Should I get a new car or revalidate the COE on my existing one?

Should I get a new car or revalidate the COE on my existing one?

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Should I get a new car or revalidate the COE on my existing one?

https://www.straitstimes.com/singapore/transport/should-i-get-a-new-car-or-revalidate-the-coe-on-my-existing-one

2022-10-08

SINGAPORE - Data from the Land Transport Authority shows that there are 11,143 cars in August 2022 that are within 12 months of the end of the 10-year lifespan of their certificates of entitlement (COEs).

If the drivers want to continue owning a vehicle, they can either revalidate the COE or buy another car.

COE prices have been rising in 2022 and this is pushing up car prices.

After the latest tender exercise, one of the cheapest new cars available today, the Mitsubishi Space Star, is at $114,999 after discounts. This is $31,000 up from $83,999 in October 2021.

Rising interest rates for car loans further drive up costs.

To revalidate the COE or buy a car, which is the preferred road to take?

Replacing with a new car

This is clearly the more expensive option, but rising COE premiums have also pushed up the market value of existing cars. This can help offset the amount needed to buy a new model.

Dealers hungry for a sale are known to offer higher-than-market prices to owners trading in their old cars.

The maximum loan amount and tenure are governed by the Monetary Authority of Singapore. Depending on the import value of the car, it is possible to borrow up to either 60 per cent or 70 per cent of the purchase price for up to seven years.

Overall, a new car will normally have lower running costs than an older one.

It should not need repairs and if it does break down, the warranty would take care of the bills while the service package that is usually included with the purchase will cover the major maintenance costs for the first few years.

It should also be more fuel efficient than a comparable car that is older.

Revalidating the COE

On registration, the COE for a private car is valid for 10 years. This permit can be revalidated at a premium, which is the moving average of the COE premium for the last three months.

The renewal price has been going up with the rising COE premium.

In the category for cars with smaller engines, the premium in October to revalidate the COE for 10 years is $82,465, up from $56,560 in January.

This is also higher than the COE price from the most recent tender exercise that closed on Wednesday, which was $80,501, but using a new COE is not an option for an existing car.

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A more wallet-friendly solution is to revalidate the COE for only five years and pay half the amount. However, it will not be possible to renew the COE again at the end of the five-year extension.

Loans for COE renewal are available, but usually come with higher interest rates than loans for new or used cars.

Using a car beyond 10 years also means forfeiting the rebate on the amount of taxes paid. For a larger car like a Honda Odyssey, for example, the amount is around $5,000.

The annual road tax increases after the car passes the 10-year mark at the rate of 10 per cent per year, topping out at 150 per cent of the original amount.

As the car ages, fuel consumption and repair and maintenance costs are likely to go up as well.

Replace with a used car

Car prices will likely come down in two to three years' time as more COEs - whose supply is mainly linked to the number of car deregistrations - become available.

For those who cannot wait until 2024 or so, a used car that is seven or eight years old can be a viable interim option.

As at Aug 31, 2022, there are 50,422 cars in this bracket, representing 7.7 per cent of the total car population.

By the time their COEs are up for revalidation, the owners will have the option of paying a lower price to revalidate the COEs or opt for new - and hopefully cheaper -cars.

This seems to be a popular idea among buyers. Dealers said such cars are easier to sell than those in any other age group.

The risk is if something major fails, be it the air-conditioning system or the automatic transmission, it would be hard to justify paying for an expensive repair just to use the car for such a short period.

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