Real Cost To Own The World’s Most Expensive Toyota Prius

Owning and driving a car is a part of many people’s daily lives. But what does it really cost you financially to own one, and use it on a daily basis? Car buyers often do not think much more beyond what they have to pay upfront to make the decision. In most countries, this might not really set you back by much financially, but not in Singapore where I stay.

In this post, I am going to talk about what it means to own some of the world’s most expensive cars. And I am not referring to flashy sports cars like Ferraris, Porsches, or the Bugatti Veyron. What I am going to talk about are simple down to earth family cars, except that if you live in Singapore, they sell for heavenly prices.

Toyota Prius 1.8 — An Astounding SGD 141,988 (approx. USD 103,640)

What Accounts For This Out Of The World Price Tag?

In Singapore, where Government controls the car population, you need to bid for a Certificate of Entitlement (COE) which is limited in supply. The COE entitles you to own a car for 10 years. After it expires, you will have to bid for a new one if you still want to continue owning a car. This COE makes up a hefty chunk of the total price of the Toyota Prius. It fluctuates at each bidding exercise depending on the supply and demand, and currently costs SGD 32,001. But it can potentially dent your pocket a lot more. At its peak, a single COE can go for more than SGD 90,000.

The other major component is the Additional Registration Fee (ARF) which is priced based on the OMV multiplied by a factor. This factor is tiered according to the OMV of the vehicle with the minimum factor being 1. As the OMV goes higher, the factor is adjusted up. For Prius, the ARF is SGD 35,411.

Other pricing components include the goods and services tax, excise duty, and of course not forgetting the dealer’s margin. The diagram below sums it all up.

So Does That Mean That Very Few People Own Cars In Singapore?

Well, you could not have been more wrong. Despite sky high prices, many people still went ahead to buy a car. As at August 2018, we have more than half million private cars (550,000) on the road excluding taxis, buses, goods & commercial vehicles and motorcycles (from Land Transport Authority). This, matching up against 1.3 million resident households (from Department of Statistics Singapore), translates to one car for about every 2.4 households.

I must say the car market in Singapore takes the idea of irrational exuberance to the next level. Irrational exuberance is a term coined by ex-Federal Reserve Chairman Alan Greenspan to describe the over valuation of the market during the dot com bubble. But whether the valuations are fed on hype or hot air, at least the dot com stocks did appreciate before it crashes. Cars in Singapore is an entirely different animal. It is basically a depreciating utility product that will be worth only a small fraction of its purchase price at the end of 10 years.

What is the nominal cost to own and drive a car in Singapore for 10 years?

Under current car loan rules, for a Toyota Prius, a buyer would have to foot a down payment SGD 56,795, 40% of the car’s purchase price. The remaining 60% can be financed through a loan with a bank which is to be paid back through monthly instalments over a maximum tenure of 7 years. The current car loan effective interest rate charges works out to be around 5.186% (based on flat rate of 2.78% charge by local banks). This means a monthly instalment of SGD 1,212 which you would have to diligently settle for 7 years.

2. Road Tax and Auto Insurance

In addition to these, there are also numerous running expenses that collectively add up to a sizeable amount as well. There is an annual road tax of SGD 976 and an estimated annual auto insurance of about SGD 1,200. The latter is mandated by law. And trust me, you would want to have an insurance. Just a simple change of rear bumper due to an accident can rack up charges in excess of SGD 2,000 here.

3. Petrol, Parking and Maintenance

Then you got to pay for petrol, parking, routine maintenance and repair. All these can vary significantly between individuals. As an estimate, on a per month basis, it might be about SGD 200 for petrol (Prius guzzles only half the fuel of typical cars), SGD 300 for parking charges, and SGD 100 for maintenance. This should be a fairly conservative estimate. With rising costs, we can expect these expenses to go up further in the future.

4. De-registration of the car after 10 years

At the end of the 10 years, you can de-register your car and get back 50% of its ARF value. The ARF value of the Prius is SGD 35,411 so you will be able to receive back SGD 17,706.

In a nutshell, we can distill down to 4 different cash flows over the 10 years. The first is the upfront down payment of SGD 56,795. The second is a monthly expense of SGD 1,993 during the first 7 years where you have to service the outstanding car loan in addition to the operating costs. The third is a monthly expense of SGD 781 during the last 3 years on operating costs alone. And the final is the SGD 17,706 that you will get back from de-registering the car.

If you add up all the costs you will incur over a 10 year period, this would come up to SGD 234,617 (USD 171,258). For an average salaried person, this is a fairly significant sum of money. The table below shows a breakdown of the costs. But note that I have spread out the annual road tax, insurance and maintenance over 12 months for easier reference and calculation later.

Is that all there is to cost? We are almost there but not quite yet.

What is the true cost?

So if you had chosen to take public transport instead of buying a car, how different would your situation be 10 years later? Let’s assume you set aside the same amount of money as if you are buying the Toyota Prius, but all you spend is SGD 300 on public transport each month.

In this scenario, you will save on the down payment of SGD 56,795. And you will have SGD 1,693 remaining each month in the first 7 years. Even during the last 3 years where car loan instalments are no longer applicable, you will still save SGD 481 each month. But of course, you would not get back any deregistration value at the end of the 10-year period since you do not own a car. The total nominal savings you would have over 10 years had you not purchased the Prius is SGD 198,617.

These are substantial savings which you could have put to work. If you had invested these savings each month at a 5% compound annual growth rate (CAGR), it would have grown to SGD 289,254. With a higher CAGR, this amount increases steadily. But you can kiss those money goodbye if you bought a car.

Difference in cash level after 10 years between a car owner and one who takes public transport at different CAGR

Word of Advice

I am a victim of impulse buying when I first joined the workforce. Swinging single with no other commitments then, I bought a car. That was 17 years ago, and I am still driving one. I often think to myself how nice would it be if I can go back in time, and instead of buying a car, invest the money in stocks or properties. If I had done that, by now, I would be sitting on an additional pile of cash or assets that is enough to buy me a small apartment.

But my needs are different with a family now. Between me and my wife, we use the car for work and to ferry our kids to schools and different places. And spreading the use of the car over 4 persons does makes the expense more justifiable. Of course, strictly speaking, can we do without a car? Yes, definitely. There are many others with bigger families that rely solely on public transport to go about their daily lives.

Ultimately, the decision will depend on many factors that differ from family to family, or individual to individual. For some, the numbers may work out, or perhaps they are rich enough to not be bothered by a few hundred thousand dollars. For others, their primary consideration may not be an economic one. Money is not always the sole determining factor. However, if you ask me whether I would buy a car again if you take me back 17 years ago.

The answer is clear. NOT A CHANCE.

Originally published at on October 16, 2018.

Finance | Investments | Writing | Blog