Considering getting a company car? Maybe you need a commercial vehicle?

It’s a known fact that Singapore is the most expensive place to buy an automobile. Even an annual survey conducted by Germany’s Deutsche Bank has reaffirmed it. This makes things very tricky when trying to buy a business vehicle for your company.

Your business maybe getting busy by ramping up production and orders are increasing. Or things are finally a little stable and you’re looking for something to make things easier on your employees. Or it could just be the tax benefits.

Being in Singapore, things can get complicated really quickly when getting a car, even if it’s for personal use. Read on for a comprehensive rundown of what you should consider and evaluate before getting a business vehicle.

 

Owning a business vehicle in Singapore has alot of consderations
Source: http://www.comfort-transportation.com.sg/different-expressways-in-singapore/

Driving Licenses

We need to cover the bare basics first. In the rare occasion your employee does not own a license, it now costs around $2000 for a drivers license. You can read more about that here.

If you have employees who are foreigners or expats, their licenses should be checked to see if they are eligible in Singapore. For employees that have recently become permanent residents, they need to check for their licensing eligibility details too.

Source: https://enterprise.os1.com.sg/food-business-license-permit-guide-registration-singapore/

Any details on licenses and if your employees need to convert to a Singaporean driving license can be checked here.

 

Actual Usage vs Cost

How much do you foresee your business using the car? Having a clear-headed and realistic evaluation of the frequency of usage will go a long way. Business vehicles are one of the prime ways SME’s rattle their cash-flow. This can cause major issues with meeting supplier demands and payroll later.

Is it for business or personal use? Would the overall monthly cost justify the actual usage of the car?

Cost is an easy thing to overlook when making a purchase like this. Keep in mind that this should be a calculated investment. The best thing to do is sit down with your accountant or a partner you trust in and make an honest forecast of how much this will cost you on a monthly basis compared to how much the business makes

The cost of owning a business vehicle ramps up quickly and might outweigh the benefits


Generally, there are 5 things that need to be considered as part of the cost of buying a new car in Singapore:

 

  1. Open Market Value (OMV)

The OMV price is the price of a car without any fees, taxes or margins. This is basically around the price other countries are paying.  

 

  1. Additional Registration Fee (ARF)

Singapore uses a progressive vehicle tax system and utilizes a tier-based structure for its rates.

Vehicle OMVARF Rate
First $20,000 of the OMV100% of OMV
Next $30,000 of the OMV (i.e. $20,001 to $50,000)140% of Incremental OMV
Remaining OMV Above $50,000180% of Incremental OMV

Source: https://www.lta.gov.sg/apps/news/page.aspx?c=2&id=abe37346-e5b5-4d01-8dae-9a5d9810657b

 

  1. Excise Duty & GST

Excise duties are taxes imposed on specific goods only. Some examples of goods that have an excise duty imposed on them in Singapore are alcohol, cigarettes, petrol & cars.

According to the Land Transport Authority Singapore’s website, excise duties consist of 20% from the OMV of your vehicle.

This means if the OMV of your vehicle is $15,000, the Excise duty imposed on your car would be: 20% X $15,000 = $3000

 

  1. Certificate of Entitlement (COE)

The Certificate of Entitlement is a license that allows you to hold the vehicle for up to 10 years. Since the rates of a COE depends on the demand, the cost of a COE can exceed even the car itself at times.

The prices are decided using a open bid uniform price auction.

More details from the LTA can be found here.

 

  1. Local Dealer’s Margin

And when you purchase the vehicle from a dealer, they get their cut from the purchase too. The margin includes their costs like overheads and profits for the dealership.

This is what is described by the Local Dealers Margin.

The rates range from 15% for basic cars and can go upwards of 50% for higher end cars.

 

Continuous Costs

After the purchase, there are a few more considerations when it comes to cost. These are essential aspects that are easy to forget about when thinking about buying a vehicle. But these upkeep costs can easily end up exceeding the initial purchase cost and will place a much higher burden on your budget in the long run.

 

  1. Road Tax

If this is your first time purchasing a vehicle, road taxes are compulsory for all vehicles according to the LTA.

Different tax structure rates apply depending on the type of fuel your car runs on.

 

Petrol or petrol-compressed natural gas (petrol-cng) cars

Engine Capacity (EC) in cc6-Monthly Road Tax Formula

(From 1 August 2016)

EC < 600S$200 x 0.782
600  < EC < 1,000[S$200 + S$0.125(EC – 600)] x 0.782
1,000 < EC < 1,600 [S$250 + S$0.375(EC – 1,000)] x 0.782
1,600 < EC < 3,000[S$475 + S$0.75(EC – 1,600)] x 0.782
EC > 3,000[S$1,525 + S$1(EC – 3000)] x 0.782

 

Compressed Natural Gas (cng) or Diesel Cars

Engine Capacity (EC) in cc6-Monthly Road Tax Formula

(From 1 July 2008)

EC < 600S$200 x 0.782
600  < EC < 1,000[S$200 + S$0.125(EC – 600)] x 0.782
1,000 < EC < 1,600 [S$250 + S$0.375(EC – 1,000)] x 0.782
1,600 < EC < 3,000[S$475 + S$0.75(EC – 1,600)] x 0.782
EC > 3,000[S$1,525 + S$1(EC – 3000)] x 0.782

 

Example

If a car’s engine capacity is 1,600cc, the Road Tax is as follows:

Road Tax= [S$250 + S$0.375 (1,600 – 1,000)] x 0.782
= [S$250 + S$0.375 (600)] x 0.782
= [S$250 + S$225] x 0.782
= S$475 x 0.782
=S$372

Source: https://www.lta.gov.sg/content/ltaweb/en/roads-and-motoring/owning-a-vehicle/costs-of-owning-a-vehicle/tax-structure-for-cars.html

 

  1. Motor Insurance

There are many providers available when looking for motor insurances. The amount you pay will greatly depend on the rates offered by the insurers themselves.

Based on this in-depth coverage on the 11 cheapest car insurance rates Moneysmart’s, rates range from $600 – $1200.

Rates differ as per your risk profile according to each insurer.

 

  1. Parking Cost

After the public car park fees raised on December 1 2016, private car park fees now have a range of 1-2.50$ an hour.

And if you will be bringing back the car to your home or allow your employees to do so, parking will cost you about $110 a month for HDB block parkings.

 

  1. Petrol

Petrol would cost you around $240 and anywhere and additional 20-40$ for ERP charges. This would depend on how far and how often you would use the car.

Plus, some businesses decide to transfer the cost onto their customers, clients or employees as it may be worth it for them. Review your margins and costings with your accountant to see if you could save on this.

 

  1. Maintenance

Rates differ according to your workshops. You could review a few workshops before choosing one as prices may vary by a big margin. In the case of larger costs, inquire further to see if the cost is justifiable.

An estimate for how much maintenance can cost you is about $1000 a year. If you use the car a lot more than usual, this number can easily go up and you should add that into your cost estimations in forecasts.

 

  1. Interest Costs

The rates at which you borrow is dependent on your cars OMW, not the price that includes all the extra charges.

If you’re serious on getting a loan, you should take a look at the Total Debt Servicing Ratio (TDSR) and how it affects your loan rates. This can give you a better overview on how financially prepared you need to be when applying for the loan.

Here are a couple of rates.

BanksInterest Rates (5 Yr Tenure)
Standard Chartered Bank2.68%
Citibank2.78%
DBS 2.78%
UOB 2.78%
OCBC2.78%

 

Lease vs Buy

Source: https://enagent.com/first-time/know-how/2/

Leasing is generally cheaper in the short term requiring 0% down payment. It may have slightly higher monthly instalments compared to purchasing depending on your leaser. Purchasing a car in Singapore requires 30%-50% down payment of the OMV price which is a pretty large sum for most people.

An attractive reason for most business owners to consider getting a car would be the tax advantages. Is there a major differences in your savings from tax advantages between leasing and buying?

Here’s an in-depth look at specifically what is taxed and what isn’t from this site from the Inland Revenue Authority Board of Singapore.

Another thing to consider if you want to lease or buy is how long are you looking to own the vehicle.

Would you be keeping the car for a while or are you looking to be able to change the model every few years or so ?

 

Trust

Are you intending to purchase this business vehicle for your own use or will your employees be using it most of the time?

Do you trust them? If you have employees that you are not sure about, making sure you have strict systems in place can help avoid unexpected expenses that you won’t find out about until your accountant gives you a call.

 

Status/prestige

 

Leasing is another option to consider if purchasing isn't viable.

Source: https://www.carsandcoffee.com.sg/leasing-fleet-pricing?gclid=Cj0KCQiAxNnfBRDwARIsAJlH29Bc1S6oYu4OtJkJViXPaxn7fCTPxIe1pjqtyqcBVdpDWGBVtRcvxrgaAlK_EALw_wcB

 

If you’re looking to drive a luxury car while staying cost-efficient, it definitely pays to lease. In the past, you rarely saw luxury rentals in Singapore. Times are different now. Even Daimler Motors has jumped on the wagon.

An additional benefit is you get to change your car model pretty often too.

 

Fuel Economy

Are you purchasing a heavy duty vehicle? Or just a sedan? Or is it an SUV?

You should definitely take your vehicle’s individual fuel consumption into consideration too. Besides being able to reduce your carbon footprint, it can also reduce your overall expenses too.

Here is a list of 5 Fuel Efficient Cars You Can Find In Singapore.

Car PriceAnnual Fuel Cost

MERCEDES BENZ E300 BT HYBRID SEDAN

$282,888$967.60

TOYOTA PRIUS CVT

$128,988$1536.00

PEUGEOT 208 1.6 E-HDI ALLURE

$124,900$896.80
CITROEN DS5 2.0
$196,988$1459.20
BMW 320D ED$282,888$896.80

Source: https://carro.sg/blog/fuel-efficient-inefficent-cars-singapore/

Look out for deals & rebates

Purchasing a business vehicle is a major decision. Putting some thought into the timing of your purchase can help you lighten the cost of a business vehicle.

Look out for seasonal discounts, deals and rebates. Different dealerships have varying discounts and rebates available. Doing your research into different dealerships and future announcements for rebates can help save a lot of money.

 

Conclusion

Getting a business vehicle can be a significant financial investment that also requires a good deal of time in order to go through with. To avoid unnecessary costs that may hurt your company’s cash flow, it’s important to have a good grasp on the potential costs of the vehicle, and fully weigh that against the effective revenue that having the vehicle will bring in. If the investment is justifiable based on the ROI after considering all the factors, then it is safe to proceed.

If you need a quick injection of cash into your business in order to fund necessary investments such as a business vehicle without falling  behind on your overhead costs, consider applying for a lighting quick loan with FS Bolt.

FS Bolt is a product of Funding Societies Pte Ltd. Submitting an application is quick and easy. You can get an approval decision with 2 hours and receive your loan of up to $50,000 within 24 hours!

 

 


Sources  

 

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