Scrap vs COE renewal: When, why and how?

Car ownership in Singapore is prohibitively expensive. Revalidated COEs do offer a cost-effective outlet to own a vehicle well into the next decade, but is it always the best option?

There are several key factors to take into account before deciding if you should scrap your car , or renew its COE. Overall condition, mileage and parts availability all play a part in determining if it’s worth it to keep your existing car on the road for another decade.

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Why do new cars depreciate more?

New cars suffer from a deterioration of body value regardless of their geographical location. It is estimated that the instant you drive a car out of the showroom, it can lose up to 10 per cent of its sticker price.

It then continues to accumulate wear and tear, all whilst the automaker is coming up with updated and/or all-new models to replace the car you already have. In fact, you can safely anticipate a theoretical body value loss of up to 15 per cent a year, up till the sixth year mark.

There’s the whole COE malarkey thing to deal with here too, which can either mask the true body value loss, or, and more typically, exaggerate its depreciation.

Renew your COE if - your car is in good working order

Modern cars are more durable than what most people give them credit for. It isn’t uncommon to see more robust Japanese commuter cars overseas routinely hitting mileage figures north of 200,000 kilometres on their original engines and transmissions.

You can attribute part of the reliability to robust Japanese engineering, but these cars typically also have one thing in common - a comprehensive service history. Regular maintenance is cheap insurance against catastrophic engine failure, crucial for mechanical longevity!

If in doubt, get your car inspected by a qualified mechanic to discern its true mechanical health. When/If given the all clear, you can go ahead and source for a reputable finance company (if needed!) to revalidate your COE!

Renew your COE if - you own a common car

With an older car, parts availability can become a real concern. If you own a fairly common car, chances are that parts will be a lot easier to track down should you need them. Afterall, these are the vehicles that already have robust aftermarket parts support networks.

Obscure cars may have a certain charm and ‘cool’ factor, but the reality is that in a shunt, you’d not have a car to use as your mechanics comb the web to track down replacement parts. Unless there’s historical and/or collector’s value, you’d be better off scrapping your car.

ALSO READ: How to scrap your car, and how much money you’ll get back

Renew your COE if - it is of a premium marque

Taste is highly subjective, but you can’t deny that higher-spec cars tend to visually age more gracefully than their more mass-market counterparts. With the correct visual tweaks, a luxury/sports car from the mid-2010s can still look fairly modern.

In this context, it makes sense to renew your car’s COE, as you get to enjoy that premium look and feel for the price of a brand-new economy car. Do be warned though - an expensive car when new may be more affordable to purchase upfront right now, but parts of these cars will still be that of a ‘premium’ car - so you have to pay that ‘luxury tax’ to keep them on the roads!

Scrap your car if - it has a dodgy past

Dodgy takes on many different forms. It perhaps could have suffered from years of neglect from  infrequent maintenance, or have had a massive accident at some point, which was then repaired poorly.

In either scenario, you’d be looking at potentially incurring significant extra costs to isolate and rectify issues that may pop up as a result of your car’s seedy past - unless you are good mates with a reputable mechanic, individually solving these problems can cost more money than what the car is actually worth as scrap.

ALSO READ: 7 things to know before scrapping or exporting your car

Scrap your car if - it has significant PARF rebates

Renewing your COE means giving up on the PARF rebates. This is a sum of cash you’ll receive for taking your car off the road before the 10 year mark. PARF rebates include your car’s pro-rated balance COE value at the time of deregistration. Combined, especially if your car has been originally registered in times of high COE, the rebate sum could be significant - think in the high thousands. This sum of cash can be better put towards the down payment of a new car with a factory warranty for a greater peace of mind.

It pays to not be penny wise and pound foolish. Whilst it is true that cars with a revalidated COE suffer from a more gradual depreciation curve, it does not always translate into long-term cost savings. Costly repair items may add up, negating the very financial advantage you were seeking in the first place.

Scrap your car if - it has a large capacity engine

Older cars tend to have larger engines to produce the same power levels of modern vehicles with smaller, turbocharged motors. The larger engines attract higher road tax charges to begin with, a problem that is made worse, as revalidated cars will suffer an increase in road tax charges.

Unless it's a performance car, or a collectible classic, opting for a modern substitute will save you a fairly sizeable chunk of change in the long run. The increase in road tax is actually fairly significant, incurring an additional 10 per cent road tax annually, capped at 50 per cent.

Look at it this way, a Nissan GT-R would have a pre-COE renewal road tax of $3,636. At the 15th year mark, you’ll be paying $5,454 annually - not an insignificant amount of money!

So should you scrap, or renew?

If your car is mechanically sound, there's no reason why you shouldn't renew your COE. With no reduction in body value annually, you're only paying for the degradation of the remaining COE validity, which would present a significant saving over buying new.

If your car is already developing several major faults, and looks to be due for a major mechanical overhaul, perhaps consider scrapping your car instead, using the PARF rebate to offset the down payment of a new car. With car prices as high as they are today, perhaps you should consider shopping used to land yourself a more affordable replacement should your current car be not up to the task for another decade of motoring!

This article was first published in Motorist.