Is it worth it to buy a car in Singapore?
This post was inspired by one of my readers, who commented that he regretted buying his vehicle.

I've never had any desire to own my own car, but Terence prompted me to investigate the hidden costs of owning a car in Singapore, which I think many people do not really consider when they say they want to buy a car.

Take my boyfriend for instance. He's really wants to buy a car, and keeps telling me that he can get a used model for just over $20,000. But I know the costs are going to be a lot more than that. Here's why:

1. The COE in Singapore is dreadfully expensive.

When I was studying in the U.S., I remember being amazed that my local friends could get a car of their own for as little as $2,000 (you read that right). 

They were shocked when I told them about our COE system for car ownership in Singapore, which requires one to have at least $70k - $80k for a piece of paper.
Source: May 2015's COE tender exercise
The Straits Times & Land Transport Authority

2. Higher loan repayments every month.

Due to the recent car loan restrictions by MAS, we are now required to pay off the full sum within a maximum of 5 years (even if your car has more than 5 years of COE left on it).

Assuming a 3% interest rate, it'll be safe to say that average monthly repayments would be a minimum of $1,500 for most people. Can you afford that extra $1,500 each month without resorting to more borrowing?

3. Road tax 

Without even counting ERP (which can be pretty hefty too over time, especially if you drive during peak hours), you'll need an average of $700+ for your annual road tax. It may not sound like a lot, but over the full 10 years of your COE, that can work out to quite a bit.

4. Car insurance payments

You'll be stupid to try and save on this one, because an accident can then easily wipe out most of your savings and leave you penniless.

But even if you're a safe driver, the annual cost of car insurance is going to amount to over $2,000 easily. Don't forget to multiply that by 10 years again.

5. Petrol costs

My friend spends $250 a month on petrol for his car so I'm just going to take that as a rough guideline. In 1 year, that works out to be $3,000. In 10 years, that will set you back by $30,000.

And that's not even factoring in the potential rise of oil prices. 

6. Maintenance and grooming costs

Every car needs regular maintenance to keep it running well and looking decent. I found conflicting figures on this one, so let's stick to a safe estimate of $10,000 over the lifetime of your car.

7. Parking fees

Most people I talk to forget about parking fees when they're calculating their finances for their car. Considering that you will park mostly at home ($150), at work ($200 - I'm taking the cost my previous workplace charged) and occasionally at the malls or other places ($50), let's estimate an average of $400 per month if you drive often.

Average Monthly Fees

Just based on your loan repayment, petrol and parking fees, the monthly cost of owning a car can come up to $2,000 easily.

If you take that amount and invest it into an ETF like the ST Index instead long-term, you could be so much richer. 

Using a very simplistic calculation and assuming that we reinvest our profits each year back into the STI, you can choose to be either $720,000 poorer by the end of 30 years, or $2,855,351 richer.

(Even if we were to assume an even more modest returns of 5%, this would give you $1,646,039.)

I hear many Singaporeans talking about how buying a car in Singapore is a good investment for their career, for their social status, etc.

The truth is, buying a car in Singapore is possibly the worst investment decision you can make. Aside from the well-known fact that your car depreciates in value each year, you have to also factor in all the other hidden costs that you may not have thought about fully about before wanting to buy a car.

While there may be circumstances where a car is downright necessary, for the most part, public transport is a good and cheaper alternative if you're willing to cut back on the ego and put up with a bit of inconvenience in order to keep the money in your own pocket. Furthermore, there's nothing shameful about riding the public transport. And for times when you must really need a car, there's always a taxi, Uber or GrabCar.

If you truly want to grow your money, the trick is to skip the car and really save / invest the rest.

Given a choice between a liability that cost me money AND also loses around 10% of its value every year, versus pumping that same money into the stock market for 8% annual growth, I think I rather choose the latter. 

What choice will you make?

With love,

Budget Babe


  1. Thanks, good post! It's about time someone reminded us on the cost of owning and maintaining a car. It's so prohibitively expensive I don't even entertain the thought, and it constantly amazes me how my married friends can afford to buy a car (plus own a condo and hire a maid). The conclusion is that either they earn truckloads more than me, or they are severely in debt and living paycheck to paycheck. Whatever the case, it's not my business; but as a friend I certainly hope they are managing their money properly. As you pointed out, the depreciation and related costs can seriously set you back by a lot.

    What you have computed is the opportunity cost of NOT investing the $2,000 monthly into an ETF which pays 8% per annum (a pretty high number these days haha). The actual total cost should be the difference between the $2.8m and the -$720k, which amounts to about $3.5m!

    I have a family (wife + 1 kid) and we get by quite well using the bus and MRT, without having to purchase a car. I haven't bought a car since I started work 15 years ago, and am quite satisfied with my lifestyle (even if there is the occasional inconvenience, which can be suitably solved by calling a taxi). With the savings, I have managed to invest in to reap decent and consistent returns through capital gains and dividends. Therefore, I would advise other readers to do the same.

    Unless the car is an absolute necessity (e.g. for work, where you are compensated for owning it), or for handicapped/infirmed parents/siblings/children, then I think it is a luxury we can do without.


    1. I love that part about opportunity cost being $3.5M!

  2. My family of 2 adult children, one NS man and a housewife have been surviving without car for donkey years. My three children till now still didn't think of getting their driving license.

    1. My dad scrapped our family car before I finished my PSLE...and taught me that public transport is always better, cheaper, easier (no need to look for parking lots!).

  3. my current car left 1 year
    i am debating with my family not to buy another car next year
    my wife and daughters are spoilt
    3 against 1,
    i am going to lose the battle :(

    1. Oh dear, I wish you all the best Jimmy!

      Not sure if this would work, but perhaps if your wife and daughters really want the car, you could try suggesting them to pay for it? And it could even be computed on a percentage division split i.e. if your eldest daughter uses it 40% of the time, she pays for 40% of the monthly expenses.

      Just a suggestion, you could try to see if making them feel the pinch would help?

  4. Dont buy new car.
    buy used car.
    Nothing beats convenience of using own car.
    can go eat durians at middle of night.
    can go parks or farms where no buses can go.
    can go cemetries where taxi uncle will refuse to take u.
    (Of course, do ur sums first)

    1. Definitely agree with you that if one really has to get a car, getting a used car is better (of course, always calculate if one can afford it first).

      The convenience is indisputable but then again, what will we pay for convenience?

  5. This comment has been removed by the author.

  6. Hi BB,

    Not sure why, but my comment mysteriously disappeared after i click on "publish".

    Nonethless, honoured that my reply has inspired you.

    It's nothing wrong getting a car. But at the end of the day, it's always the "what i could do with the money spend on the car" that bugs me. And it still bugs me to today. =)


    1. Hi Terence,

      Thanks for inspiring me to do this post! :) It's ok, we always make decisions that we regret when we're much older.

      Musicwhiz above has put it in a very nice way of computing the opportunity cost lost in total. Works out to be quite a sum 0.0

    2. Hi BB,

      You are welcome.

      Yeah, Musicwhiz comments are certainly an eye-opener =)

  7. Hi BB,

    I love your long-term comparison of "investing" in a car and investing in the stock market.

    The challenge is that we often only do have a short-term view, suffer from instant gratification and extreme discounting. We prefer a small but immediate payoff over a larger payoff down the road.

    We stumble on the difficulty our brains have placing us in the future with any degree of accuracy. Blame our ancestors for that who 'only' had to make decisions about immediate threats and rewards (fight or flight) to survive. That's why our brains are always quite happy to capitalize on an immediate reward.

    I am guilty as well having always owned cars since I turned 18. Although my first car was a real necessity (hardly any public transport), cost me about 1 K SGD and lasted me three years. This only works in Germany. Lol

    My third car I owned in Singapore was magic. I drove it for 2.5 years and sold it with a profit of 24 K SGD thanks to rising COEs. This is only possible in Singapore. Lol
    But I doubt that I ever could repeat such a deal.

    Nowadays my cars are getting smaller. Who needs a huge engine theoretically propelling you from 0 to 100 in 6 seconds when the next traffic light is 5 seconds away?

    My five cents worth: When you really value the convenience of a car, go for a used one and choose the smallest engine size and then enjoy your privileges without envying those who drive those shiny new bug German cars.

    1. Hi again Tacomob!

      1K for a car! Imagine that. I wouldn't mind paying $333 a year for a car as long if that was all it cost :P

      24K profit in Singapore was also a super good deal. You must be really lucky, or smart, or both!

      Great advice there on buying used cars with the smallest engines. Thanks for sharing with everyone here!

    2. Hi BB,

      No, $333 a year was not all it cost. Of course the regular culprits did apply there as well such as road tax, insurance, a bit of fuel and oil (old cars tend to use up a bit more) and the occasional service done by a friend and paid for in beers. Nice currency that is, Lol

      I do consider myself lucky and I love to hear that people think I am smart - big grin

      By the way I am keeping my fingers crossed that Singapore is moving ahead to become one of the first countries to adopt autonomous cars in a big scale. Then car ownership would be really obsolete. One would only pay for the actual transport service from point A to point B sans the entertainment by the friendly taxi driver of course.

      I recently have written a post on that subject.

      BB, can I mention the link here? Not sure. Would I violate any etiquette?
      Alamak, I just bluntly put the shortlink here:

      and people who are not interest in autonomous cars please just ignore it. And those who are, maybe it contains some valuable information for you.

  8. Hi BB,

    I think I should give another side of it. Too many people are bashing cars because of financial costs. There are other reasons why there we should own a car, and I list some of the more important reasons here:

    Money is essentially not the end point. Time is the most important resource here. I suppose all the financial freedom fighters wanted to save enough to earn enough passive income so that they hve the time to do what they wanted to do. For me, I do it concurrently. I probably save a lot of time with a car. With that time saved, I can squeeze in enough work to compensate for my usage and yet enjoy the fringe benefit of freedom of travel.

    I guess that shld give a balanced view of this car issue.

    1. Great post LP! Thanks for sharing the other side of the issue from a very balanced perspective.

      I can't disagree with you, and I'm not completely against cars either. The main thing though, is that people should always factor in hidden costs before buying a car, instead of just looking at the price of the car + COE itself. Small things can add up to a lot.

      Saving on time is definitely valuable especially for your line of work! I take 1.5 hours one-way to travel to my student's house on weekends, so that's 3 hours lost easily. And another 3 hours each time I have to travel back to my university, which only takes 30 minutes via car / taxi. But at this moment, since I'm not earning a lot either, I don't think I can / should buy a car. I can afford to wake up a little earlier to take the public transport instead ;)

  9. We shouldn't confuse the usage of a car. It can be a good tool for making more money or high expenses for some convenience. Car can be convenient for passengers but not exactly attention free for driver.

  10. I agree with tacomob partly.
    personally i think lambo pors ferrari are only for show. How to drive a 500bhp car in spore properly without breaking rules?
    I drive a s class daily. Its powerful no doubt. But i hardly go more than 90kmh on expressways.
    i rather enjoy the comfort inside n take a longer route with a longer time than speed to my destination.

    1. Hi Low Paul,
      Nice ride. Just make sure you do drive your 90km/h off and on stuck in second gear. These kind of powerful German engines need to be revved on occasion to prolong their life.
      I should know. I am a German as well. Lol

    2. Hi Tacomob,
      True. My technician told me to take it to NSH at 110kmph to clear its "carbon" once a while.
      but havent gone to msia in it. Safety first.

    3. Hi Low Paul,
      Where got. No need to go all the way to NSH to clear your carbon. Just drive from Changi to Tuas at 95kmph and stay in a low gear 2nd or 3rd. Rev at least to 5,000 rpm and ignore the looks from the drivers around you.
      Very safe.

  11. I don't really agree with your article on the following :

    1. used cars have higher depreciation than new cars now. Sounds incredile, but it is true.

    2. the assumption of 8% per annum over 30years is excessive, STI is supposed to be how high?

    3. when you ascertain the costs of owning a car, do you balance it with the benefits associated with owning a car?

    Based on the above, and the choice of "headline", i think you can do a subsequent post arguing why anyone would want to own a car.

    1. Hi,

      Agreed with you that 8% may be excessive as another reader pointed out to me as well, thus I've put another comparison at 5% below. Nonetheless, both figures are used to illustrate a simplified concept and should not be taken as a guaranteed fact.

      For point 3, LP above (in the comments) has actually a really good post balancing out this debate on the benefits of owning a car vs the cost. Feel free to check it out! Given that I don't personally own a car, so writing one on that angle would not be accurate at all.

      At the end of the day, owning a car is a personal choice. It's not one I would make, but everyone is free to make their own choices regarding purchasing a car!


  12. Thanks for this great post, i find it very interesting and very well thought out and put together. I look forward to reading your work in the future.

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  14. This is a very insightful article. I actually felt that I needed a car to become a multi-millionaire, but after I got one, I saw the bills stacking up quick. It may be my fault for buying an older car with lots of mechanical issues, but when I got it, I did not realize how much all this stuff adds up!

    Henry Hansen @ Ethica Private Wealth Specialists

  15. It really is amazing to see what a car can do but when you look at the expenses that you have to carry it really shows you that it is not worth much in the end. Unless you make a living from driving then there really is no real need for it. You are better off cycling or walking, thanks.

    Freddy @ Jacky Jones Chrysler Dodge Jeep Ram

  16. I never really thought about the hidden costs of owning a car. When I read a post like yours that breaks everything down, it is really amazing. Of course, some people may not have a choice if they live in a rural area that does not have access to public transportation.

    Cedrick @ Viva Chrysler Dodge Jeep

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