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​COE renewals reach new high

Published on: 15-Feb-2020

The tendency for people to keep their cars beyond 10 years has grown stronger.

Last year, the number of certificate of entitlement (COE) revalidations hit a new high of 41,777 - 12.6 per cent higher than the previous record of 37,114 in 2018.

The number is estimated to represent more than half of the cohort of cars which turned 10 last year.

In Singapore, consumers must secure a COE before they can own a motor vehicle.

Each COE lasts for 10 years, and must be revalidated, or renewed, if a car owner wishes to keep his vehicle beyond 10 years.

The revalidation trend started in earnest in 2015, when high COE prices made new cars inaccessible to many. Since then, it has been growing year on year.

As a result, about 22 per cent of cars are older than 10 years now, compared with less than 4 per cent in 2009.

The cost of revalidation fluctuates with COE premiums, and motorists can choose between a five-and 10-year revalidation. 

Most people choose to revalidate for five years largely because the initial cost is lower. 

But last year, the number of 10-year revalidations overtook the number of five-year renewals for the first time.

Analysts said a 10-year revalidation may cost more initially, but is more economical in the long run.

This is because the car's preferential additional registration fee (Parf), or scrap value, is forgone once an owner chooses to revalidate. 

This cost is lower when depreciated over 10 years instead of five.

Nanyang Business School Adjunct Associate Professor Zafar Momin said there is another factor that makes 10-year renewals more favourable - the car owner has the option to renew the COE again at the 20th year. This is not open to five-year renewals.

Analysts said a 10-year revalidation may cost more initially, but is more economical in the long run.

This is because the car's preferential additional registration fee (Parf), or scrap value, is forgone once an
owner chooses to revalidate. 

This cost is lower when depreciated over 10 years instead of five.

"The car owner can also decide to sell or scrap the car in the 15-to 20-year window for some value, or he can simply continue using the car till its COE expires, or buy another car if the conditions support it within the 10-year window," he said.

Property agent Elgin Lim was among those who renewed for 10 years last year. 

The 46-year-old, who owns an Alfa Romeo 159, said he decided to keep his car beyond 10 years because he enjoys driving it, and it is economical to do so. 

"The COE was low," he said.
"Plus the car's Parf, the cost came up to around $50,000. And everything in the car works. 

The other reason is that I enjoy driving it. It feels special."

Prof Momin said there are now more reasons for people to keep their cars beyond 10 years, including "a slowing macroeconomic landscape clouded with significant geo-political uncertainty, risks of job security and increased cost of living... and unexpected global crises like the Covid-19 outbreak".

He expects the number of annual COE revalidations to reach between 55,000 and 60,000 in the next threeyears - if prevailing conditions do not change drastically.

Property agent Elgin Lim, 46, with his Alfa Romeo 159. He says he is keeping his car beyond 10 years because he enjoys driving it, and it is economical to do so.

Soruce: The Straits Times, 15 February 2020 

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