Get the Best Car Insurance in Singapore
The price of a COE should be a major consideration for any prospective car-owner, as there are times when it's possible to pay more for the COE than for your car. As a result, it's helpful to have a general idea of what people are paying for them, especially as you consider what reserve price you'll need to pay to succeed in the bidding process. It's also just as important to understand what drives changes in COE prices. In the following guide, we compare the average price of COEs in 2019 with prices from past years, and outline the primary factors that determine the cost of COEs.
Average Cost of COE
The following graph shows how the average COE price has changed over time from 2009 to the present day. As of December 2019, the average cost of COEs was S$27,853. This reflects a slight decline from 2018, which had an annual average cost of S$28,246.
COE Renewal Loans
|Reasons to use the Motorist:|
|Reasons to use the Motorist:
While the average cost of a COE has come down in the past few years, it can still be quite a significant payment. If you require financing for your COE renewal, we recommend using the Motorist's website. This site uses your car's information (Vehicle Number, Deregistration Date, etc.) to obtain the cheapest COE renewal interest rate available. They even guarantee the lowest rate possible—in the case that you find a better rate they will give you S$50. They also organise free pre-COE car inspections. For these reasons, it's worth considering applying for a COE renewal loan through Motorist if you require financing for this expense.
Factors affecting COE prices
COE premiums are affected by changes in the supply and demand of COEs. Granted, it's not easy to predict with a high degree of certainty what will happen to COE prices in the future, as they fluctuate from month to month. However, having an awareness of the main factors that tend to affect COE premiums will help you to spot trends and make well-timed, smart decisions.
One of the biggest factors affecting COE prices is the supply of COEs available. The LTA regulates the number of cars on the road in Singapore, and when the LTA increases vehicle quotas, the supply of COEs increases and this applies a downward pressure on their price. Of the various factors that influence the vehicle quota, one of the most important things for you to pay attention to is the number of vehicle deregistrations. This number is highly variable and, even better, can be predicted based on publicly available data.
Currently, we are seeing a very high number of vehicles being deregistered, which is the main reason the vehicle quota has been relatively high through 2016 and 2017. This is because of extremely low COE prices in 2006 to 2008 which led to very high car sales in those years. As the COEs for those cars are now expiring after 10 years, a glut of COEs have become available and the LTA has increased the vehicle quota in response.*
The table below displays the number of new cars aged less than 1 year from 2006 to 2019, demonstrating the high car sales from 2006 to 2008 compared to following years. Though some owners of these cars chose to renew their COEs on these 10-year-old vehicles, the vast majority did not, resulting in higher car deregistration. In response to a rise in car deregistration, the LTA has increased COE quotas to control the population of cars. In tandem, there is a large drop in COE premiums and new cars in 2018 after the LTA enforced a zero percent growth rate policy in order to control the motor vehicle population.
Table B: Number of New Cars in Singapore by Year
|Year||# of Cars Aged 0 - <1|
|*As of September 30th|
Demand for COEs among consumers also plays a significant factor into the prices of COEs. Higher demand drives up COE premiums, whereas lower demand drives them down. There are a number of factors that influence demand that you should pay attention to.
Generally speaking, when the economy isn't doing well, demand tends to be lower. This is because for COEs to be in demand, people need to be buying cars. During bad economic times, fewer people do. Singapore is currently experiencing a slowdown in economic growth, and the value of the Singapore dollar has fallen. With a weaker dollar in Singapore, imported cars become less affordable, which would tend to have a negative effect on car sales -- and demand for COEs.
Interest rates play a role in this regard as well. Due to high car prices, the majority of Singaporeans take out car loans to buy their vehicles. When interest rates are high, people are disincentivized to take out loans, which has a negative effect on car sales and demand for COEs. At present, interest rates in Singapore are still quite low. However, they are expected to increase in the coming months, which, combined with a slowing Singapore economy and uncertainty about global economic conditions, may depress car sales and COE demand.
Our findings suggest that demand for COEs is indeed relatively low at present, tracking with the slowdown of Singapore's GDP growth over the last four years. In Category A (small cars), for example, the ratio of number of bids to COEs available have declined significantly since its peak in 2013, when the number of bids doubled the number of COEs actually available. Meanwhile, in 2017, there have thus far been only 30% more bids in Category A than allocated COEs. This suggests that demand for COEs relative to their supply has been in decline since 2013.
Table C: Ratio of Demand to Supply of COEs
|Year||COE Quota||Bids||Ratio of Bids to Quota|
Another factor that can affect demand for COEs is the passage of new government regulations, such as emission standards. For example, Singapore has implemented more stringent and extensive emission standards under the new Vehicular Emissions Scheme (VES) that will take effect in 2018. These regulations, which will impose tax surcharges on more models and disqualify more from tax rebates than previously, will apply upward pressure on overall car prices. Higher car prices tend to have a negative effect on car sales and COE demand. We saw this happen in 2018 as COE premiums dropped throughout the year as buyers waited to see how much further premiums would decline.
At the same time, other government regulations may play minor roles in COE prices. For instance, in 2018, the LTA reduced the vehicle growth rate to zero. This meant that the number of new cars allowed on the roads has to match the number of cars that were deregistered that year. However, because the COE quota is determined by deregistrations, it was predicted not to have a large effect on COE quotas. Indeed, we saw only a slight increase in the COE bids to quotia in 2018 compared to 2017 and a drop in the COE premium.
If you're thinking about buying a car within the next year or two, it would be a good idea to keep an eye on how consumers, car dealerships and automakers react, and to find out if the models you're interested in will be affected.
- In 2016, roughly 27% of cars turning 10 years old had their COEs renewed; as of February, 2017, about 32% have. This reflects a huge increase in the number of people who are choosing to renew COEs rather than deregister their cars as they turn 10 years old.