## 19 Aug How Much Do You Need to Earn Before You Even Think of Buying a Car in Singapore?

I 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?

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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 2015)

*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…

Chery J3 Hatchback!

Sporting a 1.6L engine with automatic transmission and 125 bhp horsepower. All for S$83,999, 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 while it used to be from South Korea. The Kim Chi cars have been beaten by the Bak Kwa 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$83,999, 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 5 years and the loan is also capped at 60% of the car price, since the Open Market Value (OMV) for Chery J3 should be less than S$20,000. For your information, the maximum car loan will be 50% 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$50,400 (60%)
- Cash = S$33,598 (40%)

And here are the loan details using the installment calculator

- Interest Rate = 1.48%
- Term = 5 years
- Total Interest = S$3,730
- Monthly Installment = S$902

#### Step 2: Determine the Road Tax Payable

You can use this calculator to get your road tax.

The amount for Chery J3 as a 1600cc car would be S$744 per year, or S$62 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 30-year old male, working indoors, and driving the Chery J3.

The annual insurance premium was about S$2,500. 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$209 per month.

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

#### Step 4: Estimate petrol cost

- Chery J3 is expected to do 9.2km per litre of petrol. This is poor fuel efficiency by today’s standard.
- Assuming an average of 50km per day, or 1,500km per month.
- The prevailing petrol price is about S$2.10 per litre. But the stations would usually give discounts with credit cards. Let’s assume a 15% discount, and petrol price will be S$1.79 per litre.
- Monthly petrol cost = S$292

#### 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$90 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$20.
- Total monthly parking cost = S$486

#### 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 a 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

#### 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!

The monthly amount is estimated to be…

- Car loan installment = S$902
- Road tax = S$62
- Insurance premium = S$209
- Petrol cost = S$292
- Parking cost = S$486
- ERP cost = S$40
- Fines = S$20
- Servicing and repair = S$175
- Car wash = S$32
- Car accessories = S$7
**Total = S$2,225**

And do not forget the S$33,598 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$450,000 and a 20-year loan at 2.6% would mean a monthly mortgage of S$2,400. Shared equally between husband and wife, each will have to commit S$1,200 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$3,007 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 make more than S$3,007 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$691.61
- Another S$508.39 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$2,405.60
- Cash payments for loans = S$1,410.39
- Car expenses = S$1,323
- Remaining salary for other living expenses = -S$327.79

You will actually run into deficit! Assuming you would need at least S$2,000 per month for your living expenses and that means you need to earn about S$2,300 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, 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:
*

## komatineni

Posted at 09:47h, 19 AugustGood, 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 :)

## J

Posted at 13:10h, 27 JanuaryHi sir. Is the 5k calculated household or individual income assuming a dualincome?

## Alvin Chow

Posted at 14:22h, 27 JanuaryIf 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.

## Shawn Lee

Posted at 13:27h, 19 AugustEnjoyed the read, good analysis and breakdown Alvin. Now I know how much I need!

## Jeremiah Say

Posted at 19:48h, 19 AugustThis 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.

## Mickey J

Posted at 14:17h, 20 AugustI 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.

## JY

Posted at 23:57h, 20 AugustYour article is seriously flawed.

## James Choo

Posted at 22:36h, 22 AugustJY care to elaborate?

## AL

Posted at 15:05h, 23 AugustHi Alvin,

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

Recalculate please.

## Alvin Chow

Posted at 09:59h, 24 AugustWhat 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%?

## How Much Do You Need to Earn Before You Even Think of Buying A Car In Singapore? | Salary.sg - Your Salary in Singapore

Posted at 09:36h, 24 August[…] article originally appeared […]

## Tcs

Posted at 20:48h, 26 AugustPetrol cost is not included in yr final calculation :)

## Alvin Chow

Posted at 11:42h, 29 AugustPetrol cost has been factored.

## Luxury Items: It’s Not Just About The Sticker Price

Posted at 18:00h, 22 September[…] Don’t get me wrong. I have no intention of getting a car, at least NOT YET, especially after reading this post. […]

## Leon

Posted at 10:09h, 19 JanuaryCOE price dropped to be consider in your calculation, this is a link for the historic COE price.

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

## First-Time Expat in Singapore: Tips for Getting Around

Posted at 23:44h, 26 March[…] far outweighs its benefits, especially when you’re living in Singapore. For example, according to Big Fat Purse, you need to be earning at least SGD 5k a month in order to maintain ownership of your car, due to […]

## CH

Posted at 23:11h, 05 JuneHaving 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.

## Troy

Posted at 00:37h, 09 JulyYou left out petrol cost in step 10.

## Troy

Posted at 00:42h, 09 JulyAnd you have two “step 5″s.

## Alvin Chow

Posted at 09:23h, 09 JulyThank you for spotting and highlighting the mistake. Amended!

## Roger

Posted at 14:17h, 28 AugustMedian household income is around $8000, so more than 50% should be able to own a car.

## Fairus

Posted at 06:33h, 22 SeptemberPerks 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!!!!!!

## James

Posted at 14:19h, 01 OctoberThis 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 :)