What Is COE and How Does It Work in Singapore?

If you’re considering buying a car in Singapore, you’ve likely encountered the term Certificate of Entitlement (COE). But what exactly is COE, and how does it impact your car ownership journey? This comprehensive guide demystifies COE, explaining its purpose, how it works, and its significance in Singapore’s unique automotive landscape.

Table of Contents

1. Introduction to COE
2. The Purpose of COE
3. COE Categories
4. How COE Bidding Works
5. Historical COE Price Trends
6. Factors Influencing COE Prices
7. COE Renewal and Its Implications
8. Expert Opinions on COE
9. Conclusion
10. Frequently Asked Questions

Introduction to COE

The Certificate of Entitlement (COE) is a license in Singapore that grants the holder the right to own and use a vehicle on public roads for a period of 10 years. Introduced in 1990 by the Land Transport Authority (LTA), the COE system was designed to control the vehicle population and manage road congestion in the city-state.

The Purpose of COE

Singapore is a small island nation with limited land resources. To prevent excessive traffic congestion and environmental degradation, the government implements strict measures to regulate the number of vehicles on the road. The COE system serves two primary purposes:

1. Controlling Vehicle Growth: By limiting the number of COEs issued, the government effectively caps the number of new vehicles that can be registered.
2. Managing Road Usage: The high cost of obtaining a COE encourages people to consider alternative modes of transportation, promoting public transit and reducing reliance on private vehicles.

COE Categories

COEs are divided into five categories based on vehicle type and engine capacity:

• Category A: Cars with engine capacity up to 1,600cc and maximum power output not exceeding 97kW.
• Category B: Cars with engine capacity above 1,600cc or maximum power output exceeding 97kW.
• Category C: Goods vehicles and buses.
• Category D: Motorcycles.
• Category E (Open Category): Can be used for any vehicle type except motorcycles but is usually used for high-end cars.

Source: Land Transport Authority

How COE Bidding Works

The COE is obtained through a competitive bidding process conducted twice a month. Here’s how it works:

1. Submission of Bids: Interested buyers submit their bids through a participating bank or financial institution.
2. Bidding Exercise: The bidding opens on the first and third Monday of each month and lasts for three working days.
3. Determination of Quota Premium (QP): The QP is the lowest successful bid price. All successful bidders pay the same QP, regardless of their individual bid amounts above this price.
4. Allocation of COEs: COEs are allocated to the highest bidders until the quota for that exercise is filled.

Example: If 1,000 COEs are available and 1,500 bids are submitted, the top 1,000 highest bids secure a COE.

Historical COE Price Trends

COE prices are known for their volatility. For instance:

• In 2013, COE prices for Category B reached an all-time high of over S\$90,000.
• During the COVID-19 pandemic in 2020, COE prices dropped significantly due to reduced demand.
• As of October 2023, COE prices have rebounded, with Category A and B prices hovering around S\$70,000 to S\$80,000.

Case Study: According to a report by The Straits Times, the surge in COE prices in 2023 is attributed to a strong post-pandemic economic recovery and increased demand for private vehicles.

Factors Influencing COE Prices

Several factors contribute to the fluctuation of COE prices:

1. Economic Conditions: A robust economy boosts consumer confidence, leading to higher demand for cars and, consequently, higher COE prices.
2. Vehicle Quota: The number of COEs released affects supply. A reduced quota typically drives up prices.
3. Regulatory Changes: Policy adjustments by the LTA can impact COE availability and categorisation.
4. Seasonal Demand: Periods like the Chinese New Year often see increased demand for new cars.

COE Renewal and Its Implications

At the end of the 10-year COE period, vehicle owners have two options:

1. Deregister the Vehicle: The car is scrapped or exported.
2. Renew the COE: Pay the Prevailing Quota Premium (PQP) to extend the COE by either 5 or 10 years.

Important Note: Vehicles that renew their COE for 5 years cannot renew again and must be deregistered after the extension.

Expert Opinions on COE

Dr. Walter Theseira, an economist at the Singapore University of Social Sciences, notes:

“The COE system is effective in controlling vehicle population but can be a double-edged sword. While it curbs congestion, it also makes car ownership exceedingly expensive, impacting the middle class the most.”

Conclusion

The COE is a critical component of Singapore’s transportation policy, balancing the need for personal mobility with the constraints of limited land and a desire for efficient public transport. Understanding how the COE works is essential for anyone considering vehicle ownership in Singapore.

Frequently Asked Questions

Q1: Can I transfer my COE to another person or vehicle?

A1: No, the COE is tied to the specific vehicle and cannot be transferred between individuals or vehicles.

Q2: What happens if I fail to secure a COE after bidding?

A2: You can participate in the next bidding exercise. Your bid deposit will be refunded if unsuccessful.

Q3: Is there a way to predict COE prices?

A3: While trends can be analysed, COE prices are influenced by various unpredictable factors, making precise predictions challenging.

Q4: How does COE affect car loan eligibility?

A4: The total car price, including the COE, impacts the loan amount and eligibility, as there are regulations on maximum loan-to-value ratios.

Q5: Are there exemptions to the COE requirement?

A5: Certain vehicles, like diplomatic cars and vintage vehicles under the Classic Vehicle Scheme, have different regulations.

For more detailed guides and the latest COE updates, visit coeprice.sg.

References

• Land Transport Authority (LTA). Certificate of Entitlement.
• The Straits Times. “COE prices hit record highs in 2023 amid strong demand.”
• Singapore University of Social Sciences. Dr. Walter Theseira’s research on transportation economics.

Disclaimer: This article is for informational purposes only and should not be considered financial or legal advice. Always consult with a professional for personalised guidance.