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The number of small car owners renewing their COEs hit a new high last month, with the majority going for a five-year extension.

22 Apr 2015 | Local News : Singapore

The number of small car owners renewing their COEs hit a new high last month, with the majority of them going for the shorter five-year extension - instead of 10.

Besides looking at initial costs, industry experts caution owners to consider other costs, such as road tax and maintenance fees, before renewing COE for their cars
According to figures from the Land Transport Authority (LTA), 285 Cat A cars had their COEs revalidated in March for five years.

Less than half of those renewed their COEs for Cat B cars - a total of 118. Only 52 cars in Cat A had their COEs renewed for 10 years - the number is 70 in Cat B.

Owners of cars that are nearing their 10-year COE lifespan may extend the COE for a further five or 10 years before the COE expiry date by paying the Prevailing Quota Premium (PQP), which is the moving average of the COE premiums in the preceding three months.

Renewing the COE for five years means paying only half the PQP, which is now $62,721 for Cat A and $71,730 for Cat B cars.

The main difference is that cars with their COE renewed for five years must be deregistered upon its expiry, whereas 10-year COEs can still be renewed for a couple more cycles.

The Business Times reported that the trend is expected by industry players. A Sales Manager of a mass market dealership told the local papers, "There are more and more people with cars reaching 10 years of age, and those who own smaller and cheaper cars are most likely to be those who - even if they beg, borrow or steal - will not be able to come up with the 40 percent cash downpayment for a new car."

Under the vehicle financing rules, a 40 percent cash downpayment is required if the Open Market Value (OMV) of the new car is below $20,000, and 50 percent if the OMV is above $20,000.

This means the PQP of a Cat A car (for five years) is more affordable than the downpayment for even the cheapest mass market car, which has breached the $100k mark. This is true even if one considers the PARF rebate (also known as scrap value), which is a sum of money, which the owner will receive when he deregister the car.

In the case of an old mass-market Cat A model, this is generally about $6,000 to $7,000.

"By paying the PQP, you also do not have to take a car loan with a monthly instalment to service. So revalidating the COE would appear to be a less expensive way to continue driving a car," the Sales Manager added.

However, he cautioned those who are looking to renew the COE of their 10-year old cars. The owner must consider a few factors, such as the road tax, as road tax for cars older than 10 years of age goes up by 10 percent each year until it reaches a maximum of 50 percent.

Another consideration is that the insurance coverage is limited to that for third-party fire and theft; comprehensive coverage policies are not extended to such cars.

The most important issue, perhaps, is the condition of the car. This is because an older vehicle tend to require more maintenance and repairs, which will increase the cost of ownership.

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