Does it make financial sense to renew my COE?

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While the idea of a brand-new ride would appeal to most, the increasing costs of car prices as well as taxes and surcharges means that renewing a COE might make more economical sense.

Introduction

All good things come to an end, or does it? When it comes to owning a car in Singapore, it would seem so, especially when the Certificate of Entitlement (COE) approaches its expiration. While the idea of a brand-new ride would appeal to most, the increasing costs of car prices as well as taxes and surcharges means that renewing a COE might make more economical sense. Car owners would then be faced with the question, should renew COE or not har? Here are some things to note when weighing up your options.

How It Works

Good things come to those who wait, and in the context of car ownership in Singapore it comes in the form of bidding for COEs. Successful bidders are entitled to own a car for 10 years, after which they have the option of deregistering or extending it. Opting to extend their COE for another 10 years grants them the privilege of not having to go through the bidding process all over again, by simply paying for the Prevailing Quota Premium (PQP) instead. This can be calculated using the average of COE prices in the most recent 3 months. For instance, if the average COE prices of the past 3 months were $50,000, $45,000 and $43,000, the PQP would therefore be $46,000.   

Difference On Your Wallet: Getting A New Car vs. Renewing Your COE

For the uninitiated, renewing your COE would seem like the most cost-effective solution. Which, to be fair, is mostly true. But possessing a car in the most expensive city to live in is no one-way street and hence, it is still worth analysing from different angles. To put things into perspective, let us take into consideration the following example.

Buying A New Car

Toyota Altis (Registered 2009)
Estimated PARF Rebate (end of COE) when car is deregistered: $9,500

Assuming a Toyota Altis owner fully utilises his 10-year COE prior to deregistration with no body value left on the car (no extra money upon deregistering), the PARF rebate he can expect is about $9,500. Taking into account present-day prices, a new Toyota Altis costs $93,000. We can get the depreciation across 10 years by subtracting the PARF rebate. In this case, the depreciation on your Toyota Altis would be about $83,500.

Renewing Your COE

As of November 2019, renewing your COE based on the PQP would cost $32,416. While this is substantially cheaper than purchasing a new Toyota Altis, there are additional costs to take note of. One of it being the additional road taxes you’ll end up paying for. COE-renewed cars face incremental road tax at 10% every year and are capped at a maximum of 50%. This means that the money you have saved from sticking to the same set of wheels could be eroded by the costs of keeping them on the roads.

Another possible money pit is the higher cost of maintenance and repair. Older cars tend to require more maintenance and incur heftier repair fees. Depending on the condition of your car, be prepared to pay about $20,000 or more throughout the next 10 years.

This brings us to our next point, the decrease in fuel efficiency. Older and worn out engines consume more fuel, leading you to more frequent stops at gas stations and driving up your petrol expenditure as a result. Most Singaporeans drive an average of 150,000km within a timeframe of 10 years and on paper, a litre of petrol gets you 15.7km. This equates to approximately 9,554 litres of petrol needed for that period. An engine that has already been heavily utilised may experience a 20% blip in fuel efficiency, consuming an additional 1,911 litres as a consequence. Visits to your insurance agent will also be more costly due to the 10-20% increase in premiums for ageing cars. A table of all the hidden costs to be aware of has been compiled below.

 

New Car 

Renewed COE 

Cost

$93,000 

 

PARF Rebate

$9,500

 

COE PQP Rate (As of Nov 2019)

 

$32,416

Additional Road Tax

 

$2,232 

Servicing Opportunity Cost 

 

$3,726 

Additional Petrol Cost 

 

$3,822 

Estimated Additional Repair & Maintenance Cost (Over 10 years)

 

$20,000 

Estimated Final Cost

$83,500 

$62,196 

Is It Worth It?

Doing the math with the figures shown, the total difference between purchasing a new car and renewing your COE is roughly $21,304. This sum may vary depending on how much you potentially have to fork out for maintenance. The condition and mileage of the car would thus, be crucial in justifying your decision.

If Japanese or Korean brands such as Toyota, Hyundai or Mitsubishi are your kind of ride, you’ll be paying for a COE that is 50% of the price of the car. Bearing in mind the several hidden costs mentioned above, it is fair to say that paying more for a new car would probably save you money and time over the long run.

On the other hand, upscale brands like Audi, Mercedes and BMW may seem more viable for a COE extension since a COE for one could represent about 25% of the total car price. However, these cars often come with higher road taxes due to their larger engines that require more fuel and lengthier bills from the repair shop because of the restricted access to the premium components.

Summary

At the end of the day, or end of your COE in retrospect, it hinges on the condition of your car. If it is already draining your finances at the mechanic’s, there is a high probability that it will continue to do so after extending your COE. It is inevitable that repairing a used car would cost more, especially if spare parts are no longer available locally and have to be brought in. All of these bits and fixes could add up unknowingly. In which case, our advice would be to go for a renewal only for cars that are still in good working conditions. You will be paying lower upfront costs, receive advantageous interest rates for a car loan, and can be assured with warranties. They say that too much of a good thing could be a bad thing, but we say that the more good things the better – especially when it comes to deciding whether or not you should renew your COE. 

Verdict

What we like
- Luxurious feel
- Large telematics touchscreen
- Extremely spacious
What we do not like
- Lack of automatic boot for auto close
- Drive shaft even though it is a front wheel drive
Editor’s recommendation
The Toyota Camry has successfully done a full model change that is significantly sportier and aesthetically better looking compared to its predecessor. It does not feel you are getting a second class car as compared to equivalent continental class cars, yet the cost savings are substantial.

Specifications

Toyota-camry-gear-knob.jpg
A car that negates risk

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