars every two years or so. “We also offer things longer warranty, lifetime warranty for their vehicle as well – anything that we can throw in, basically,” he added. Ride-hailing platforms that TODAY reached out to declined to share the proportion of their driver partners who are driving on a part-time basis.
In his response, Minister of State for Trade and Industry Alvin Tan said: “The short answer is MAS will work with MOT to monitor the situation in the COE market.” “Consumers are willing to lock in their leasing rates for at least one to two years to fix their financial commitment towards car ownership and to protect themselves from a price hike from the rising COE prices.”
LTA data showed that the number of such cars had grown incrementally from 21,403 in 2012 to 24,610 in 2019. It then surged by about 26 per cent in a year to 30,966 cars by 2020, before growing even further to 35,109 in 2022. TODAY understands that lease-to-own financing arrangements are not subject to motor vehicle financing rules as they are more akin to car rentals.
Dr Tan Ern Ser, an associate professor of sociology from the National University of Singapore, said that such unfulfilled aspirations might be a cause for concern. Mr Loo of CarTimes said that at the end of the day, cars are not strictly necessities for most people.