Renew Car COE 5 years or 10 years?


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Over the last 15 years, I had several different
cars registered under my name. They are either new or used-cars from 1.5L to 2.5L,
from Japanese to continental cars and from sedan to MPV. No posh cars though.
Cannot afford. I had also rented cars for few months, and even had experience
of selling cars in the old days. That said, the one experience I do not have,
until recently, is the renewal of car COE. Last week, I renewed COE of my
Toyota Estima.
Initially I opted 5 years, but a friend of mine
gave the rationale why 10 years is better if you can afford the COE upfront. I
will explain why but before that you need to understand how COE works, what is
Minimum PARF value, and what is Prevailing Quota Premiums (PQP). You can also find
out more information @ www.onemotoring.com.sg.
COE
Basically, if COE is 30K for 10 years, if you decided
to deregister your car at year 5, you get back 15K and at year 6 you get back
12K. So, it is a pro-rata basis costing 3K p.a.
PARF vs COE cars
If your car is still within 10 years, it is a
PARF car. If it is more than 10 years, it is a COE car. You can read here what is the
difference between PARF and COE car. E.g. a car has a PARF of 15K, if you
decide not to renew COE, you take 15K back. If you decide to renew COE, you
will have to forsake this 15K.
PQP
PQP is the moving average of the COE prices in
the last 3 months and varies from month to month. Below is the table showing
PQP of COE. My car 10 year period expires in mid-May, so I am allow to choose
either PQP for March, April or May. You can see that there are differences in
pricing. I am lazy to wait for May PQP (Cat B) to be out and quite sure it is
going to be >35K, hence I chose the cheaper PQP in March which is 33K compared
to April one which is 35.4K.

Source : LTA
So, 5 years or 10
years?
I opted for 10 years COE. Let’s see the
advantages and disadvantages.
Advantage : Cheaper
Annual Depreciation

Using my car 2.4L Toyota Estima as an example, i.e.
PARF 17.6K, PQP 33K.
If 10 year COE
I am paying 17.6 + 33 = 50.6K for 10 years.
This means that annual depreciation is about 5K
for the car.
If 5 year COE
I am paying 17.6 + (33/2) = 34.1K for 5 years.
This means that annual depreciation is about 6.8K
for the car.
So we can see that 10 year has cheaper annual
depreciation of 1.8K. This is because the PARF is spread over 10 years rather
than 5 years.
Disadvantage : More
expensive road tax and higher insurance and maintenance cost
Of course, you have to take into account road
tax and insurance of older cars are more expensive. Basically, there is an
annual road tax surcharge for COE car as per table below. And also, the
maintenance cost for an older car is usually more expensive due to wear and
tear.

Source : LTA

E. g. PARF car of my model, road tax will be S$1,682
pa. COE car road tax will be with additional of surcharge. Using road tax
calculator here,
10-11 year = 1,682 + 170 = 1852
11-12 year = 1,682 + 338 = 2020
12-13 year = 1,682 + 506 = 2188
13-14 year = 1,682 + 674 = 2356
14-15 year = 1,682 + 842 = 2,524
5 years surcharge is 2,530. P.a. = 506.
15-19th year = 1,682 + 842 = 2,524.
5 years surcharge is 4,210. P.a. = 842.
Therefore road tax difference of S$336 p.a, if
you continue to drive the car after 5th year.
Advantage : 10 years COE can opt to scrap car at 5 years and get back pro-rated COE

If you already bought your 10 years COE initially, and on the fifth year and thereafter, if you feel that your car is not performing or you wish to scrap it, you can opt to de-register it and get back your COE pro-rata rebate. 


But on the retrospect, if you opt for 5 years COE initially, you will not be able to extend the COE for another 5 years once the 5 year initial period is up. 
Advantage : Easier to
sell half way through  

This is the reason where my friend explained to
me and why I decided to renew for 10 years. 
For 5 year COE car, let’s say I driven for 2.5 years
and sick of the car, I decide to sell. The car is only left with 2.5 years COE.
It will be very difficult to sell, because buyer will go for newer COE car
which depreciation p.a. is almost the same price. And also poorer family may
want a COE car that they can drives longer years with a lower annual depreciation.
 This
means that you will likely need to de-register your car rather than sell your
COE car. Then the PARF you forsake will be more pricey because you only spread it
over a period of 2.5 years other than 5 years.
If your COE is 10 years, then after 2.5 years,
your car still have a life span of 7.5 years.
Using my car as example,
5 year COE : 34.1K
10 year COE : 50.6K.
After 2.5 years Deregister,
5 yr COE : take back ½ COE value i.e. 8.25K. So
(17.6+8.25K) / 2.5 years = 10.3K
Hence, depreciation is 10.3K p.a for the first
2 years if you de-register.
If you try to sell, it is quite likely that you
will not find a buyer, because it is left with 2.5 years and depreciation is
impossible to be cheaper than 6.8K where we initially calculated.
In retrospect, for the 10 year COE, after 2.5
years, I am likely able to sell because the COE still have a 7.5 year life span
and the depreciation is cheaper at 5K plus.  
Conclusion
I opted for 10 year COE for the reason that lower
p.a. depreciation if I were to drive more than 5 years. And also possibility of
selling is higher if I were to sell it mid-way.
The only disadvantage is I need to have 16.5K more
upfront. But at any point of time, if I de-register my car, the amount of COE I
take back is always pro-rata.
So renew COE for 10 year if you can afford it!

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56 thoughts on “Renew Car COE 5 years or 10 years?

  1. I would also pt for 10 years.

    However, what about maintenance cost?

    Gear box overhaul, engine overhaul et may cost a lot as compare to the value of car.

    1. Hi Ray, it’s a comparison between 5yrs and 10yrs. If your PARF car is already problematic, then better dun renew.

      If on 6-7 yrs, lets say maintenance cost is too high, then you can always de-reg!

      So comparatively, if you can afford 10yrs better than 5yrs.

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  2. Always renew 10year . Don't be like the car dealer that they will only do 5year. They kill it . Like a cancer for the car in 5year. Top of the cost. I have renew all my car and bike 10year . I have keep a few car and bike and they run good. Depend how you take care of them

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  11. Hi, can you elaborate further on this para:

    [Advantage : 5 year cannot renew to 10 years thereafter

    If you opt to renew COE for 5 years, once it expires, you any time you decide to de-register your car and get back the COE pro-rata rebate, you can!]

    1) How is it an 'advantage' when I opted for the '5-year' renewal and end up unable to 'renew to 10-year'??

    2) What do you mean by saying "If you opt to renew COE for 5 years, once it expires, you any time you decide to de-register your car and get back the COE pro-rata rebate, you can!"??

    You mean I still get to 'get back something, i.e. COE pro-rated rebate, when my 5-year COE expires??

    1. Hi Storm rider, thanks for the message. Actually what I meant was that I already opted for 10 years COE. So the article all the advantage is based on my 10 year COE.

      So if you opt for 10 year COE as a basis, you can still get back your COE pro-rata if you deregister.

      But if you opt for 5 years, you cannot extend to 10 years.

      My typo and poor grammar…. or copy and paste error.

      I have updated more clearly in the article.

      Nope if you opt for 5 year COE initially, after or on 5th year, your COE is down to zero.

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