Certificate of Entitlement | When to buy a car - DirectAsia

Singapore is one of the most expensive countries in which to own a car. In fact, it is for this reason that we’ve been named the most expensive city for expatriates to live in by the Economist’s Intelligence unit. Other than your house, your car is probably going to be the second most expensive thing you’d ever buy. So before you go ahead and commit, make sure you at least have 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:

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 high enough (in the appropriate category) will get a COE, while those who bid too low will have to 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 March 2019 second round bidding exercise, Category A COEs cost around S$26,659. Category B COEs cost around S$39,401, and open COEs cost S$41,000.

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 four 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.

Overall, COEs are still more affordable in 2019 than they have been in previous years.
 

What factors affect COE Prices?

Like many commodities, COE prices are determined by the interaction between demand and supply at each bidding exercise.

Demand can be affected by factors like the economic climate (whether the economy is growing or in a recession), launch of new vehicle models, and competition among vehicle manufacturers among others. Supply of COEs is influenced by the allowable vehicle growth rate and the number of replacement COEs from vehicle de-registrations. However, you can expect the latter to have a greater impact; as shown by recent falling COE price despite a zero-growth policy for cars and motorcycles being implemented since February this year.

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 January to the present, we can see that COE prices have remained within the range of S$25,000 to S$26,700 for category A. Prices have remained within this range since early this year, although market expectations for a smaller COE quota has driven up prices in the last round of bidding.

While we expect COE prices to rise slightly in the following months, it is unlikely that prices will increase significantly. This is because many drivers are also choosing to renew their COEs over getting new ones, which lowers demand. Increasing interest rates will also cause new car-buyers to think twice since expensive car prices here means most people will have to take up a car loan.
 

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So overall, the answer is probably no. But take our forecast, along with anybody else’s, with a big dose of salt. There are no guarantees.
 

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.

Decide if you are ready to take on costs such as parking fees, ERP fees, and your road tax. When buying your car insurance, don't just pick the first one you come across. They are not all the same. Companies like DirectAsia, for example, can give you the most affordable premiums if you are a safe driver.

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