As the population grew amid land constraints, traffic congestion became a major concern for the Singapore government. In 1990, the Certificate of Entitlement (COE) system was enacted to limit the number of vehicles in Singapore.

For first time car owners, the COE bidding system can be overwhelming. In this article, we will give you a crash course how COE works.

What is a Certificate of Entitlement (COE)?

COE is a certificate that gives you the right to register, own and use a vehicle in Singapore for a period of 10 years. When it expires, you can either choose to scrap your vehicle or to renew your COE for another 5 or 10 years.

The number of available COEs is decided by the Government every six months. As there is a quota limit for each category of vehicles dictated by the Land Transport Authority, before buying a new vehicle, you are required to submit your bid for a COE against other buyers in the same category.

You will need to have a COE for these five categories of vehicles.

Category A – Cars with engine capacity of 1600 CC and below

Category B – Cars with engine capacity exceeding 1601 CC and above

Category C – Goods vehicles and buses

Category D – Motorcycles

Category E – This is an “open category” COE, which can be used for all of the above

The COE Open Bidding System

Each vehicle category has a separate bidding exercise which happens twice per month. As of January 2017, the final price of a COE for Categories A and B are around $50,000. You can check the most recent bidding results on Car Club’s Facebook page.

Here’s how the bidding system works:

Bidders would submit their reserve price, which is the amount they are willing to pay for their COE. The system will automatically raise the current price of COE by $1. If the current price of COE exceeds a bid, the bidder is out of the running. The current COE price will keep going until the number of bidders are equal to the amount of available COEs. The bidding then ends with the final COE price being the amount that the winning bidders will pay.

Let’s take the Category A for example. Assuming at the time of bidding, there are 5 potential car owners wanting to secure COEs but there are only 3 available.

Reserve price Successful bidder COE price to be paid
Bidder 1 – $78,000 Yes $55,901
Bidder 2 – $69,000 Yes $55,901
Bidder 3 –  $56,000 Yes $55,901
Bidder 4 – $55,900 No $0
Bidder 5 – $53,000 No $0

Note: During the bidding process, you cannot withdraw your bid. Nor can you revise your reserve price downwards. You can only revise it upwards.

How Do You Bid?

  1. Doing your own COE bidding:

To do your own bidding, you would need to have one of the following bank accounts: Citibank, OCBC, POSB/DBS, UOB (for companies).

For DBS/POSB account holders, you can submit your bids at the ATM machines. For the rest, you would have to contact the bank for more details.

For Category D (Motorcycles), bidders will need to place a deposit of $200 as a prerequisite. For all other categories, the minimum amount is $10,000.

  1. Leaving the hard work to car dealerships:

If you find the entire bidding process too confusing, a much simpler way is to let the car dealerships take care of it.

The first option is getting a car with a ready COE. In this case, the dealer will use a Category E for your vehicle’s COE. Since the Category E is open for all vehicles, dealers often have a handful of ready COEs in this category for urgent needs. The cons of this option is COE price comes with Category E is not always the most profitable.

Scenario:

Your car belongs in category A which the COE price is $50,000. You take a Category E that costs $70,000 because you need it urgently.

When you scrap the car 5 years later, you will get the rebate of $25,000, not the $35,000 from Category E.

Another way is to leave your money with the car dealers and they will help you to submit several bids until they secure a COE for you. However, you won’t be able to determine the final bid price since the dealer’s end goal is to successfully get you a COE at all costs.

The last option is to let your car dealer know how much you are willing to pay for your COE. The dealer will then take their time to bid on your behalf until they secure a COE within your price range. Obviously, the lower your reserve price, the longer it takes for you to get your COE.

The COE Rebate and Extension

After 10 years, you do not have to bid again for your car’s COE. You simply re-validate your COE by paying the Prevailing Quota Premium (three-month moving average of the Quota Premium for the respective category).

This situation is a common dilemma for many car owners. They have two choices: either scrap their car or continue to pay for a COE extension that could sometimes cost more than the market value of their car.

Since a COE typically lasts for ten years, if you decide to de-register your vehicle early, you can apply for a rebate of your COE.

Exceptions and Criticisms of COEs

In rare cases, some car owners managed to profit from the sale of their cars due to the fluctuation of COE price.

Scenario:

Xiao Ming bought a Toyota for $90,000 when the COE price was $40,000. After one year of driving, COE prices shot up to $60,000. The one-year-old Toyota went for $150,000 due to tax increment. Xiao Ming then managed to fetch a profit from his car in the resale market.

Despite the COE’s system to reduce car numbers in Singapore, many people argue that the scheme fails in making Singapore a car-lite country. The logic is simple. Since car owners paid so much for their car, they would try to utilise it as much as possible. Once drivers decide to drive more, which means more cars on our roads, which ironically, is the issue that COE was meant to solve.

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By | 2017-07-04T01:35:31+00:00 March 14th, 2017|0 Comments

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