Transportation

Understanding Singapore’s COE System

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Ryan Ong

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Singapore has as much road space as Greece has optimism. Just check during rush hour: The roads degenerate into one giant parking lot. Kids stare out the car windows, and get a kick watching nearby snails zoom by. The government’s solution? The Certificate of Entitlement (COE) system, which ensures we’ll only buy a car as a last resort. In this article, we give you a crash course on how it works:

 

What is a Certificate of Entitlement (COE)?

The COE gives you the right to own and operate a vehicle, for a period of 10 years. After that, you can pay to renew the COE for another 5 – 10 years (see Prevailing Quota Premium below).

COEs are divided into five categories. In order to own and operate a vehicle, you need a COE of the matching category:

  • Category A – Cars with engine capacity of 1600 CC and below
  • Category B – Cars with engine capacity exceeding 1600 CC
  • Category C – Goods carrying vehicles and buses
  • Category D – Motorcycles
  • Category E – This is an “open category” COE, which can be used for all of the above.

The number of available COEs in each category is determined by the Vehicle Quota System (VQS), which is figured by the government every six months.

Since the quota’s limited, not everyone who wants a COE can get one. And since gladiatorial death arenas would just take up more space (and be less proftable), the government imposed the COE open bidding system.

Using this method, car buyers bid against each other to win COEs.

 

The COE Open Bidding System

 

Honda at car show
“Or we just make buyers swordfight to death here, it’s easier. And the next logical step in Reality TV.”

 

COEs for each category are bid for separately. The starting bid is $1, and you will pay only a bit more than that, assuming 90% of our population dies in a sudden zombie apocalypse. Otherwise, the eventual price of a COE (as of June 2012) falls between $70,000 – $80,000 for cars (Categories A and B).

COEs for goods vehicles and buses are around $59,000, and COEs for motorcycles hover around $1,700. You can check the most recent prices on One.Motoring.

Here’s how it works:

  1. It starts when bidders submit their reserve price in the open bidding system. The reserve price is the amount being bid.
  2. The bidding system then automatically raises the Current COE Price (CCP) upward, by increments of $1.
  3. When the CCP exceeds a bidder’s reserve price, that bidder is out of the running (no chance of getting a COE).
  4. The CCP keeps rising, and stops once the number of bidders still in the running equals the number of available COEs.
  5. The bidding exercise then ends, and whoever’s still in the running is a successful bidder.

The latest CCP (whatever dollar amount it ends on) is called the quota premium (QP). All successful bidders in the same category pay the same quota premium.

 

Bookshelf full of maths textbooks
“So, is this the rest of the introductory guide?”

 

In order to soothe your now pounding headache, here’s a simplified example:

Let’s say there’s room for just three Category A cars in Singapore (a fair estimate by next Christmas, at the rate we’re going). There are, however, five bidders. At the close of the bidding exercise, the results could look like this:

 

Reserve Price of Bidder

Successful or Not?

Bidder 1- $80,000

Yes

Bidder 2- $76,000

Yes

Bidder 3- $72,000

Yes

Bidder 4- $70,000

No

Bidder 5- $67,000

No

There are three winners because, of course, there are only three COEs available.

Now, say the QP was $70,001. Bidders 1, 2, and 3 would only pay $72,001, not the full reserve price.

If you’re still confused, try practicing with this interactive demo.

 

When and How to Bid

 

eggs with scared faces drawn on
Let me give you a diagram of the process here.

 

There are two COE open bidding exercises each month. These are held on the first and third Monday of the month, and start at 12 pm. The exercise ends two days later (on Wednesday) at 4 pm.

There may be exceptions, such as if public holidays occur between Monday and Wednesday. In these cases, the bidding exercise will be extended.

Bidding for COEs Yourself

To bid for the COE yourself, you need an account with one of the following banks:

  • POSB / DBS
  • Citibank
  • OCBC
  • UOB (for non-individuals)

You can bid for COEs at DBS ATM machines. For the other banks, you will have to contact them for details (you may have to do the bidding via phone or Internet banking).

You must have a fixed bid deposit of $200 for Category D (motorcycles) bidding. For other categories, your minimum deposit is $10,000. You will be able to set the reserve price, and revise it upward once bidding starts.

Note that you cannot revise a bid downwards, nor can you withdraw a bid once it’s made.

If you’re a successful bidder, you will pay the difference between your QP and deposit amount upon registration. If there is an excess amount left in the deposit, the money can be used to offset the registration fees (RF) or additional registration fees (ARF).

Getting the Car Dealership to Help

 

SHut up and take my money
Warning.

 

Car dealerships can help with the bidding process, if you find it a pain.

For starters, you can purchase a car that already comes with a ready COE. Your grandchildren will work as slaves in a Nicaraguan mine to pay it off, but it’s one option.

The second option is to give the dealer a month, after which you’re guaranteed to get a COE. The price can be unpredictable though, since the dealer will bid aggressively for you.

The third option is to give the dealer a reserve price, and have the dealer repeatedly submit bids for you until you win at that price. Obviously, if the reserve price you set is too low, there’s little chance of the dealer getting you a COE.

For more on getting dealers to help with COE, follow us on Facebook. We’ll let you know the best ways shortly.

 

Last of All, the COE Rebate and Extension

When your COE expires, you can extend it for 5 – 10 years. There is no bidding; you simply pay the Prevailing Quota Premium (PQP), which is the moving average of the past three months’ QP.

When you de-register your car early, you get a rebate based on the amount of “unused time” on your COE. Check One.Motoring for the formula and calculator.

 

Image Credits:
epSos.de, blue_quartz, maizers, topgold, lillybeane

Do you have any questions about the COE? Comment and let us know!

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.

  • Jason

    One of the funniest and best written articles I have ever read on this topic – simply great.