Is It Better To Renew My COE Or Buy A New Car?

Stuck between renewing your COE or buying a new car? Let us help you look at the pros and cons of both to assist you with concluding which is the better choice! Firstly, let us give you a heads up on what COE is about.

What Is COE And How Does It Works?

In Singapore, before a vehicle can be driven, vehicle owners first need to bid for a COE for their vehicle. This COE then permits the vehicle to be driven in Singapore for 10 years.

Towards the end of their 10 years COE period, vehicle owners may decide to de-register their vehicles or extend their COE(s) for an additional 5 or 10 years. However, if the owners chose to extend their COE, they need not bid for a new COE. Instead, they pay the Prevailing Quota Premium (PQP).

This PQP is dictated by using the moving average of the COE prices over the most recent 6 bids (about 3-months). For instance, if the average COE prices over the most recent 3 months were SGD 40,000, SGD 35,000, and SGD 32,000 then the PQP would be an estimate of SGD 35667.

However, do take note that if you would like to renew your COE is on a 5 years basis, you will be unable to extend your COE for the second time towards the end of the 5 years COE period.

Pros Of Renewing COE

1. Lesser Depreciation

Vehicle depreciation is the lost estimation of vehicles over time. The lower the depreciation, the better it is for you as a vehicle owner. By renewing your COE, you will enjoy lesser depreciation! Vehicle depreciation can be fairly difficult to explain, therefore we have assembled the following table to assist you better.

2. Lower Upfront Cost

For COE renewal, the greater part of your expense would be paying for the Prevailing Quota Premium (PQP). The PQP varies monthly depending on the COE prices in the bidding exercises conducted over the most recent three months.

3. 100% Loans From Finance Companies

Most, if not all, finance companies in Singapore would permit loan tenures for as long as seven years for COE renewal.

In any case, the financing rate for a COE renewal loan can be 100%. This is unlike the vehicle financing rules of buying another vehicle; where only a limit of 70% of the loan is permitted.

Cons Of COE Renewal

1. Higher Maintenance Cost

After all, a vehicle is still a machine, and it will encounter mileage and wear and tear throughout the years. By extending the lifespan of the vehicle, more effort must be made to continue its life span.

Besides, some parts of the vehicle might be obsolete, which may increase the expense of vehicle maintenance.

2. Higher Road Tax

When you renew your COE, you will have to pay more for road tax.

Road tax goes up by 10% every year after 10 years of vehicular life. This continues until it reaches a surcharge of 50% of the road tax.

3. Forfeited COE And PARF Rebate

COE and PARF rebates are forfeited when you renew your COE.

Pros Of Buying A New Car

1. Zero To Low Maintenance

By buying a new vehicle, you’d have more assurance concerning the dependability of the vehicle.

Moreover, you’ll be able to enjoy advantages like exclusive discounts on vehicular maintenance and warranty coverage for servicing.

However, like numerous things, the dependability and functionality of the product is a hit-and-miss circumstance. There have been recalls for brand new vehicles because of breakdowns brought about by factory productions.

2. COE/PARF Rebates + Body Value

COE and PARF rebates are forfeited when you renew your COE.

By buying a new vehicle, you’d be able to receive rebates to help offset the purchase of a new vehicle.

3. The Satisfaction Of Driving A New Car

There is nothing more invigorating than driving a brand new car and taking in the smell of new leather seats.

4. Lower Road Tax

Road tax for new vehicles will be lower compared to a COE vehicle. As mentioned, the road tax goes up by 10% every year after 10 years of vehicular life. This will continue until it reaches a surcharge of 50% of the road tax.

Cons Of Buying A New Car

1. 60-70% Bank Loan

As indicated by the car financing regulations in Singapore, you are only entitled to a limit of 70% loan of the vehicle’s buying cost.

The loan is subjected to the vehicle’s Open Market Value (OMV). Here’s a table to showcase the car financing structure for buying a new vehicle.

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(Credit: POSB)

2. Higher Cost

The expense of purchasing a new vehicle compared to renewing your COE is higher. Not only do you have to go through the entire COE bidding process, but you will also have to pay for the body value of the vehicle and the loan interest rate that comes with the purchase.

3. Time Consuming And Tedious

Buying a new vehicle is a lot of hard work. Besides comparing a large group of choices, you would still have to plan out your Budget, consult your loan provider, sell your previous vehicle, and find time to test drive your new vehicle. There is also a waiting period for your new vehicle to arrive, which could take up one to three months.

4. Higher Depreciation

The annual depreciation for a new vehicle is a lot higher than a COE vehicle. As a vehicle owner, you would want the depreciation to be as low as possible.

For a better picture, let us compare the differences between purchasing a new Toyota Corolla Altis 1.6 Standard (A) and having its COE renewed on a 10 years basis.

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