COE renewal after 10 years - Car owners, should you even bother?

Singapore is probably the only country in the world where cars are so expensive that owning a Toyota Altis can be considered a luxury. If that wasn't bad enough, your car will be de-registered after 10 years unless you pay for COE renewal. Even cats and dogs live longer than cars in Singapore!

But, there's no use complaining. This is the law in Singapore and there's no loophole to get around it. So what are your options once your car has been around for 10 years? Here are 3 things you can do.

1. SCRAP THE CAR AND BUY A NEW ONE

I suspect this would be the option most of you would choose. Once you have experienced the sheer convenience of having your own means of transport, it's very difficult to be convinced to give it all up and subject yourself to the risks of public transport.

A car becomes less of a convenience and more of a necessity for several types of people. These include families with small children, those who work in out-of-the-way locations like Jurong Island or other industrial estates, those who work till late or are on the night shift.

Yes, for these, even with the still ridiculous COE prices might not put them off getting a brand new car. Just be prepared to pay around $100,000 for a new set of wheels. Hopefully, your current car isn't 10 years old yet, and there's still some PARF value that you can get out of it to help you offset the cost of the new car.

You'll have to set aside at least $30,000 as a down payment, but can take a loan for the remaining amount. Assuming you get the best car loan with an interest rate of 2.78 per cent. That still comes up to a repayment of almost $985 a month over 7 years.

And that's not including all the other costs you'll incur through the years like maintenance, insurance and road tax, to name a few.

2. RENT OR LEASE A CAR

If you've been wondering if it's better to lease or buy a car in Singapore, it boils down to four questions you should ask yourself.

Do you need the car urgently and can't afford the down payment?

Are you not planning to stay in Singapore for long?

Do you intend to stop driving in a few years?

Do you want to indulge in a luxury model?

If you answered yes to any of these questions, then when you de-register your 10-year-old car, consider renting or leasing a car in its place. Renting or leasing a mid-sized sedan would set you back by $1,600 to $1,800 a month. This is mainly because the cost includes insurance, road tax and even full vehicle maintenance.

3. PAY THE PREVAILING QUOTA PREMIUM AND RENEW COE

Right now, there are two options available if you want to keep your current car and pay the Prevailing Quota Premium to renew your COE. Do note that if you take this route, you will forfeit the remaining PARF value of your current car.

How to renew COE? You can either pay 50 per cent of the Prevailing Quota Premium and renew your COE for 5 years, or 100 per cent of the Prevailing Quota Premium and renew it for 10 years.

Using figures from the recently-closed exercise in April 2019, the Prevailing Quota Premium is $29,159 for Category A and $43,102 for Category B.

That means, if you only need your car for 5 years, this could set you back by a little more than $14,500 for Category A or $21,500 for B.

If you need your car for 10 more years, you'll have to pay $29,159 for Category A and $43,102 for Category B.

Since you're just renewing your COE and not actually buying a new car, you will not be eligible for the usual car loan. There are some exceptions though, such as the UOB COE Car Loan and Maybank's car loans. Be extra cautious about some companies that claim to offer a "COE loan" - always pay attention to the terms and conditions of any loan before you sign on the dotted line.

If you don't want to take any chances, one other option you have is taking a personal loan from any bank.

How much you can loan depends on your income. While you can technically loan up to 4 times your monthly salary, the exact amount would be dependent on whether you have any other credit facilities (like credit cards) with the bank.

In other words, unless you're earning $10,000 a month, you can forget about taking out a big enough personal loan to pay off the full Prevailing Quota Premium. (And if you're earning that much, then you probably don't even need to take out a loan at all!)

But keeping your car for 5 years? Now that's within reach…

Say you want to keep your Category A car for 5 years and your monthly income is $5,000. By doing COE renewal, you need to pay a bit more than $14,500, or 50 per cent of the Prevailing Quota Premium. The bank allows you to loan up to $20,000 over 5 years. That means you'll repay as little as $312 per month over the next 5 years.

The immediate savings of this choice is obvious. Your monthly repayment amount is half that of a car loan for a new car, and the down payment is a fraction of it. It's also much cheaper than renting or leasing a car, and you'll get to keep driving a familiar set of wheels.

Of course, this is assuming that you've been diligent in maintaining your car over the past 10 years. If you've been slacking off on your oil changes or your regular car servicing routine, then the chances of your car surviving for another 10 years are slim. Even if you find the best interest rates using a personal loan comparison tool, all your savings will probably end up paying off your repair bill.

On the flip side, it's also important to note that if you have kept your car in tip top shape and only renewed your COE for 5 years, no manner of begging or weeping is going to get LTA to allow COE renewal again at the end of 5 years just because you decided not to renew it for 10 years. On the other hand, should you renew it for 10 years, you will be allowed to renew it again (should you wish) after those 10 years are up. Weird? Yes. But too bad.

This article was first published in MoneySmart.