Extending the COE

Motorists going the distance to extend their car COEs

A surge in number of motorists renewing their car COE is slowly changing the age profile of Singapore's youngish vehicle population

Mr Gay Eng Joo renewed the certificate of entitlement (COE) for his Honda Civic Type R not long after his wife Ng Whey Whey did so for her Mazda 3.

"From a cost viewpoint, it's a no-brainer," Mr Gay, 46, says. "A new car will cost a lot more."

The extension cost him around $68,000 - $52,473 for the COE and $15,638 for the foregone Parf or scrap rebate. A new Civic Type R costs more than $180,000.

The engineer adds that most cars are able to last more than 10 years if they are well maintained.

"Unfortunately, most people have a preconceived notion that they need to replace their car by the 10th year. So they slacken their car care from the seventh or eighth year. These cars then become 'unextendable' as a result."

The mindset is understandable, given Singapore's car taxation system. Firstly, each COE lasts 10 years, which motorists can renew by paying the prevailing quota premium. Secondly, those who keep a car beyond 10 years forgo its scrap rebate, which is at least half its open market value (or cost before taxes).


PHOTO: AZIZ HUSSIN FOR THE STRAITS TIMES, LAU FOOK KONG, COURTESY OF SOONAM SUNEETH

If my young son dirties the car or if I go over a bump too fast, it’d be ‘oh’... with a new car, it’d be ‘ouch’. And rather than buying a used car, I wanted to stick with something I know.

REGIONAL DIRECTOR OF A MEDIA COMPANY NG WHEY WHEY (above, with her husband Gay Eng Joo, six-year-old son Ewan and their Mazda and Honda) on why she renewed her car’s COE

Indeed, Singapore's car population is young because of the COE system, which was introduced in 1990.

By 2006, 66 per cent of passenger cars here were under three years old and 85 per cent of them were under five years old. Then, the average age of cars in, say, Japan, was six years. In the United States, it was 10.

But things began to change that year. On the back of a huge COE supply, premiums slid to well below $20,000. When the global financial crisis hit in 2008 to 2009, they plummeted to as low as $2 and $200 for smaller and bigger cars, respectively. Consumers were able to buy a Japanese family car for less than $50,000 and a German luxury sedan for less than $150,000.

But when these cars approached their 10th year, new car prices had more than doubled as COE supply dwindled.

Teacher Soonam Suneeth, 55, remembers that well. She renewed the COE on her Toyota Mark X in January. "When we bought the car 10 years ago, we paid $88,000 for it. COE was $10,000. But in January (this year), COE was $52,000 and the same car would have cost well over $100,000."

 

She says the car, which has clocked 175,000km, has been trouble-free and the only thing she has had to replace was the blower for the air-conditioner.


PHOTO: AZIZ HUSSIN FOR THE STRAITS TIMES, LAU FOOK KONG, COURTESY OF SOONAM SUNEETH

When we bought the car 10 years ago, we paid $88,000 for it. COE was $10,000. But in January (this year), COE was $52,000 and the same car would have cost well over $100,000.

TEACHER SOONAM SUNEETH (above, with her architect husband Suneeth Changaroth, 61), who renewed the COE on her Toyota Mark X in January

"If it had given us a lot of problems, we would have given it up."

After renewing the COE for another 10 years, she replaced the dashboard, which had some cracks on it.

"We may change the upholstery too," she says.

Many other car owners have taken the same route since 2015 - the year when car COE revalidations started to balloon. That year, close to 10,000 did so, more than four times the previous year's number.

Last year, that figure grew to almost 30,000 and there is no sign of the trend slowing down this year.

Logistics manager Henry Ho, 60, who drives a 12-year-old Toyota Wish, explains: "It's a dollar-and- cent consideration."


PHOTO: AZIZ HUSSIN FOR THE STRAITS TIMES, LAU FOOK KONG, COURTESY OF SOONAM SUNEETH

The car is still in a very good condition. And the mileage is so low, at less than 150,000km. It’d be such a waste to get rid of it.

RETIREE BRENDA PECK (above), who extended the COE on her Mercedes-Benz E200 NGT in June last year

He bought the car early last year from his mechanic for $11,000 and paid $46,000 for the COE renewal. Then, he spent about $3,500 replacing parts such as tyres, drive shaft and hydraulic pumps.

"It's not as good as a new car. Fuel consumption and road tax are a bit higher. But it's a lot cheaper than a brand new Wish, which would have cost $110,000," says Mr Ho.

Not everyone chose to renew for 10 years though. The majority renewed for five years, paying half the cost of the prevailing quota premium.

Ms Ng was among them. The 42-year-old regional director of a media company says she chose a five-year extension on the advice of her mechanic.

She says she chose to keep her old car for "prudence and practicality".

"If my young son dirties the car or if I go over a bump too fast, it'd be 'oh'... with a new car, it'd be 'ouch'.

"And rather than buying a used car, I wanted to stick with something I know."

Bread-and-butter cars are not the only ones being renewed. Nearly 40 per cent of renewals are for bigger, more premium models.

Retiree Brenda Peck, 61, extended the COE on her Mercedes-Benz E200 NGT in June last year.

"The car is still in a very good condition. And the mileage is so low, at less than 150,000km," she says. "It'd be such a waste to get rid of it."

She says the only parts she has replaced are the brake pads - once.

Businessman Derek Han, 46, has just renewed the COE on a high-powered Subaru Forester STi he bought last year.

He plans to do the same for his Honda Accord Type R and Volvo V50 T5 when their COEs run out next year.

To prepare the Forester for its next 10 years, he has stocked up on $10,000 worth of wear-and-tear spare parts, in case they run out.

He has renewed the COE on his motorcycles too (he has 12), including a pair of 35-year-old Suzuki Katanas.

Motor industry players are noticing the trend. Mr Joey Lim, managing director of automotive workshop Harmony Motors, says business from older cars peaked last year, with most customers choosing to replace parts such as shock absorbers, suspension lower arm and rubber parts such as engine mounts.

Mr David Siew, managing director of leather and infotainment specialist Tomo-CSE, says although the bulk of his clients are car dealerships, he notices a rise in retail customers, including those who are sprucing up their COE-renewed cars. "We are renovating to target this group of customers," he says.

The COE renewal trend has also changed the age profile of Singapore's car population noticeably.

Today, 11 per cent of cars are over 10 years old, up from 7 per cent in 2006.

And only 43 per cent of cars are under five years of age, down sharply from 85 per cent in 2006.

Experts are divided on whether this is a positive trend.

Singapore University of Social Sciences economist Walter Theseira says it may lead to poorer air quality as "older cars are built to older emission standards, which permit a higher amount of pollutants than current emissions standards".

But he admits diesel cars, which are rare here, are more of a concern in this aspect.

He adds the trend might have "some effect on COE quota volatility over time" and could even "contribute to the 'peak and valley' (fluctuating quota size) issue".

Nanyang Business School Adjunct Associate Professor Zafar Momin, however, says the trend "could potentially smoothen the volatility of COE quota supply", a view which many motor dealers share.

He adds that overall, revalidating a COE is a more sensible option than buying a new car.

"Holding on to your old car may be environmentally more friendly than buying a new and more fuel-efficient car," he notes.

"Studies indicate that the carbon footprint of manufacturing a new car is quite significant and could tip the balance in favour of retaining an old car, even if it is less fuel-efficient."

A version of this article appeared in the print edition of The Straits Times on August 26, 2017, with the headline 'Old is gold'. Print Edition | Subscribe