The cost of buying a BMW or Mercedes in Singapore is approaching the annual income of the average local family, thanks to a luxury car tax.

The right to buy a “open category” vehicle, which may be put toward any vehicle type but commonly ends up being used for larger cars in the densely populated island, brought in 125 bids at the city-most state’s recent bimonthly auction for as much as S$116,020 ($87,000).

That implies the price of a 10-year ownership permit, which excludes the purchase of the vehicle, is equal to 92% of the median yearly household income in the country.

The most recent statistics are in spite of the government raising the additional registration fees for vehicles costing more than S$40,000, a move that is anticipated to generate an additional S$200 million in the upcoming budget year while negatively impacting the top third of newly registered vehicles by market value.

With Singapore’s status as one of the first Asian financial hubs to effectively recover from the Covid-19 pandemic, fresh wealth began to pour in from countries like Hong Kong, mainland China, and India, among others. This led to the government imposing a higher tax. The most recent round of bidding, though, demonstrates that the higher tax isn’t having much of an influence.

There will always be people in this city of 5.6 million who want to own a private vehicle — or maybe more than one — and can afford to pay for it, according to Song Seng Wun, an economist at CIMB Private Banking. This is true despite a widely praised public transit system in which a bus or subway ride can cost less than S$1.

The expensive ownership rights are the result of a quota system that restricts the number of vehicles allowed on the country’s roads through the twice-monthly bidding procedure, helping to manage congestion and pollution. If your bid is accepted, your brand-new Mercedes-Benz will be ready for the road.

Luxury models benefited the most when the overall permit allotment was cut by 14% and premiums shot up to a then-record high in November of last year, with Mercedes automobiles overtaking Toyota models as the top auto brand registered. In recent months, a Mercedes-Benz or a BMW accounted for one out of every four registered vehicles.

A growing preference for electric and hybrid cars, which have accounted for more than half of new purchases so far this year, has also contributed to price increases. Depending on the car’s characteristics and the permit cost, buying a car like a Tesla Model 3 Performance in Singapore might easily cost more than $200,000.

The supply of 10-year entitlements is anticipated to steady after a recent change made by the government’s Land Transport Authority, which is good news for Singaporeans who merely need a regular car to commute to work or a weekend movie.

Costs are still rising, though, for the time being. The following auction will be held on April 5 if you urgently require a vehicle.

(Adapted from Live.Mint.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized