A depreciation cost guide for first-time car owners

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Buying your first car is certainly an exciting milestone.

But before you actually become a proud car owner, it is important that you crunch those car depreciation numbers and figure out if the car you’re eyeing will lead to a huge loss on the cost of your car.

This rings true regardless of whether you’re purchasing a new or used car.

For those who don’t already know, car depreciation is very real: It shows you the true cost of owning and operating your car on an annual basis, on top of the costs of fuel, maintenance and other expenses you’re expected to fork out. 

How to calculate your car’s annual depreciation

Here’s a simple formula you can use to calculate your car’s average annual depreciation. 

Annual depreciation = (Total cost of vehicle – Sale value of vehicle) / No. of years in service

Car depreciation is never constant throughout your car’s 10-year life.

A new car generally depreciates at a higher rate in the first three years, so avoid selling your car unless you absolutely have to due to unforeseen circumstances. 

What makes up the total cost of your vehicle?

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To understand what contributes to the total cost of your car, zoom in on the following components. 

Open Market Value (OMV)

Put simply, the Open Market Value of your car is the price paid or payable when a vehicle is imported into Singapore.

This is determined by the Singapore Customs.

It includes things like the purchase price of the car, insurance, shipping, as well as and all other charges incidental to the sale and delivery of the car to Singapore. 

ALSO READ: Used car buying guide for Singapore: Where to buy and what to check

Registration Fee (RF)

The Registration Fee is a non-negotiable, upfront flat fee tax of $220 when you register a new car in Singapore. This amount is accurate as of time of writing. 

Additional Registration Fee (ARF) 

The Additional Registration Fee is a tiered tax you have to pay upfront when registering your vehicle.

Ranging from 100 per cent to 180 per cent of your car’s Open Market Value, the ARF can work out to be a massive sum. You may refer to LTA’s website here for more information.

Your Car’s Open Market Value (OMV)  ARF Rate (per cent of OMV to pay)
First S$20,000 100 per cent
Next S$30,000 140 per cent
Above S$50,000 180 per cent

Certificate of Entitlement (COE) 

Everyone who’s remotely interested in owning a car would know that cars are very pricey in Singapore because of COE.

This precious piece of 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 according to the vehicle type and/or engine capacity. 

ALSO READ: The ultimate guide to car ownership in Singapore

Other things to consider

The purchase cost of a car also includes GST, excise duty and dealer’s markup. It will be good to spend some time reading up on our handy guide on maintaining a car in Singapore. 

What makes up the sale value of your vehicle?

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Consider the following when calculating the sale value of your car. 

Preferential Additional Registration Fee (PARF) rebate

The PARF rebate applies when you deregister your car within the 10-year period and if it has never had its COE renewed.

It is a tiered tax rebate ranging from 50 per cent to 75 per cent of the Additional Registration Fee (ARF) paid based on the open market value of your car.

Age of car at deregistration PARF rebate
< 5 years 75 per cent of ARF paid
5 – 6 years 70 per cent of ARF paid
6 – 7 years 65 per cent of ARF paid
7 – 8 years 60 per cent of ARF paid
8 – 9 years 55 per cent of ARF paid
9 – 10 years 50 per cent of ARF paid
> 10 years NA

COE rebate 

This rebate is the pro-rated amount of any unused COE you may have left at the point of deregistering your car.

To calculate the amount of COE rebate you are eligible for, use the following formula: 

COE rebate = (Quota Premium paid x No. of months left on your COE) / Total no. of months bought by COE

Your car body’s value 

This is the amount you will get back if you scrap your car, sell it to a used car dealer or export it. As a general rule of thumb, take the lowest amount as a safe guideline when calculating your car depreciation cost. 

ALSO READ: How to scrap your car, and how much money you’ll get back

The resale value of your car 

This is the amount you’ll receive if you sell your car on the second-hand market. Many different factors can affect the resale value of your car, including: 

  • Mileage your car’s clocked up until the point of selling
  • Brand, model and make 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

PHOTO: Pexels

There’s no denying it — owning a car is expensive in Singapore.

As much as it is a chore, you need to do your homework and crunch those numbers when considering a big ticket item such as a car. 

Besides figuring out how much value your new car may potentially lose over the years you expect to be driving it, you need to know how much you’re eligible to borrow when getting a car loan. 

It is always a great idea to plan ahead, save up and figure out if you’re truly able to afford a car comfortably before committing to buying one.

Other car-related costs that you have to consider include things like road tax, car park fees, car insurance and car servicing.

This article was first published in SingSaver.com.sg.