Why the COE System in Singapore Benefits Only the Rich


Peter Lin



Welcome to Singapore. A country where there’s always someone complaining about how much a car costs here, thanks to COE. The automatic response to this is, “Yeah, but who asked you to buy a car?” And then if that’s not enough, someone else will chime in, “You want us to have traffic jams like the ones in Bangkok, issit?” And they’re not wrong. The COE system has definitely meant that there are a lot less cars on the roads in Singapore. But is it the best way to reduce cars in Singapore?


Sorry ah, I’ve been hiding under a rock – how does COE work again?

It’s not easy to understand the COE system. In fact, we wrote a whole article on it and it barely scratched the surface. If we had to put it simply? The Certificate of Entitlement is a license that makes it more expensive to buy a vehicle in Singapore.

The cost of the COE is decided via a bidding exercise that occurs twice a month. A limited quota of COEs are made available during these bidding exercises, based on the number of cars on the road. COE prices rise when the demand for COE is high, or when the supply or quota is limited, or both.

We’ve also taken a look at how COE prices have changed in the past 10 years. It’s dropped as low as $2 almost 7 years ago, though it never came close to that number ever again. These days, COE for Cat A and Cat B cars are hovering around the $60,000 mark.


So… COE is how the government controls the number of cars in Singapore?

Yes, but it’s not the only method they’re using. Back in 2013, they introduced new rules and restrictions for car loans that essentially made it harder to afford a car. In fact, earlier this week, we took a look at the types of in house car loans that some dealers and financial institutions are using to get around these loan restrictions.

While we can’t say whether these methods are right or wrong, the fact that people are looking for loop holes means that the system is broken.


Broken? That’s a little harsh isn’t it?

We say it’s broken because the current system makes it easier for the rich to buy cars, and penalises those who need a car but can’t afford it. Now, before you accuse me of being anti-government, let’s look at it objectively.

Say you want to buy a car in Singapore today. Thanks to COE, it’s not entirely clear how much you might end up paying. COE runs on a bidding system that depends on the quota of licenses available. This supply is controlled by the government and is generally determined by how much they want to expand the volume of cars on the road.

However, the COE for each particular exercise is set according to the lowest bid across the board. That means that those who can afford to pay $120,000 in COE for their new Mercedes-Benz? They only need to pay half that amount – about $60,000.

On the other hand, because the supply of COEs are controlled, that means those who can’t afford the $60,000 COE will end up losing out. In the latest COE exercise, 592 out of 2,276 Cat A bids were unsuccessful. That’s more than 26% who won’t be getting a car this time around.

And even if you do successfully bid for it, then you may find yourself in a bit of a financing problem. According to MAS, your car loan can only cover a maximum of 60% of the purchase price (for an OMV of less than $20,000). That means you’ll need to come up with at least 40% of the car’s purchase price as a downpayment. That’s no small sum. We’re saying you’ll need to cough up anything from $40,000 to $120,000 for a new car, depending on the model.

What’s more, because you can only take up the car loan for a maximum of 5 years, you may find yourself repaying a sizeable amount each month. That’s definitely going to put pressure on your finances.

To put it simply, in a hypothetical situation:

  • Government decides to decrease COE quotas even more under the premise of controlling car numbers
  • COE price skyrockets
  • Who can afford it? Yup, you get the idea

Now, before you start taking up pitchforks and torches and marching towards the LTA or MAS offices, it’s also important to note that they may not be the only ones responsible. Have you noticed that it is the dealers who, besides selling you your car, also offer you car loan packages AND help you bid for COE? Do you think they really have your interests at heart?


But… if you can’t afford it, then you shouldn’t be buying a car!

So we’re back to this question. The truth is, for many people, the desire to buy a car is exactly that – just a desire. Many people are actually perfectly capable of utilising Singapore’s public transport system without too much inconvenience.

But for some, a car is more than a status symbol. It’s a necessity.

For example, ask anyone who has school-going children, aged parents or family members with disabilities. They’ll tell you that Singapore’s world-class public transport system just isn’t enough for their needs. Yet, because they need their income to pay for education and medical fees, they can’t afford the hefty financial burden of a car.

True, there currently is some flexibility in the rules when it comes to the physically disabled, but these have to meet very strict criteria, and are often excluding the very people they should be helping. For example, you have to prove that you are incapable of taking the bus or MRT before you can be considered “physically disabled”!


Okay, enough complaining, how do you propose the COE system should change?

Firstly, we need to get rid of the idea that making cars more expensive is the only way to reduce the volume of cars on the road. We need to start treating cars the way Singapore treats property – by giving benefits to those who need it and penalising those who don’t.

There should be a comprehensive suite of COE rebates. These should be primarily given to families with young children, as well as those living with people with disabilities and aged parents. Such information is readily available – after all, they should already be receiving other benefits and grants that they are eligible for.

For example, a family living in a multigenerational home should be given rebates when buying a car because they probably need it for both their children and aged parents.

Secondly, we should consider penalising those who buy more than one car, similar to the way property buyers are currently penalised for buying more than one property. We’re not saying that you shouldn’t buy another car, especially if you feel you need one, but the penalty would definitely deter potential car buyers who want a second or third car just because they can afford it.

Also, they could stop banning alternative transport… But that’s a different side of the coin. Follow us on Facebook for more opinions on what matters to Singaporeans.


Do you think our COE system is broken? How would you improve it? We want to hear from you.

Image Credits:
TCL 1961

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Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.

  • Dai Juehua

    “We need to start treating cars the way Singapore treats property – by giving benefits to those who need it and penalising those who don’t.” Thumb Thumb Thumb

  • Joyce Koh

    Finally, there is hope. I support the idea of having COE rebates for families with younger children and elderly. Just like the the CHAS card with per capita income criteria. Families with larger family nucleus can benefit from this rebate. We genuinely need a form of transport for family outings or even to the doctor. With kids and elderly in the family, anything can happen. From falling sick to picking up the kid who missed his bus or my mum who is stuck in the train for 2 hours. The COE system in singapore is lugging that paper all over Singapore at a hefty costs which is on par for the costs of buying a HDB. Please reconsider revamping the system.. I am sure this is one factor to entice young couples to set up family in Singapore.

  • John

    Hi, the problem here lies is the concept of the COE system. It is a bidding process, but the main idea is the control of the car population and not a money making machine for profit. Thus, only the person wanting to purchase a vehicle should be THE ONLY ONE bidding for the COE and NO ONE ELSE on his behalf. This means all COE bidded is non transferrable. No Company or any entity can bid a COE on behalf of their customer. This would eradicate all speculative options. When a Company or an entity bids for an open Category COE and keeps it for the future to be transferred to a buyer, this sets a benchmark for speculation. Multiple previously kept COE by Companies or entities are used as benchmarks of estimates for the next bidding exercise. Such practice should not be allowed to occur. Even millionaires would want free or cheap COEs. On the issue of an individual bidding and getting the COE and later not wanting it, he will need to forfeit a percentage. Just like when you apply for brand new HDB flat and after getting it, you decided not to proceed, you will be penalised half the booking fee. If you eventually get the COE and register a car, it will be like the present Cat1 and 2 regulation, you can only sell it after 6 months. Having said all these, an individual has to be very sure before he makes any vehicle purchase at all, just like a property in Singapore.

  • John

    Once the speculative factor is eradicated, we will see the realism of a car buyer and his actual perspective of an affordable amount he or she would pay rather than be influence by a Company or entity. Every COE exercise it would start from scratch because not one can keep previous COEs that can be transferred to be use as a benchmark. This also would set a level playing field for all car Companies because they are not permitted to keep any transferrable COEs. They just sell their cars, the customers bid for the COE themselves. The whole idea is to eradicate the speculation and there should be a drop in COE prices.

  • forresttan

    I understand there’s a need for car when the family have children and elderly. This remains to be solve and the COE system cannot satisfy this. It’s a financial burden to many families in Singapore. The COE system is not perfect for Singapore and its ppl because we have limited space and we couldn’t build more roads to cater for more cars. I think we need to reinvent the roads to cater for greener transportation. Probably automated navigation transportation system will work in Singapore but we need to give up car ownerships and the government need cater at least half of the roads for greener transportation. Due to limited space and heavy reliance on transportation such as buses and taxis which is labor intensive. Singapore could be well positioned to become a test hub for greener transportation. It could be the next industrial revolution just like rubber, tin and so on.

  • Leong Meng Yew

    1. Firstly a total BAN on COE bidding by dealers on behalf of buyers. Dealers have a bigger stake in the COE,as no COE means no sale.
    2. Pay what you bid COE System. The rich tend to bid as high as they want to guarantee a COE, as they know, no matter how high they bid, they are just going to pay the lowest COE strike price. Pay your bid price will ensure all bidders bid with prudence rather than Exuberance.
    3. Lastly whatever subsidy deem fit.

  • PG

    COE is an outdated idea and shows the lack of creativity , and until there is a creative idea for personal city transport , the problem will not go away .
    Public transport has its limitations , as people should know from other countries .
    The other problem an excessive number of commercial vehicles and vehicles used for business , and many heavy commercial vehicles are unnecessary and very old technology .The building industry uses too many outdated too big vehicles , incompatible with the streets of Singapore.
    The problem , lack of creativity

  • Christopher Bong

    I have always know that the COE system benefits the rich as well as a very good source of income for the government. The needs of the people has never been considered.

  • John Tan

    By penalizing those who simply bid for very high prices (eg. top 10% of highest bidders are immediately disqualified). This perhaps could be an easy and immediate way to curb the unrealistically high COE prices. This makes those who can afford to bid very high to think twice before placing their bids.

  • Jacob

    Quit talking about rebates already. Why should other people pay for you through tax monies? Just stop the bidding by dealers first. That will remove one avenue of profiting by dealers. Then make individuals pay what they bid for. Next, reduce the cost of using taxis by making taxi business not-for-profit basis.

  • Wo King Tre

    I have school going children, and I cannot understand why a car is necessary when people have school going children? Have anyone noticed that roads are hardly clogged during school holidays? Have anyone noticed that areas around schools are choked up with inconsiderate parents stopping willy-nilly to drop off or waiting to pick up their kids? What’s wrong with letting kids take public transport or school bus to school?

  • Vinit S

    I support the idea of COE and the bidding process. It is a deterrent and that is how it should be treated. I also support the idea of penalizing two or more cars. I do not agree with the need of subsidizing families with kids, kids should take school buses to school.
    Cars do not make sense in a small city like Singapore. Also, a simple mathematical exercise proves that usually total costs of a car are higher than total costs of renting a taxi.
    On a related note, I propose the idea of scaling the traffic fines in line with annual incomes of the the violators (a system used in Switzerland). Then they will bite the rich.