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Renewing Your COE After 10 Years – Should You Even Bother? – MoneySmart.sg

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Renewing Your COE After 10 Years – Should You Even Bother?

CAR OWNERSHIPJanuary 27, 2015
renew COE singapore

Singapore is probably the only country in the world where cars are so expensive that owning a Toyota Altis can be considered a luxury. We’re the only people insane enough to spend almost as much on a vehicle as we would on an HDB unit. If that wasn’t bad enough, your car will be de-registered after 10 years unless you pay to renew your COE. Even cats and dogs live longer than cars in Singapore!

But, there’s no use complaining. This is the law in Singapore and there’s no loophole to get around it. So what are your options once your car has been around for 10 years? Here are 3 things you can do.

1. Scrap the car and buy a new one
I suspect this would be the option most of you would choose. Once you have experienced the sheer convenience of having your own means of transport, it’s very difficult to be convinced to give it all up and subject yourself to the risks of public transport.

A car becomes less of a convenience and more of a necessity for several types of people. These include families with small children, those who work in out-of-the-way locations like Jurong Island or other industrial estates, those who work till late or are on the night shift.

Yes, for these, even with the still ridiculous COE prices might not put them off getting a brand new car. Just be prepared to set aside at least $160,000.

You’ll have to set aside about $80,000 as a down payment, but take a loan for the remaining amount. Assuming you get the best car loan with an interest rate of 1.88%. That still comes up to a repayment of almost $1,400 a month over 5 years.

And that’s not including all the other costs you’ll incur through the years like maintenance, insurance and road tax, to name a few.

2. Rent or Lease a car
If you’ve been wondering if it’s better to lease or buy a car in Singapore, it boils down to four questions you should ask yourself.

Do you need the car urgently and can’t afford the down payment?
Are you not planning to stay in Singapore for long?
Do you intend to stop driving in a few years?
Do you want to indulge in a luxury model?
If you answered yes to any of these questions, then when you de-register your 10-year-old car, consider renting or leasing a car in its place. Renting or leasing a mid-sized sedan would set you back by $1600 to $1800 a month. This is mainly because the cost includes insurance, road tax and even full vehicle maintenance.

3. Pay the Prevailing Quota Premium and renew COE
Right now, there are two options available if you want to keep your current car and pay the Prevailing Quota Premium to renew your COE.

You can either pay 50% of the Prevailing Quota Premium and renew your COE for 5 years, or 100% of the Prevailing Quota Premium and renew it for 10 years.

Using figures from the recently-closed exercise in January 2016, the Prevailing Quota Premium is $51,301 for Category A and a little less than $50,100 for Category B.

That means, if you only need your car for 5 years, this could set you back by almost $26,000 for Category A, or a little more than $25,000 for Category B.

If you need your car for 10 more years, you’ll have to pay $51,301 for Category A and a little more than $50,000 for Category B.

Since you’re just renewing your COE and not actually buying a new car, you won’t be eligible for a car loan. Instead, one option you have is taking a personal loan.

How much you can loan depends on your income. While you can technically loan up to 4 times your monthly salary, the exact amount would be dependent on whether you have any other credit facilities (like credit cards) with the bank.

In other words, unless you’re earning over $10,000 a month, you can forget about taking out a big enough personal loan to pay off the full Prevailing Quota Premium. (And if you’re earning that much, then you probably don’t even need to take out a loan at all!)

But keeping your car for 5 years? Now that’s within reach…
Say you want to keep your Category A car for 5 years and your monthly income is $5,000. You need to pay slightly less than $26,000, or 50% of the Prevailing Quota Premium. The bank allows you to loan up to $20,000 over 5 years. That means you’ll need about $6,000 in cash and then pay as little as $700 per month over the next 5 years.

The immediate savings of this choice is obvious. Your monthly repayment amount is half that of a car loan for a new car, and the down payment is a fraction of it. It’s also much cheaper than renting or leasing a car, and you’ll get to keep driving a familiar set of wheels.

Of course, this is assuming that you’ve been diligent in maintaining your car over the past 10 years. If you’ve been slacking off on your oil changes or your regular car servicing routine, then the chances of your car surviving for another 10 years are slim. Even if you find the best interest rates using a personal loan comparison tool, all your savings will probably end up paying off your repair bill.

On the flip side, it’s also important to note that if you have kept your car in tip top shape and only renewed your COE for 5 years, no manner of begging or weeping is going to get LTA to allow you to renew your COE again at the end of 5 years just because you decided not to renew it for 10 years. On the other hand, should you renew it for 10 years, you will be allowed to renew it again (should you wish) after those 10 years are up. Weird? Yes. But too bad.

Are you planning to buy a new car once it hits the 10-year-mark or renewing your COE? Share your thoughts with us.

Image Credits:
Peter Dunne

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Peter Lin
Peter Lin
I am the poster boy for reinventing one’s self. I’ve been a broadcast journalist, a technical writer, a banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you’ll ever meet, which is why I’m also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.

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