Basics of Certificate of Entitlement (COE) Explained

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In Singapore, hitting the road in your new car is a more complicated matter than just buying it, registering it and getting it insured. First, you'll also need a COE, or Certificate of Entitlement. But what is a COE and how can you get one? Read on to find out.

What is a COE?

COE stands for Certificate of Entitlement. It entitles you to the right to register, own and use a vehicle in Singapore for the duration of 10 years. Before you buy a car, you'll need to obtain a COE first. This is no easy matter, as there is only a limited number of COEs to go around. Why?

Due to its small size (700 square kilometers) and high urban density, Singapore regulates the number of vehicles crowding its roadways so that traffic congestion does not reach an untenable level. In 1990, Singapore instituted the Vehicle Quota System (VQS) to address this issue. The VQS imposes a quota on the maximum number of vehicles that can be used in Singapore at any given time, and is enforced through the controlled distribution of a limited supply of COEs. A COE is only good for 10 years; after that, you'll have to either pay to renew it for another 5 or 10 years to keep using your car, or deregister and scrap your car.

Having to get a COE to register and own a car further achieves the goal of reducing car ownership in Singapore by making the cost of owning a car much greater. Because the demand for COEs greatly outweighs the supply, it is very expensive to buy or renew a COE: the average cost of a COE for Category A vehicles (cars up to 1600 cc & 97kW) in 2016 was S$49,587, and the price has been known to rise all the way to S$100,000 in the past. The COE premium is cheapest for small cars up to 1600 cc & 97kW and more expensive for big cars that exceed 1600 cc & 97kW.

Generally, if the LTA reduces the quota of COEs available, the overall price of COEs will increase. Other factors can also increase consumer demand and the price of COEs. For example, changes in exhaust emission standards could cause a surge of interest in buying compliant vehicles among consumers anxious to avoid paying a penalty. This increased demand could also drive up COE prices.

How to get a COE

You can get a COE by bidding in auctions administered by the LTA that are held bi-weekly throughout the year on the first and third Monday of every month. Depending on the vehicle you are buying, you will bid within one of five categories, depending on the size of your car. Often, owners of big cars will try to get their COE by bidding in Category E, where COE premiums tend to run cheaper than in Category B.

Category ASmall cars (up to 1600 cc & 97kW)
Category BBig cars (exceeding 1600 cc & 97kW)
Category CBuses and goods vehicles
Category DMotorcycles
Category EOpen for any kind of vehicle.

How COE Bidding Works

Bidders submit bids by naming a reserve price that is the maximum they are willing to pay for the COE. That amount is immediately deducted from their bank account. If there are not sufficient funds to cover the reserve price, the bid will be rejected. Over the course of the three-day bidding process, the Current COE Price (CCP) will increase by S$1 at a time until the number of bidders whose reserve prices match or exceed the CCP equals the number of COEs available in that bidding exercise. The Quota Premium (QP), which is the price that all successful bidders in that category will have to pay for their COE, will be whatever the CCP was when the bidding ended.

As you can see, the price you'll pay for your COE if you bid successfully will not necessarily be as much as the reserve price you set. If the QP ends up being less than your reserve price, you will be credited back the difference. If, however, the CCP rises above the reserve price you have set, you will be notified that you have been outbid. You may revise your bid upward to put yourself back in the running for a COE.

Where You Can Submit Your Bid

There are two ways to go about the bidding process. You can either bid yourself in the Open Bidding System or designate your car dealer to do it for you. As a private individual, you may only submit bids through DBS/POSB at an ATM, meaning you'll have to have an account with DBS/POSB. Though perhaps something of a hassle, your direct involvement will ensure that you are comfortable with the reserve price and possibly expedite the process of getting a COE in the same month if you bid successfully. Bidders are charged an administration fee each time they submit a bid or revise their reserve price.

If you don't want to engage in the Open Bidding System yourself, you can opt to have your car dealer bid for you, and pay the resulting QP to the dealer together with your car purchase. You can direct your dealer to do this in one of two ways:

  1. You can elect to receive a guaranteed COE in 6 weeks' time. If you choose this option, you run the risk of ending up having to pay a high QP, as dealers often bid aggressively to ensure they successfully win a COE. However, you're at least sure to get a COE in a relatively short timeframe.

  2. You can elect to receive a COE in 3 months' time. Your bidder will repeatedly submit bids over several bidding exercises at a reserve price you name until you (hopefully) win. While this option does ensure you won't be surprised with a higher QP than you're comfortable with, you do face the risk that the reserve price you set won't be high enough to win a COE at all. Such an outcome could set you back several months before you're able to buy your car and begin driving.

How to renew your COE

After 10 years, your COE will expire. When this happens, you can either deregister your vehicle or renew your COE by paying the Prevailing Quota Premium (PQP), which is the moving average of COE prices (QPs) in the preceding 3 months. The PQP will, accordingly, vary from month to month. Fortunately, though, you won't have to go through the bidding process again just to renew your COE. You may renew your COE for either another 10 years or another 5 years (in which case you would pay only half the PQP). Note that if you choose to renew it for just 5 more years, you won't be able to renew the COE again after that and will have to scrap it. If you renew it for another 10 years, you will be able to renew the COE again. If you choose to deregister your vehicle instead of renewing your COE, you may be eligible for a COE and/or PARF rebate.

Consider this if you require a COE renewal loan

If you need financing to pay for your COE renewal, we recommend using the Motorist. The platform finds consumers the best COE renewal interest rates available. This can be very helpful as lenders do not always publish their COE loan rates online. The Motorist site asks for your car's information (Vehicle Number, Deregistration Date, etc.) and then gives you what they describe as the guaranteed lowest rate from one of Singapore's top lenders (e.g. Maybank, HFL, UOB. If you find a better rate elsewhere, the Motorist will give you S$50. Furthermore, they will set up a complimentary, pre-COE car inspection. We recommend that you use the Motorist to compare COE renewal loans before you apply for financing.

Mary Leah Milnes

Junior Research Analyst

Comments and Questions

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