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Certificate of Entitlement 2014 Updates- DirectAsia Insurance

If you own a car in Singapore – or wish to own one – your heart beat may quicken when you hear the terms ‘Certificate of Entitlement’ or ‘COE’ in the news. Most recently the LTA has been looking into ways to make the COE system more efficient and fairer. Here’s a run-down:

Cat A Engine Power 97kW or Less - New Criteria

The headline change is that engine power will be a new criterion for COE categorisation, from February next year. Cars with 1600cc or less will still fall into Category A, but must now have an engine capacity of 97kW or less – the same as 130 horsepower. Cars over 1600cc and 97kW – considered ‘premium’ as opposed to ‘mass market’ – will fall into Category B.

COE update on Category A cars

COE Singapore - 23 Years in the Making

The government recently concluded a two-month consultation on how to improve Singapore's 23 year old car-rationing system. Members of the public, academics and figures in the motor industry took part.

traffic jam on peak hours

Other Ideas the LTA Considered

The consultation examined a number of other suggestions for improving the COE:

Multi Car Surcharge - Rejected

  • No agreement on how it would work
  • Easy to circumvent, difficult to enforce
  • Penalises multi-generation households
  • May go against Singapore's meritocratic system

Pay as You Bid System - Rejected

Proponents say it would make bidders more conservative and drive down COE premiums. After consulting auction theory experts on this, the LTA concluded that:

"Our current open bidding system does not encourage aggressive bidding; in fact, it generally incentivises people to bid the true amount that they are willing to pay.
"From what we observe of the bids, very few bids are substantially above the final COE price. This suggests that bidders monitor the prices and are cautious about over-bidding.
“According to experts in auction theory, an open PAYB system is likely to lead to a similar outcome. Industry watchers also caution that a PAYB system may not necessarily lead to lower COE prices overall no matter how risk-averse buyers are, as prices are ultimately driven by demand.
"Thus, LTA will not implement a PAYB system.” - LTA press release, September 2013.

Banning Car Dealers from Bidding on COEs – Rejected

While there were many calls in earlier surveys for a ban on car dealers being able to bid on COEs, the LTA concluded that:

  • COE price was dependent on “willingness-to-pay”
  • Some buyers prefer dealers to handle paperwork for registration, insurance, finance, trading in, etc.
  • Not possible to prevent dealers bidding on a buyer's behalf
  • Banning dealers from bidding might mean buyers would have to find separate financing for their COE.

Ways to Smooth the Supply of COEs – Being Explored

"LTA will continue to study if there is a practical way of putting aside some of the upswing in supply expected in the next few years, and to save them for the future when the supply of COEs turns downwards again."

Public Transport Investment

The LTA re-iterated the government's commitment to continued investment in public transport, a crucial aspect of life on an island state where it is not possible for everyone to own a vehicle.

COE Price Rises, Wednesday 18th September

As expected by many industry experts, COE prices have increased in the latest tender – although the extent of rises has surprised many.

  • Small cars: S$83,751 – up +S$6,447
  • Large cars: S$86,239 – up +S$9,139
  • Open Category (for any vehicle type – used mainly for cars): S$87,001 +S$7,001
  • Commercial vehicles: S$76,001 – +S$2,002
  • Motorcycles: S$1,703 – +S$43

Concern Over Cat B ‘Overcrowding’

The new engine power criteria will see many Category A cars placed in Category B, raising fears that the category will become overcrowded, increasing demand and pushing up prices. The Category B price rose by 12 per cent in this most recent tender, the highest amount of any category, and nudging the record highs seen earlier in the year.

COE changes more car under Cat B

What Do You Think?

The Certificate of Entitlement is something every driver has an opinion on - and as Singapore's most customer-focussed car insurer, we really want to hear your opinions on the changes. Is it a fairer system, or is there more the LTA could do? As always, feel free to join in the conversation by leaving your thoughts below.

More info from LTA about new categorisation criteria: For Cat A car models registered in 2012 that would have been moved to Cat B under the new criteria, and list of car models in Cat A, and Cat B under new criteria.