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More motorists opting to renew their COEs

More motorists opting to renew their COEs

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chitchatboy

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blogentry-133713-0-19391300-1482319618_thumb.jpgMore motorists are shelving plans for a new car, opting to renew the certificates of entitlement (COEs) instead when their cars hit the 10-year mark.

 

Industry observers say this is down to a variety of factors, including high COE prices and the uncertain economic climate.

 

In the first 10 months of this year, owners renewed the COEs for 24,050 cars, according to figures provided by the Land Transport Authority (LTA) yesterday.

 

That is about one in four (27.2 percent) of the 88,357 cars due to be deregistered and eligible for COE revalidation.

 

In the same period last year, only about 11.7 percent of such cars had their 10-year COEs renewed.

 

Under Singapore's vehicle quota system, a new car is bought with a COE that is valid for 10 years. After that period, car owners can either opt to deregister their vehicles, or renew their COEs and continue driving them.

 

They can renew their COEs by paying the prevailing quota premium (PQP) - an average of a COE premium over three months - for another 10 years. They can also opt to pay half the amount for a COE renewal of five years.

 

"Many of the owners who bought cars in the mid-2000s, during the COE boom period, may not be able to afford to get into a car today because the COE prices are higher now," said SIM University economist Walter Theseira.

 

"Some people may be able to scrape together the money to pay for half of the PQP, but not for the down payment for a new car," he added.

 

In 2006, COEs for small cars ranged between $8,000 and $13,000. The COE premium was $48,000 at the recent tender exercise that ended earlier this month.

 

Singapore Vehicle Traders Association first vice-president Raymond Tang said motorists may be waiting for a fall below the $40,000 mark before jumping in.

 

Dr Theseira said motorists then hang on to their cars as an interim measure.

 

Whether it is waiting for the right price or the uncertain economic climate, Mr Tang said that by not deregistering cars, fresh COE supply will shrink and this will keep COE prices high.

 

COE supply is mainly determined by deregistrations.

 

Motorists who renew their COEs forgo the car's scrap rebate, which is called the Preferential Additional Registration Fee (Parf).

 

While the Parf varies according to the value of the car and its age at which it is deregistered, Mr Tang said, "Why not take back your $8,000 or $9,000, for example, and use this money to pay for a second-hand car?"

 

Businessman Ken Ong, 41, is one motorist who chose to renew his Nissan Sunny's COE two years ago. "I paid about $33,000 for a five-year renewal. The COE price was high back then. Also, my car has been very reliable, with few problems," he said.

 

The following article is written by Adrian Lim, a correspondent with The Straits Times.

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The last 2nd paragraph quotes Singapore Vehicle Traders Association first vice-president Raymond Tang, "Why not take back your $8,000 or $9,000, for example, and use this money to pay for a second-hand car?"

 

Politically correct statement for SVTA which does not benefit car buyers.

 

Doesn't make any sense to purchase a used Cat A Japanese branded car at $11K to $12K annual depreciation, with just a few years left to drive, and unforeseen parts replacement costs.

 

Renewal of 10 year COE makes the most economic sense, at only $6,000 annual depreciation over 10 years ($50K CAT A PQP + $7K to $9K scrap value foregone).

 

Even if you thrown in another $5,000 for wear and tear parts replacement, it costs you only $6,500 a year over 10 years.

 

Anytime you want to scrap the car, you get back pro rated COE value and is not at the mercy of used car dealers who offer ridiculous trade in prices.

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The last 2nd paragraph quotes Singapore Vehicle Traders Association first vice-president Raymond Tang, "Why not take back your $8,000 or $9,000, for example, and use this money to pay for a second-hand car?"

 

Politically correct statement for SVTA which does not benefit car buyers.

 

Doesn't make any sense to purchase a used Cat A Japanese branded car at $11K to $12K annual depreciation, with just a few years left to drive, and unforeseen parts replacement costs.

 

Renewal of 10 year COE makes the most economic sense, at only $6,000 annual depreciation over 10 years ($50K CAT A PQP + $7K to $9K scrap value foregone).

 

Even if you thrown in another $5,000 for wear and tear parts replacement, it costs you only $6,500 a year over 10 years.

 

Anytime you want to scrap the car, you get back pro rated COE value and is not at the mercy of used car dealers who offer ridiculous trade in prices.

Plus u r "getting" a car that u know well mechanically compared to buying an unknown car from a car dealer

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Plus u r "getting" a car that u know well mechanically compared to buying an unknown car from a car dealer

Actually, there are pros and cons. No perfect choice, depending on the individual's car model and condition. 

 

Let's analyze the 2 options.

 

Option 1: Renew COE

If choose to renew existing car's COE, need to fork out at least $20K+ for the privilege to drive 5 years. 

 

Pros: If existing car is in relatively good condition with less problems, this will free up a lot of money in the long run, as there will be no more installments to pay. Only need to standby some money for the occasional wear-&-tear and repairs, associated with older cars after 10th year

 

Cons: Need to fork out cold hard cash of $20K+ and forego the PARF value of existing car. If existing car is a high-end one, it may not make sense to renew as one is foregoing the PARF value, which can be substantial. For instance, the popular Merc C 180, the scrap value can be worth at least $25K. So it is like $25K+COE renewal $$ going down the drain. Total damage could be up to $50K.

 

Option 2: Sell car and get 2nd hand

There is a wide range of models to choose from, in the second hand market.  Can opt to get a relatively new one, like those less than 2 years old to minimize possible costs in repairs and wear-&-tear replacement.

 

Pros: 

Can use the car's scrap value to offset the downpayment required. Is a good option for those who foresee expensive wear-&-tear issues with their existing cars.

 

For instance, the ever popular Altis model 2015 needs an downpayment of about $20K+, so after offsetting, the cash outlay can be lower than $20K only or even lesser and you can still be entitled to get back some PARF on the second hand car. 

 

Hence, less cash outlay in this option, as opposed to Option 1.

 

Cons: 

Slight worries about picking up a lemon car. But this is reduced if choosing brands which are known to be reliable, or newer models. And need to pay installments again. 

 

 

Conclusion

If one is driving an existing car and has experienced many wear-&-tear or repairs, it is more economical to go for Option 2, since the cash outlay in Option 2 is generally lesser than that in Option 1. 

 

However, if one is driving an existing car and has not experienced forking out huge amounts for repairs or wear-&-tear, then it makes sense to go for Option 1. 

 

Actually, to go for Option 1, one is potentially letting go a lot of $$, as explained above. 

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This Mr Tang lives in his ideal world. If every car don't need repair, no problem, of course his statement is ok. He don't know almost all 2nd hand car buyer will repair or replace certain parts of the "new car" (not mod). And he think the time taken to and fro workshop is free? Then not need calculate the hassle of sourcing a reliable and reasonable priced car/dealer?

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