Budget 2013: Motoring Implications
Major regulatory changes are set to affect the motoring industry after Finance Minister Tharman Shanmugaratnam outlined key changes to the tax structure for the Additional Registration Fee (“ARF”) for cars and to the conditions for car loans in the Budget for 2013. New ARF Structure The new tiered ARF structure will see high end cars paying higher taxes, as ARF rates become pegged to tiers in the cars’ Open Market Value (“OMV”). This is a marked change from the current flat rate of 100% of OMV, regardless of the OMV quantum. As outlined in the table below, there is no change to the tax on vehicles with an OMV of up to $20,000. Cars that fall in this category include the Ford Focus ($13,682) and the Mitsubishi Lancer ($16,615). On the next $30,000 (i.e. OMV of up to $50,000), the ARF rate is now 140% of the incremental OMV of $30,000. Cars in this bracket include the BMW 320i ($39,486) and the Toyota Alphard ($43,782). For the remaining OMV above $50,000 (i.e cars with an OMV greater than $50,000), the ARF rate becomes 180%. Luxury and performance cars such as the Lexus GS350 ($66,239) and the Ferrari 458 Italia ($325,203) make up the cars in this segment.
OMV
ARF Tax Rate
Example
OMV
Current ARF Payable
New ARF Payable
Percentage Increase in ARF
First $20,000 of OMV
100% of OMV
Ford Focus
$13,682
$13,682
$13,682
0%
Next $30,000 of OMV
140% of incremental OMV
BMW 320i
$39,486
$39,486
$47,280
$20,000 (100% of first $20,000) + $27,280 (140% of remaining $19,486)
19.7%
Remaining OMV above $50,000
180% of incremental OMV
Ferrari 458 Italia
$325,203
$325,203
$557,365
$20,000 (100% of first $20,000) + $42,000 (140% of next $30,000) + $495,365 (180% of remaining $275,203)
71.4%
The new rules will come into effect after the first Certificate of Entitlement (“COE”) bidding exercise in March.
New Car Loans Regulations
With effect from 26 February 2013, loans will be capped at 60 percent of the purchase price of motor vehicles for OMVs up to $20,000.
For vehicles with OMVs greater than $20,000 the loans will be limited to 50 percent of the purchase price.
The tenure for the loans is now capped at 5 years. These are marked changes from the prior availability of 100 percent loans for a loan period of up to ten years.
Both these new policy measures will likely result in a reduced demand for cars and a corresponding deflationary effect on COE prices, as the government seeks to curb runaway car prices and encourage prudent spending without an over-reliance on bank financing.
We have upgraded our car loan calculators to comply with the new restrictions by the Monetary Authority of Singapore.
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