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Why are cars so expensive in Singapore?

In Singapore, cars are always, and have always been classified as a luxury good, simply because it is just too costly to own. Despite Singaporean’s high spending power, an average Singapore is barely able to afford a car.

If you are wondering why cars are so costly in Singapore, we will break it down for you in this article.

So what are the factors which make up the price of a car?

  • Open Market Value (OMV)
  • Certificate of Entitlement (COE)
  • Additional Registration Fee (ARF)
  • Excise Duty and GST
  • Dealer’s Margin


1. Open Market Value

OMV is basically the original price of a car that is what most, if not all, the people in other countries are actually paying for.

Here’s an example: The current OMV of a new BMW M Series M4 Coupe is $74,914. In most European countries such as Germany, you would probably just have to pay that amount to drive away the continental gem.

However, in Singapore, it is currently priced at a whopping $395,800! Let’s delve deeper into the costs.



2. Certificate of Entitlement (COE)

Almost everyone on the streets of Singapore would know about COE. This is essential to allow your car to be driven on the roads of Singapore for a decade. The prices of this COE is based on the simple logic of demand and supply, as prices can rise steeply when demand is high, resulting in prices of cars to rise.

There are various categories of COE. As for cars, only the category A, B and E would be relevant to refer to. The current prices of COE fluctuates between $45,000 to $55,000.


3. Additional Registration Fee (ARF)

All cars in Singapore would be subjected to this registration fee. During the registration of your car, the ARF, which is a form of tax, would actually be imposed.

The Additional Registration Fee is based on the following calculations obtained from the LTA website:

Vehicle OMV ARF Payable (in %)
First $20,000 100% of OMV
Next $30,000

(Eg Value falls between $20,001 to $50,000)

140% of OMV
Above $50,000 180% of OMV


For example, a BMW M Series M4 Coupe that has an OMV of $74,914 will incur the following ARF.

Series M4 ARF Payable
First $20,000 $                                                 20,000.00
Next $30,000 $                                                 42,000.00
Next$ 24,914 $                                                 44,845.20
Total $                                               106,845.20


4. Excise Duty and GST

Excise Duty is yet again, another type of tax imposed on certain goods in the country. There are four main categories of dutiable goods in Singapore, namely intoxicating liquors, tobacco products, motor vehicles as well as petroleum products and biodiesel blends. Since cars actually fall into one of the four categories, we would have to pay this fee for our car purchase as well.

The Excise Duty on cars in Singapore is exactly 20% of the OMV. On top of that, another 7% of the GST will be taxed on both the amount for the Excise Duty and OMV.

Using the same BMW M Series M4 Coupe having OMV of $74,914 as an example, there will be an excise duty of $14,983 (20% of $74,914) and a GST of $6,292 (7% of $74,914 + $14,983).

5. Dealers’ Margin

In addition to those four factors of cost above, there is also the dealers’ margin. Being in the car trade with such high capital cost, those dealers would also need to take a profit to cover their own expenses through selling you the car. This is then called “dealers’ margin”. It could be as low as 15% for affordable brand of cars or as high as 50% or more for luxury cars.

To calculate this dealers’ margin, we add up the OMV, COE, ARF, Excise Duty and GST, which is referred to by some dealers as “basic cost”. After which, we are able to compare the actual sales price against this basic cost and you will be able to get the difference in cost, known as the dealers’ margin.

With the latest COE price of category B being $53,300, the BMW M Series M4 Coupe currently has a basic cost of $256,334, which gives us a calculation of 54.41% dealers’ margin!

So, this is how an affordable $74,914 BMW dream become a costly $395,800 dream in Singapore.


OMV $    74,914.00
COE (Cat B) $ 53,300.00
ARF $  106,845.20
Excise Duty and GST $ 21,275.58
Dealers’ Margin (54.41%) $  139,465.22
Price You Pay For The BMW Dream in Singapore $  395,800.00


Since we are paying much more for a car in Singapore as compared to the rest of the world, we should now start working harder to fuel our dreams to drive in that lovely BMW Coupe someday, on the roads of this sunny island.

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