Singapore is one of the most expensive countries in which to own a car. See for yourself, in Deutsche Bank’s price of goods survey in 2015. Next to your house, your car is probably going to be the second most expensive thing you ever buy. So before you go ahead and commit, make sure you have at least a general understanding of the Certificate of Entitlement (COE).
What is COE?
The Certificate of Entitlement (COE) allows you to register, own, and use a private vehicle in Singapore for a period of 10 years. The cost of a COE must be paid on top of the car’s cost (the Open Market Value), and any relevant taxes (such as the registration fees).
COEs are divided into different categories, but for car owners the relevant categories are:
|Cars up to 1,600 cc in engine capacity. Your regular family car.|
|Cars above 1,600 cc in engine capacity. This is most often a high powered sports car, or a larger vehicle.|
|Also called “open COEs”. These COEs can be used for any type of vehicle.|
As there are only a limited number of COEs to go around at any time, motorists must bid for the right to have one. Those who bid sufficiently high (in the appropriate category) will get a COE, while those who bid too low can try again next time.
The bidding process starts every first and third Monday of the month, and you can either do it yourself at an ATM, or get your car dealer to do it for you. If you are in a hurry, you can also buy a vehicle that has been registered with an open COE, and drive it off the lot right away (but that means you won’t have a shot at getting a cheaper COE, via the bidding process).
The price of the COE is is always the highest unsuccessful bid, plus one dollar. For more details on the process, check the Land Transport Authority (LTA) website.
As of the October 1st round bidding exercise (5th October 2016), Category A COEs cost around S$51,500. Category B COEs cost around S$53,000, and open COEs cost S$54,200.
COE prices will fluctuate based on the number of available COEs, and on how much buyers are willing to spend. As such, no one can accurately predict the prices of COEs; we can only make calculated guesses, and spot general trends.
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The Current State of the COE
First, some good news for car buyers: COE prices today have fallen significantly, since their peak in 2013. If you look at old news reports from three years ago, you will see COE prices at the time had a jaw dropping range of between S$77,000 to over S$80,000. You dodged a bullet there.
Now on to the bad news: COE prices today are much higher, compared to the start of the year.
This was due to a rush for COEs in April. At the time, COE prices were in the range of S$46,000 to S$49,000. However, it was announced that companies such as Uber and Grab were intending to expand their fleets. Also, it was reported that Uber had grabbed 800 COEs.
This caused many people to rush and bid aggressively for COEs, as they were worried that Grab and Uber vehicles would gobble up all the COEs and drive up bids.
Overall however, COEs are still more affordable in 2016 than they have been in previous years.
But Will COE Prices Drop Even More If I Wait?
In the short run (within the span of a few months, or until the end of the year), this is almost impossible to predict. There are too many factors that could impact COE prices, to guarantee an accurate forecast.
However, between September to the present, we can see that COE prices have remained within the range of S$46,000 to S$52,000. Notably, the prices for Category A COEs were at a four month low in September, and have not moved much since.
Given that Singapore is in a weak economic situation, with two-thirds of the economy in recession, buying a car will not be a priority for many people right now. This means weaker demand, and fewer bids.
Car dealers interviewed by local news media have also mentioned that many vehicles on the road today are nearing the 10-year mark. As vehicle COEs expire, or are voluntarily deregistered before reaching their full 10 years, there will be more COEs available. This increased supply will probably prevent prices from getting too high.
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Another potential source of COE reductions involves car loans. Some motorists have been using a loophole in the laws regarding private hire cars, to obtain loans they can’t usually get. If the government takes action to plug this loophole, it is likely that we’ll see fewer car buyers, and lower COE prices.
So overall, the answer is probably yes. But take our forecast, along with anybody else’s, with a big dose of salt. There are no guarantees.
In the much longer term (such as within the next decade), there is also a good chance that COE prices will trend downward. This is on the basis that an abundance of car sharing and private hire services (such as Uber) could reduce the need to buy your own car. Also, there are more MRT stations and buses becoming available each year. Efficient public transport means less need for private transport.
So Should I Buy Now or Wait?
Here’s the ultimate secret to timing your car purchase:
The right time to buy is determined by your financial situation, not by the COE prices. It is unlikely that you can “time” the COE market with any real success; that’s a matter of luck. But while you can’t control that, you can ensure you buy a car only when you are ready.
What does That Ready Mean?
As a rule of thumb, do not purchase a car unless you have sufficient savings to make loan repayments for at least three months. This buys you time in case something goes wrong, such as (touch wood) you lose your job. When you have these savings, then it is the best time to buy a car.
In addition, don’t forget to factor in other costs besides the COE.
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