10 things you should know about renewing your COE

Is your car’s COE coming to an end? Here are 10 things you should know if you’re thinking of renewing your COE when it expires.

According to the Land Transport Authority (LTA), nearly one in four cars whose Certificates of Entitlement (COEs) were due to expire in 2016 had their COEs renewed. A combination of higher car prices from an increase in import taxes and surcharges in recent years, as well as an uncertain economic climate, has resulted in the rising number of COE revalidations in recent years, as more and more owners seek alternatives to new car ownership.

In 2017, more than 100,000 cars on our roads, making up 15 percent of the population, will see their COEs reach their expiry date, and three out of 10 cars currently on our roads are now over eight-years old. If you own one of these cars, you will have a decision to make as the car’s COE expiry deadline approaches. If you’re thinking of renewing your COE, here are 10 things you need to know before you take the plunge.

More than 100,000 cars, or about 15 percent of the population, will see their COEs expire in 2017

1. You will forgo your PARF rebate

First of all, when you opt to renew your car’s COE, you’ll instantly lose your car’s PARF rebate. This is the amount of money you get back from the Government once you deregister your car, and is also known as the scrap value.

However, extending your car’s lifespan beyond 10 years would see you forgo the PARF rebate, which is something to consider if your car’s ARF value is fairly significant. For example, if you have a premium car such as a 2007 Mercedes-Benz E200, which usually has an ARF value of around $50,000, you will be forgoing $25,000 in PARF rebates upon renewal. In contrast, a family car such as a 2007 Honda Civic, which typically has an ARF of about $20,000, will only ‘lose’ $10,000 in PARF rebates.

2. There is additional loading on road tax for cars over 10-years old

For cars over 10-years old, there is an additional surcharge levied on the car’s road tax. This amount is chargeable at an amount of 10 percent over the car’s regular road tax rate per annum, up to a maximum of 50 percent. For a car with a large capacity engine, the increase in costs can grow to be quite significant.

Using an example of a 2.4-litre car with an engine capacity of 2,362cc, the payable annual road tax before it is 10-years old would be $1,632. In the 11th year, this will go up to $1,802, and then $1,966 in the 12th year, and so forth, eventually reaching a maximum of $2,458 (150 percent of $1,632) from the 15th year onwards.

Cars above 10-years old get an additional 10 percent loading on their road tax, up to a maximum of 50 percent

3. Non-renewable if COE is only revalidated for five years

There is an option of renewing your car’s COE for just five years instead of 10, for which you simply pay half of the Prevailing Quota Premium (PQP) at the point of renewal. This might be a more financially sound option for those who may not have as much ready cash for a full 10-year COE renewal, but bear in mind that if you opt for a five-year renewal, you will be unable to extend the car’s lifespan any further once the COE’s tenure is up. A 10-year COE can be renewed in perpetuity, however. Do take note that commercial vehicles have a statutory lifespan of 20 years, and you cannot renew its COE for any further than that.

4. You will suffer less depreciation on your car after renewal

Renewing your car’s COE will always be more financially accessible than buying a new car, as you’ll only pay the cost of the new COE. Therefore, the resulting depreciation over the next 10 years will be significantly less than if you’ve purchased a new car.

Taking the above example once again, a new Honda Civic currently retails for $114,999 inclusive of COE (as of 2nd May 2017), and has an ARF of about $20,000. The PARF rebate after 10 years will therefore be $10,000, and thus the annual depreciation will be $10,499 a year.

If you renew the COE of your existing Civic, the depreciation will simply be a straight-line division of the renewal premium (which currently stands at $50,665 for Category A cars, as of May 2017) over the next 10 years. Even if you take into the account the loss of the PARF rebate, the depreciation of the car will only be less than $6,000 annually.

If you intend to renew your car’s COE, you will need to pay the PQP for your car

5. You will need to pay the PQP

Should you decide to go ahead and renew your car’s COE, then what you need to do is to pay the PQP, which is the moving average of the COE prices over the last three months. You can enquire the current PQP rates here. For vehicles, which have a Category E Open COE, your PQP will be based on the respective category that your vehicle belongs in (Category A, B or C).

For owners of cars under the Weekend Car (WEC), Off-Peak Car (OPC) or Revised Off-Peak Car (ROPC) scheme, you will have to pay the PQP of the relevant normal car category. There will be no discount or rebate given for renewing the COE of such cars, and it will remain as a WEC/OPC/ROPC upon renewal. However, you can subsequently convert it to a normal car without having to top-up any rebate back to the LTA.

6. You can still renew your COE after it has expired

You can actually renew your COE up to a month after it has expired, and should you choose to do so, you will need to send in an application request at the LTA’s Customer Service Centre at Sin Ming. Payment through this method can only be made in cash, cashier’s order or NETS, and there are late payment fees applicable depending on the type of vehicle you are renewing the COE for.

If you choose to do it before the COE expires however, you can send in your application online through Internet banking via the LTA’s website, or send the payment out by post. This has to be done at least two weeks before your car’s COE expiry.

Before you renew your car’s COE, you will need to submit an application to the LTA

7. You will forfeit the remaining balance of your COE rebate upon renewal

Aside from the PARF value, the LTA also offers a rebate on any ‘unused’ value of your current COEif you deregister it before the full 10-year tenure is up. However, should you renew your COE before it reaches its expiry date, you will forfeit any COE rebate that you are eligible for.

It is for this reason that most people tend to renew their COEs very close to the expiry date, or even on the day itself, in order to minimise the ‘loss’ of this rebate. However, as mentioned on point 6, you can also choose to renew your COE after it has expired as well.

8. Your renewed COE car is still eligible for COE rebates upon deregistration

While a car with a revalidated COE is no longer eligible for PARF rebates, it is still eligible for a rebate on the renewed COE. What this means is that, should you scrap or deregister your car before your renewed COE is up, you will be refunded the pro-rated amount of the COE remaining.

For example, if you renew your car’s COE for 10 years at $50,000, and you decide to scrap it exactly five years later, you will get back $25,000 in COE rebates upon deregistration. It is a point worth considering as it means your COE-renewed car does have some residual value even after renewal.

9. You can take a loan for COE renewal

Not many people know this, but there are banks and financial institutions that allow you to take loans to renew your COE. They aren’t that common, but a quick search reveals that some do offer loan quantums of up to 70 percent over seven years, at an interest rate of 3.25 percent, for COE revalidations. Financial institutions, such as Hong Leong Finance, Tokyo Century Leasing and United Overseas Bank, may offer different rates so it pays to do your research.

sgCarMart Connect offers services to help motorists who wish to apply for loans to renew their COE

Generally though, you could get approval for a loan to cover the entire COE renewal amount. The typical tenures for loan repayments are 59 months for five-year renewals, and 83 months for 10-year renewals, and interest rates can range from 3.25 to 4.75 percent. For COE renewals made through finance companies, there will be an additional transfer count added to the vehicle (that is, it will be deemed to have changed owners).

sgCarMart Connect offers a service to help owners who intend to renew their COEs to apply for the renewal loan. Just submit the relevant documents online to sgCarMart Connect, and approval for the loan will be processed within three working days. All procedures can be done online as long as the required documents are sent via fax or email. sgCarMart Connect is also able to help you apply for insurance for the renewed COE car, and this process will take another three working days to complete.

10. You can get comprehensive insurance coverage for a COE car

A common myth is that COE-renewed cars (or COE cars) are ineligible for comprehensive insurance coverage. In actual fact, it is actually possible to get comprehensive insurance for such cars, although it is indeed harder to source. AXA, for instance, will not insure cars older than 25-years old, while others like NTUC Income, MSIG and Tokio Marine will offer comprehensive cover for cars older than 10-years only on a case-by-case basis.

It is possible to attain comprehensive insurance for COE renewed cars, although they may be harder to source

There simply isn’t as much demand for comprehensive insurance for COE cars as many owners deem it unfeasible to pay a hefty premium, which is disproportionate to the value of the car. Insurers themselves are also reluctant to offer anything more than just third-party insurance (which covers claims by third parties only) for older cars, as they deem them to be more problematic and more susceptible to claims.

NTUC Income also explained that older cars have ‘little market value’, and that should the car be involved in a major accident, the tendency is for insurance companies to write off the car totally rather than paying out for the repairs as the car’s market value may not be worth much more than the residual value (the amount of renewed COE remaining).

However, if you take a loan for COE renewal from some finance companies, they may require that you obtain comprehensive insurance cover for your car as part of their terms and conditions.

Ben Chia
Photos by Low Fai Ming