What do Expats need to know before buying a car in Singapore?

Singapore’s public transport is known to be highly convenient and effective among locals as well as expats. However, some expats may still be considering in getting a car for practical reasons such as sending their kids to school. It is crucial for expats to understand that the process of purchasing a car and owning a car in Singapore is different from that of their native countries. This article helps expats gain a deeper insight into the legal steps for purchasing a car and the obligations of owning a car in Singapore.

Can Expats legally own a car in Singapore?

In Singapore, expats need not be a citizen or a permanent resident to purchase a car. Expats will, however, still need a valid Employment Pass, S Pass, Dependant’s Pass or Student’s pass to buy and register a car with the Land Transport Authority (LTA). This is to prove an expats legal status in the country.

In Singapore, Expats also need to possess a valid Singapore Driving Licence to drive their cars. Expats will need to obtain this licence within 6 months from the date of issue of their work passes. Expats can obtain this licence by training at any driving centres in Singapore or converting a valid foreign driving licence to Singapore driving licence. The criteria and more in-depth information on the Singapore driving licence is provided publicly by the Singapore Polic Force (SPF).

Understanding the COE and how it affects the purchase of cars

The Certificate of Entitlement (COE) was established on 1 May 1990 in efforts to control vehicle population growth in Singapore. It is the core legal requirement when purchasing a car in Singapore. To put it simply, the COE is what gives someone the legal right to own and use a vehicle in Singapore. The way of obtaining a COE is the same for both Expats and Singaporeans. Buyers will have to bid for a COE during an open bidding exercise and submit their reserve price which hopefully falls under the available quota.

In the case where a buyer fails to obtain a COE after bidding, and depending on the terms agreed with the car dealer, may face contractual risk such as increased contractual costs. Hence, it is advised that contracts made with dealers beforehand are reasonable enough to account for a possibility of a COE bid fail.

When a COE expires after 10 years, the respective car must be deregistered or the COE renewed; otherwise, continued use of the car is unlawful. Because of this, cars with short remaining COE often faces issues in resale value. This is a disadvantage to Expats who often face uncertain lengths of stay and own such a vehicle as it is not easy to sell it to other buyers.

Costs when purchasing a car

Aside from COE, there are mandatory legal and financial obligations that plays a significant role in the price of a car and additional fees. Here are the legal and financial obligations:

1. Open Market Value (OMV): It is the price paid when a vehicle is imported into Singapore and is used as a baseline to calculate taxes and fees.
2. Additional Registration Fee (ARF): It is the tax paid when registering a vehicle and is calculate as a graduated percentage of the car’s OMV. This means that the higher the OMV, the higher the ARF.
3. Excise Duty: It is the indirect tax levied on specific goods such as cars. The tax is typically paid by the manufacturer or importer who then passes the cost on to the buyer. The tax amount is usually ~20% of the OMV.
4. Goods & services tax (GST): On top of the OMV and Excise Duty costs, the GST is another 9% tax adding on to the total and final price.
5. Road tax: It is a recurring tax that car owners must pay to the government which is calculated based on the car’s engine capacity or power rating and other factors such as the car’s age and the type of fuel it uses.
6. Electronic Road Pricing (ERP): It is a congestion management system that charges cars for using busy roads during peak hours.
7. Mandatory insurance: It is a type of coverage that individuals, including Expats, are legally required to have to drive a car.
8. Transfer fee: It is a government-mandated additional charge for legally changing vehicle ownership. In Singapore the transfer fee is fixed at $25 SGD.

New vs Used cars: Legal and Practical differences

When purchasing a car in Singapore, expats may consider whether to buy a new or used car. Each of them comes with distinct legal and practical implications.

- New Cars: It is usually purchased from authorised dealer. It comes with a full COE validity, factory warranty and documentation from the dealer, which reduces legal and compliance risks. However, there are practical downsides to this such as a higher price tag and experiencing significant depreciation within a year of its purchase.
- Used Cars: In contrast, used cars’ price is dependent on factors like the car’s age, mileage and condition. It often costs lower than a new car while still being functional and in a relatively good condition. Nevertheless, it often comes with shorter remaining COE, existing loan, or encumbrances. Hence, Expats must ensure that the car has clear ownership with no outstanding debts in order not to fall victim to such implications.

Traffic and Vehicle regulations

Expats must know that Singapore enforces strict traffic and vehicle regulations and that non-compliance with such regulations would incur a penalty.

Singapore uses the Driver Improvement Points System (DIPS), a demerit point system, to administer penalties. When licence holders commit a traffic offence, they will gain 3 to 12 demerit points depending on the severity of the offence. If the licence holder accumulates demerit points which exceeds the threshold, his/her licence will be revoked.

Furthermore, ERP violations also carry fines, with failure to settle charges can affect future vehicle registration. For Expats looking to potentially sell or relocate a car, ensure that the car follows LTA regulations, with proper deregistration or transfer of ownership. Failure to adhere to these regulations can result in disputes with buyers and authorities. It is also important to note that leaving Singapore with unpaid fines, or penalties can create major legal and financial complications.

Awareness of such regulations and obligations ensures that expats remain legally compliant. Minimising potential legal disputes when it comes to these matters.

Conclusion

Ultimately, buying a car in Singapore is more complex that it seems as it comes with multiple legal obligations that needs to be fulfilled. Expats cannot afford to turn a blind eye to even the smallest details when it comes to the purchase of a car. Therefore, by understanding the various obligations and making sure to understand the legal differences between types of cars, can expats be assured a smooth and satisfactory experience while buying their car.

Disclaimer: This article provides general information and does not constitute legal advice. Please seek professional advice for your specific situation.

Do reach out to us at Legal Expat if you require professional advice. We have a team of qualified lawyers that can assist you. Email us at: info@legalexpat.sg or drop us a WhatsApp at: +65 8093 4393 if you require assistance.