Can Middle-Class Buyers Still Afford a New Car Today?


Jeff Cuellar



It didn’t take as much effort to knock the air out of Singaporean car buyers earlier this year. Once MAS added a tiered Additional Registration Fee (ARF) and slashed Loan-to-Value (LTV) limits and loan tenures by half, it was like an uppercut to the chin of middle-class car buyers.

Does this move mean that some Singaporeans won’t be able to afford a new car? Well, yes and no. Yes, that BMW 528I 2.0L you drooled over may be out of reach with a 50% LTV, but you can still buy a new car if you’re willing to save up and downgrade to a less luxurious model.

Here are the costs that are factored into new car loans:


Certificate of Entitlement (COE)


Even bears are choosing to take taxis in Singapore’s bearish car market.


In the span of a few years, the cost of COE has grown to Kaiju-like proportions, reaching $73,100 for Cat A vehicles 1,600cc and below this July. Will the COE go down anytime soon? It’s too early to tell, but experts predict there will only be a slight drop in price.

There are several ways to get your COE for a new car, but it comes down to two options:

  • You have the dealer to bid for COE on your behalf, including it in your loan package.
  • You bid on and obtain the COE yourself, purchase the vehicle at a dealership separately.

If you want to pay less initially, leading higher monthly repayments, go with bundling the COE with your car loan.

If you’d rather pay more upfront in order to have lower monthly repayments, pay for the COE on your own and take out a car loan. Just don’t expect car dealers to give you special rates just because you purchased the COE on your own.

To find out more about COE and how the bidding system works, check out our full rundown here. You can also read about the latest COE ruling here.


Car Loan Restrictions


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Are you feeling the squeeze of the 50% or 60% LTV yet?


MAS didn’t just restrict car buyers with its loan measures, it wrapped itself around the necks of car buyers like a boa constrictor to make you think twice about buying.

It worked well on middle-class buyers, but again, buying  a car is still possible if you’re willing to choose a different brand/model.

Here’s the quick and simple version of the new car loan restrictions:

  • All car loan tenures are capped at 5 years
  • If your vehicle’s Open Market Value (OMV) is $20,000 or less:
    • Your maximum Loan-to-Value (LTV) is 60% of the purchase price (including taxes, fees, COE)
    • Your Additional Registration Fee (ARF) is still equal to 100% of your vehicle’s OMV
  • If your vehicle’s Open Market Value (OMV) is more than $20,000:
    • Your maximum Loan-to-Value (LTV) is 50% of the purchase price (including taxes, fees, COE)
    • Your Additional Registration Fee (ARF) is tiered to this formula: [100% for first $20,000], [140% on the next $30,000], and [180% on anything above $50,000]


Interest Rate


Banks have already started moving their interest rates into the avenue of 2% – 3%.


The MAS restrictions also kicked the banks in the crotch (metaphorically speaking) by reducing loan tenures from 10 years to 5 years, causing them to lose up to half of their profit from loan interest.

This caused many banks to raise their interest rates to nearly 3%, which means you’ll have to search hard for a good rate.


Open Market Value (OMV)


Yes, shipping and handling is included in the OMV.


The OMV is the value of the vehicle as determined by Singapore Customs. It includes the manufacturer’s suggested retail price, freight cost, insurance, and any additional costs.

You can visit’s OMV page to get an idea of what your future vehicle’s price is.



Additional Registration Fee (ARF)


The ARF is kind of like buying one car for the price of two!


The ARF is a tax on the OMV of your vehicle. Before the MAS loan restrictions, it used to be a 100% tax on all Class A vehicles.

Now the tax gets progressively higher depending on the value of your vehicle, ranging from 100% to 180% on the value of your vehicle.

Here’s a chart to illustrate the rate:

Cost of Vehicle (Class A) ARF Tax Rate
First $20,000 100%
Next $30,000 140%
Above $50,000 180%

So if your vehicle’s OMV is $60,000, your ARF would be: 100% of the fist $20,000 ($20,000) + 140% of the next $30,000 ($42,000) + 180% of the remaining $10,000 ($18,000) = leading to an ARF of $80,000


Vehicle Excise Duty


Look, it’s our excise duty dollars at work!


The Vehicle Excise Duty is just another tax the government collects to use on road-related projects like maintenance, flyovers, etc. Currently, the tax rate is 20% of your vehicle’s OMV.


Goods and Services Tax (GST)


Wouldn’t it be nice if one of these popped up at the duty free mall?


Good thing you didn’t expect your new car purchase to be a GST-free. Oh wait. Unless a car dealership happens to spring up at Changi Airport so you can get GST relief, you’ll be taxed GST (7%) on the combined value of your OMV + Excise Duty.


Your Dealer’s Gross Profit


What? You thought the car salesman wouldn’t get his cut too?


Men have gone to war because they felt they were paying TOO MUCH taxes on things such as tea. But up to this point, you’ve already paid SO MUCH tax on your car that your shell-shocked response is probably “what else can they tax me on?”

The good news is that there are no more taxes to pay!

The bad news is that you still need to pay the car dealer’s gross profit cost. This includes commissions for salesmen, overhead costs, warranties, options, etc.

This can be a bit of a wild card depending on the car dealer, but expect to pay around $20,000.


I Give You… Your New Car Loan


If you choose your car and loan interest rate carefully, you can still buy a decent new car.


Now that you know every cost factor that goes into your new car loan, it’s time to see just how much you can expect to pay.

For the purpose of this article, we’ll be “buying” a Volkswagen Polo 1.2AT because it’s a sporty looking car we wouldn’t be too embarrassed to drive.

Here’s the total cost of the vehicle:

Car Loan Factor Cost
COE (Certificate of Entitlement) $73,100 (July 2013)
OMV (Open Market Value) $17,308
ARF (Additional Registration Fee) $7,308 ($17,308 – $10,000 CEVS* Rebate)
Excise Duty $3,462 (20% OMV)
GST (Goods and Services Tax) $1,454 (7% OMV + Excise Duty)
Gross Profit $20,000 (Estimate)
Total Cost $122, 632

*Note: Land Transport Authority (LTA) offers a rebate of $5,000 – $20,000 when you purchase a new vehicle with carbon emissions below 160g per kilometer (CO2/km2). But you’ll still need to pay at least $5,000 ARF. 

Click here to see vehicles under the Carbon Emissions-Based Vehicle Scheme (CEVS).

Car registration data taken from


Loan Repayments

Now that you know the cost, it’s time to see what your loan repayments will look like.

Select a car loan provider with a low interest rate to service your loan. If you’re lucky, you can find an interest rate as low as 1.88%.

Because the OMV of the Volkswagen Polo 1.2AT is $20,000 or less, the maximum Loan-to-Value you can get is 60%, meaning you’ll have to pay a down payment of about $49,052.80.

So you’ll need a loan car loan on the remaining $73,579.20

Let’s calculate now:

Loan Amount = $73,579.20

Interest = 1.88%

Loan Tenure = 5 years


Total Interest = ($73,579.20 X 1.88%) X 5 years = $6,916.45

Total Payable Amount = $73,579.20 + $6,916.45 = $80,495.65

Monthly Repayment = $80,495.65 / 60 months = $1,341.60 per month


Still Looking to Buy a New Car?


Don’t let your new sense of “entitlement” get to your head now!


In the past, you could buy a new car with little or no down payment during the days of the 90% LTV. Now, if you want to buy a decent new car, you’ll have to save around $50,000 just for the down payment alone. 

If $50,000 is still a steep amount for a new car, you should think about buying a used car with a few years of COE remaining as a cost-effective alternative. We’ll be coming out with another article on buying a used car shortly so follow us on Facebook and stay tuned.


Do you think that MAS will ease up on car loan restrictions anytime soon? Share your thoughts with us here.

Image Credits:
Funny Driving, gumption, richpicsnz, RoySmithsgrazynageissler99, Brad Briles, Sandy!, Maharepa, linkedmediagrp,

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.

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