The price of a COE should be a major consideration for any prospective car-owner, as there are times when it's possible to pay more for the COE than for your car. As a result, it's helpful to have a general idea of what people are paying for them, especially as you consider what reserve price you'll need to pay to succeed in the bidding process. It's also just as important to understand what drives changes in COE prices. In the following guide, we compare the average price of COEs in 2020 with prices from past years, and outline the primary factors that determine the cost of COEs.
Average Cost of COE
The following graph shows how the average COE price has changed over the past decade. As of 17 May 2023, the average cost of COEs was $92,000 for Category A, $113,034 for Category B and $125,000 for Category E vehicles. This signals a tapering of demand for new cars with a 8.91% decrease for Category A vehicles and a 5.33% decrease in Category B vehicles.
Factors affecting COE prices
COE premiums are affected by changes in the supply and demand of COEs. Granted, it's not easy to predict with a high degree of certainty what will happen to COE prices in the future, as they fluctuate from month to month. However, having an awareness of the main factors that tend to affect COE premiums will help you to spot trends and make well-timed, smart decisions.
One of the biggest factors affecting COE prices is the supply of COEs available. The LTA regulates the number of cars on the road in Singapore, and when the LTA increases vehicle quotas, the supply of COEs increases and this applies a downward pressure on their price. Of the various factors that influence the vehicle quota, one of the most important things for you to pay attention to is the number of vehicle deregistrations. This number is highly variable and, even better, can be predicted based on publicly available data.
When the vehicle quota was raised in 2016 and 2017, there was a high number of vehicles being deregistered. For the COEs for cars sold prior to 2010, their certifications have now expired after 10 years. This means a large amount of COEs became available leading up to 2020.*
The table below displays the number of new cars aged less than 1 year from 2012 to 2022, demonstrating the high car sales from 2016 to 2017 compared to following years. Though some owners of these cars chose to renew their COEs on these 10-year-old vehicles, the vast majority did not, resulting in higher car deregistration. In response to a rise in car deregistration, the LTA has increased COE quotas to control the population of cars.
In tandem, there was a large drop in COE premiums and new cars in 2018 after the LTA enforced a zero percent growth rate policy in order to control the motor vehicle population.
Table B: Number of New Cars in Singapore by Year
# of Cars Aged 0 - Less Than One
Source: Land Transport Authority
Demand for COEs among consumers also plays a significant factor into the prices of COEs. Higher demand drives up COE premiums, whereas lower demand drives them down. There are a number of factors that influence demand that you should pay attention to.
Generally speaking, when the economy isn't doing well, demand tends to be lower. This is because for COEs to be in demand, people need to be buying cars. During bad economic times, fewer people do. Singapore is currently experiencing a slowdown in economic growth, and the value of the Singapore dollar has fallen. With a weaker dollar in Singapore, imported cars become less affordable, which would tend to have a negative effect on car sales -- and demand for COEs.
Interest rates play a role in this regard as well. Due to high car prices, the majority of Singaporeans take out car loans to buy their vehicles. When interest rates are high, people are disincentivized to take out loans, which has a negative effect on car sales and demand for COEs.
At present, the average cost of COE premiums have been soaring. This increase has been attributed to the combination of higher demand for vehicles as the economy opens up during the tail's end of the COVID-19 pandemic and the decreasing quota numbers, which has led to high competition and even higher premium rates.
Table C: Ratio of Demand to Supply of Cat A COEs
Ratio of Bids to Quota
Another factor that can affect demand for COEs is the passage of new government regulations, such as emission standards. For example, Singapore has implemented more stringent and extensive emission standards under the new Vehicular Emissions Scheme (VES) that took into effect in 2018. These regulations, which will impose tax surcharges on more models and disqualify more from tax rebates than previously, will apply upward pressure on overall car prices. Higher car prices tend to have a negative effect on car sales and COE demand. We saw this happen in 2018 as COE premiums dropped throughout the year as buyers waited to see how much further premiums would decline.
At the same time, other government regulations may play minor roles in COE prices. For instance, in 2018, the LTA reduced the vehicle growth rate to zero. This will remain 0% until January 31st, 2025. This means that the number of new cars allowed on the roads has to match the number of cars that were deregistered that year. However, because the COE quota is determined by deregistrations, it was predicted not to have a large effect on COE quotas.
If you're thinking about buying a car within the next year or two, it would be a good idea to keep an eye on how consumers, car dealerships and automakers react, and to find out if the models you're interested in will be affected.
Regardless if you are thinking of buying a new car or renewing the COE on your existing car, having comprehensive car insurance is not only mandatory but important to ensure you and your loved ones are well protected while on the roads. For the best deals, check out our round up of Best Cheap Car Insurance in Singapore.
In 2016, roughly 27% of cars turning 10 years old had their COEs renewed; as of February, 2017, about 32% have. This reflects a huge increase in the number of people who are choosing to renew COEs rather than deregister their cars as they turn 10 years old.