**Last Updated: 2018**

Was handed this question to address in this article.

Coincidentally, this subject has a lot of sentimental value to me because I wrote about it in the 15th article of BigFatPurse.com’s history. That was in 2007! Reading that article brought back memories of me typing away on my bed in the wee hours. It wasn’t tough. It was enjoyable in fact.

Given all these years of writing and garnering more experience in life, I am sure I can deliver the answer to this question much better than the earlier article I have written.

Cars are known to be exorbitant in Singapore. Or should I say disgustingly expensive?

We have this thing called Certificate of Entitlement (COE) that is unheard of in many countries around the world. This COE alone can be more expensive than the car itself! Of course, the reasoning behind this was to regulate the car population in Singapore, so as not to clog up the small island of ours and everyone spend their time in traffic jams.

There are two parts to tackle this question. First, how much does the cheapest car in Singapore cost to own and operate? Second, to calculate the salary to afford the car costs comfortably, considering other living expenses? Ready? Let’s begin!

## Part 1 – Estimate the Cost Of Car Ownership

**The Cheapest Car In Singapore (Circa 2018)**

*There are a few important assumptions: *

- We are talking about new cars and not buying second hand ones.
- A car loan will be taken (let’s be realistic most people buy with loans).
- Passenger cars and not commercial vehicles.
- Cheapest automatic transmission car (nowadays who drives manual like me?!).

Drum roll for the cheapest car…

Perodua Axia!

Sporting a 1 engine with automatic transmission and 67 bhp horsepower. All for S$66,800, inclusive of COE, and I got this info from sgcarmart. (The car price actually comprises 7 components and if you want to know all of them, head on to this article.)

The cheapest car available in Singapore is made in ~~China~~ Malaysia while it used to be from South Korea. The Kim Chi and Bak Kwa cars have been beaten by the Satay cars in terms of cost. By the way I have weird nomenclature for cars depending on where they are made. There are Sushi and Tom Yum cars too.

So we start with the price tag of S$66,800, assuming you have no upgrade requests and the dealer has no hidden costs for you.

## Step 1: Calculate monthly installment

Assuming you take the maximum loan tenure which is 7 years and the loan is also capped at 70% of the car price, since the Open Market Value (OMV) for Perodua Axia should be less than S$20,000. For your information, the maximum car loan will be 60% of the car price for cars with OMV higher than S$20,000.

Here are the breakdown of the car price to be funded by:

- Loan = S$46,760 (70%)
- Cash = S$20,040 (30%)

And here are the loan details using the installment calculator

- Interest Rate = 2.78%
- Term = 7 years
- Total Interest = S$9,099
- Monthly Installment = S$665

## Step 2: Determine the Road Tax Payable

You can use this calculator to get your road tax.

The amount for Perodua Axia as a 998cc car would be S$392 per year, or S$33 per month.

## Step 3: Estimate Car Insurance Premiums

The insurance premium varies with a few factors such as age, job nature, and car type.

I requested a quote using a 35-year old male, 0 NCD, working indoors, and driving the Perodua Axia.

The annual insurance premium was about S$2,240. We will also not go into details of the amount of excess etc. as we are just getting an estimate.

This works out to be S$187 per month.

As age catches up and with good and clean driving records, this premium is likely to lower.

## Step 4: Estimate petrol cost

- Perodua Axia is expected to do 22.5km per litre of petrol. But I don’t think the reality would reflect the theoretical numbers. Maybe we assume 16km per litre which is more reasonable
- Assuming an average of 50km per day, or 1,500km per month.
- The prevailing petrol price is about S$2.23 per litre (95-Octane) (check here for latest).
- Monthly petrol cost = S$209.10

## Step 5: Estimate Parking Costs

Most drivers would buy season tickets at the carparks near their homes. Some may even need to pay season parking at their work place. Lastly, shopping on weekends can also incur expensive parking too which we need to include.

- Season parking for home carpark would be S$110 per month, assuming a HDB multi-storey carpark as most Singaporeans stay in public housing.
- Season parking for office varies greatly as it depends on the location. Let’s assume S$200 per month.
- Parking at shopping centres can be quite expensive. Let’s average out to assume $2.20 per hour. Assuming 20 hours of such parking per week, or 80 hours per month, the monthly cost will be S$176.
- Occasionally you will need to park in URA carparks and need the parking coupons. Let’s assume you buy two sets of coupons per month for S$24.
- Total monthly parking cost = S$510

## Step 6: Estimate ERP Costs

Depending on the route you take, if you journey to central area during the peak hours, expect to pay a lot for it.

Let’s assume $2 per day, less Sunday which the ERP gates are not in operation. It would cost about $40 per month.

## Step 7: Estimate Car Fines

Occasionally you forgot to insert the cashcard into the card reader and passed the ERP gantry. Or you have not prepared enough coupon duration to park your car and you got caught by summon lady.

This should be infrequent and we assume it will average out to S$20 per month for the fines.

## Step 8: Estimate Car Servicing and Repair Costs

Car servicing ranges from the regular ones to the major ones. The regular ones, assuming no other repairs, would cost around S$200 and to be done at every 10,000km or 6 months of driving.

The major servicing comes around every 40,000km of driving where you would need to change out the fluids and worn out belts and tyres in your car. We will add S$400 to the regular servicing every 2 years.

You hope that you didn’t get a lemon. If yes, your repair fees will sky rocket. A clutch replacement costs around S$1,200. I had a seat railing that rust and had to replace at S$800. Shock absorbers will go some time in the lifespan of the car and cost at least S$1,000 for four sets.

It is hence very difficult to estimate the required repair costs. Let’s set aside S$1,500 per year for the repairs.

~~Total servicing and repair cost per month = S$175~~ Given rising costs, we up this to $200/month

## Step 9: Car Wash

Most Singaporeans do not wash their own cars. A trip to the petrol kiosk for washing will cost S$8 per week, or S$32 per month.

## Step 10: Car Accessories

Assuming you are not a car vain pot and do not add unnecessary accessories in the car, but you would like to buy some fragrance to keep you calm during your hectic drive. It would cost about $7 per month.

## Step 11: Sum It All Up!

**tl;dr**

## How much you need to spend per month (*minimum*) on a car in Singapore:

- Car loan installment = S$665
- Road tax = S$33
- Insurance premium = S$187
- Petrol cost = S$209
- Parking cost = S$510
- ERP cost = S$40
- Fines = S$20
- Servicing and repair = S$200
- Car wash = S$32
- Car accessories = S$7

**Total = S$1,903**

And do not forget the S$20,040 downpayment you have to pay in cash!

## Part 2 – Calculate Required Monthly Salary

There are a few big ticket items Singaporeans fund their purchases with debt. They are using house and car. All these contribute to the debt servicing budget for loan repayments.

Comparing these two assets, I believe most Singaporeans prefer to have the house if they have to choose between the two. Hence, it is important to make sure you do not over commit to the car and realised you do not have enough allowance to take up a mortgage loan!

A typical 4-room HDB flat would cost around S$470,000 and a 20-year loan at 2.6% would mean a monthly mortgage of S$2,500. Shared equally between husband and wife, each will have to commit S$1,250 of their monthly salary to service the debt.

The current Minimum Servicing Ratio for HDB is 30%. This takes into account of both fixed monthly and variable component of your salary. For simplicity’s sake, we will assume fixed monthly salary.

Applying the 30% MSR limit, the gross monthly salary have to be at least S$4,167 to qualify for the mortgage loans.

You can use the mortgage calculator and MSR calculator to cater to your own context.

In actual fact, you need to earn more than S$4,167 to own the house and the car at the same time because of your living expenses.

You can also argue that not all the loan repayments are made in cash. You can use CPF for mortgage payments.

The amount of mortgage that can be paid with CPF monies:

- 23% of the gross salary goes to CPF Ordinary Account = S$958.41
- Another S$291.59 have to be topped up in cash per month for the mortgage loan

Calculate the available salary to spend on your living expenses:

- 80% of gross salary as 20% is CPF contribution = S$3,333.60
- Cash payments for loans = S$291.59
- Car expenses = S$1,903
- Remaining salary for other living expenses = S$1,130.01

Assuming you would need at least S$2,000 per month for your living expenses and that means you need to earn about S$861 more to own the car. Moreover, you should not be stretching so thinly because you need to have savings and investments to decrease your dependency on the salary.

After sooooo many calculations, here’s the answer:

## You need to earn *at least* S$5,000 per month to own a car in Singapore!

If you can afford a car and need it to minimise hassle and time to travel, better make use of your freed up time and energy wisely.

*In the meantime, if you would like to save money and receive interest that is significantly higher than that offered by the banks, consider the Straits Times Index Exchange Traded Fund. Or, download the PDF version and read it at your convenience:
*

CEO of Dr Wealth. Built a business to empower DIY investors to make better investments. A believer of the Factor-based Investing approach and runs a Multi-Factor Portfolio that taps on the Value, Size, and Profitability Factors. Conducts the flagship Intelligent Investor Immersive program under Dr Wealth. An author of *Secrets of Singapore Trading Gurus* and *Singapore Permanent Portfolio*. Featured on various media such as MoneyFM 89.3, Kiss92, Straits Times and Lianhe Zaobao. Given talks at events organised by SGX, DBS, CPF and many others.

Good, and detailed analysis. Probably you should put one big disclaimer saying that ” Zero savings, almost zero CPF OA, and no fall back plans” to have a car 🙂 If I use another simple formula which is 20-25% of annual income to buy a car. Based on that I can “afford” a car costing 80K if I make 320K. Answer is no and I am happy with my B.M.W service 🙂

Hi sir. Is the 5k calculated household or individual income assuming a dualincome?

If your household is sharing the burden of the car then you can consider household income.

If you are the only person paying for the car, then it should be personal income.

Enjoyed the read, good analysis and breakdown Alvin. Now I know how much I need!

This is absolute information in regards to buying your first car in Singapore. Cars are definitely not cheap here. Better to take those money to do some investments and build up your portfolios first.

I can’t imagine people would still want to buy a car after reading this post. I’m satisfied with cycling to my office every morning.

Your article is seriously flawed.

JY care to elaborate?

Hi Alvin,

MSR is at 25%, and including TDSR of 60%.

Recalculate please.

What I have researched is that MSR is at 30% – http://www.straitstimes.com/singapore/new-hdb-measures-target-mortgage-servicing-ratio-and-maximum-loan-tenure

Which source did you refer to at 25%?

Petrol cost is not included in yr final calculation 🙂

Petrol cost has been factored.

COE price dropped to be consider in your calculation, this is a link for the historic COE price.

http://chartist.deltaspace.com.sg/charts/10532

Having a car is a necessity to some, a joy and passion to own one for others. As Singapore has land limitations, not everyone’s dreams come easy. It depends on how much money we are willing to depart per month as expense in order to own one.

You left out petrol cost in step 10.

And you have two “step 5″s.

Thank you for spotting and highlighting the mistake. Amended!

Median household income is around $8000, so more than 50% should be able to own a car.

Perks of being the only child, i dont even have to think about buying a house (cos i’ll just live in my parents modest home). I can just focus on buying a car. Started investing 2 years ago and building up my car funds savings and hope to buy it before i reach the age of 25 wohoooooo!!!!!!

This article is not applicable to most people , first : who will buy a Cherry J3 , never heard the car at all . All I know it’/ made in China and your maintained cost is very high , easily breaks down and unreliable . Consider other options like : Honda Civic or Toyota Altis / Vios which suits the common people . Let’s take the depn of 12k / year

insurance premium is also flaw ; it does varies on the driver , experience and NO claim discount premium ( up to 50% if no claim of 5 years ) . It should be around $2k / year for the most coverage , ^ check with NTUC insurance for better understanding

Next (optional ) , some people would spend more on their car accessories like DVD player to watch movie or improve their style of the car by adding body kits or sport rims . Therefore the depn of the car would go up .

Hence , it is fair to say on avg , the running cost is expected to be $12-$15 k / year of self-owning a car in Singapore . If you can’t afford one , please consider to be rent for lion city and become the next Uber /Grab driver .

*I welcome your criticisms 🙂

Dear Alvin Chow , Its interesting to know information, if its up to day as 2017 it’ll be good. One more request if you can include Bike information. in comparison Table format it’ll be very good. In one glance we can know as per our SAL what we need to go for.

It was interesting to know this details.

Take Care.

Hi.

If I have $5000 cash with me and I don’t have to pay anything in a month except for some phone bills of less than $100. Earning about $2300 after cpf deduction. Will it be possible to own a secondhand car in Singapore?

As described in the article, you should set aside $2,300 disposable income to own a car in Singapore. If you spent the entire $2300 on car, you would have no money to eat.

Thank you, this is a well articulated comprehensive post. I’ve been contemplating on buying a car for a while but did not come across an article that provided this level of clarity. I now know my affordability if I decide to buy a car.

I’m not sure how you can live with living expenses of mere $2000 a month especially if you have a family. I wonder if people here factor in the amount of taxes and insurance that you pay annually. There are much more things in that “living expenses” category such as familial obligations, medical expenses, child care charges etc. These are vital ehen calculating the affordability of owning a car.

I enjoyed the clarity of the article. Thank you!

Hi Alvin,

This is a wonderful article. After reading the article, it seems that I theoretically can afford a car, but it will affect my savings. So whether to buy a car is still a question in my mind.

Do you think it will be possible if owning a second hand car will cost less every month?

Running costs would be the same. So the difference will only come from the car price.

But second hand cars can still incur the same monthly costs as with new cars. This is because even if the price is lower, the lifespan is also shorter -> less runway for the loan = higher monthly installment.