COE renewal makes sense - here's why

COE renewal is starting to make plenty of sense, especially in more recent times. Singapore is one of the richest financial hubs and has one of the highest per capita incomes in the world, but not many of us have the financial ability to purchase a brand new car. And a huge part of it is due to the exhorbitant cost of a car here.

For the benefit of foreign readers, a Mitsubishi Space Star (Mitsubishi Mirage) would set you back by at least S$116,999 and that's not the worst part. Despite paying such ludicrous amounts of money for a compact car, you only get to own it for 10 years because of Singapore's disturbing Certificate of Entitlement (COE) system.

When a car's 'lifespan' comes to an end, owners who don't want to subject themselves to the perils of public transport can either scrap their existing car and buy a new one or opt for a COE renewal, assuming that buying a used car is out of the equation.

By using the aforementioned Space Star as an example, let's begin by taking a look at the costs of buying a new car. At its current price of $116,999, you'd have to fork out $46,799 for the 40 percent downpayment and the monthly instalments over the maximum tenure of 7 years would set you back by $946 a month (taking interest rate as 1.88% per annum). If you drive it for 10 years, you're looking at a depreciation of $11,699 a year, not including road tax and maintenance.

If you renew the COE of your existing car for another 10 years, you will have to forsake its PARF value and pay the existing Cat A Prevailing Quota Premium (PQP) as of October of S$82,465. Considering the amound of PARF rebate that you'll forsake when you renew your Cat A COE car isn't likely to be more than a couple thousands of dollars, your effective depreciation post COE renewal will likely be less than $10,000.

There is also the option of five years COE renewal and that means paying only half the PQP. But it's important to remember that unlike the 10-year COE, the five-year COE is non-renewable, meaning the car has to be deregistered upon its expiry. 

Even with the road tax surcharges, the possibility of higher insurance premiums and maintenance costs, the cost of owning a COE-renewed car is cheaper. However, if you're spending more to maintain your old car, you will probably want to look at buying new. 

Unless your existing car is an utter piece of crap, driving an old car every day is an experience; it's more than simply good or bad, and is punctuated with soaring highs and crushing lows.

It'll also be a catalyst for human interaction. When you drive an old car, it's a conversation starter. For example, "What year is that thing?", "That used to be my first car", and even "Man, my dad and I used to go on nice drives in that!"

A new car, although great to have, tends to be overly cared for. Owners are often obsessed about keeping the car in pristine condition and spend more time worrying about dings and dents than enjoying the drive. In the words of another writer, 'a new car enslaves'.

So if you don't mind driving an older car; enjoy it in fact, renewing the COE of your existing ride doesn't seem like a bad idea at all.

*This article was updated on 30 September 2022