MORE car owners are choosing to keep their vehicles for more than 10 years, with 3,949 cars getting their certificates of entitlement (COEs) revalidated in the first five months of 2024.
This is close to the figure for the whole of 2023, when 4,403 cars saw their COEs revalidated.
It is also 74 per cent more than the 2,270 revalidations made in the same period in 2023.
In comparison, there were 15,946 car deregistrations made between January and May 2024. This is 46 per cent more than the 10,928 units in the same period in 2023.
Industry experts said that COE revalidations are up because owners who still want a car are finding it more attractive than forking out bigger sums for a new car.
Historically, revalidations of Category A COEs, which are for smaller, less powerful cars and electric vehicles (EVs), have outnumbered revalidations for larger cars and EVs (Category B).
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There were 2,396 Category A COE revalidations made in the first five months of 2024, up from 1,006 for the same period in 2023.
Of the 2,396 revalidations, 1,421 were five-year revalidations, a significant hike from 474 such revalidations in the same period in 2023.
A COE, which has a 10-year lifespan, is required to register and own a car here.
Owners can opt to revalidate the COE for either five or 10 years to continue using the vehicle. This can be done before the COE expires, or up to a month after it is due.
The cost of revalidating a COE for 10 years at any given month is the average COE premium of the preceding three months. A five-year revalidation costs half as much.
COE revalidations have been on a downward trend since peaking in 2019. After 41,777 car revalidations in 2019, there were half as many – 20,071 – in 2020, in the wake of the Covid-19 pandemic and COE tender exercises being suspended for three months.
As COE premiums rose markedly post-pandemic, revalidations went further south, plunging to 4,403 in 2023.
While there were fewer cars reaching the end of their COE lifespan compared with the years before the pandemic, deregistrations have increased in 2023 to 29,089 cars, from 24,089 in 2022. At the peak in 2016, 88,317 cars were taken off the road.
Automotive industry consultant Vincent Ng expects the number of COE revalidations in 2024 to exceed that in 2023, as there were more new cars registered 10 years ago in 2014 than in 2013.
He also said consumers have come to accept that new car prices are not coming down soon because COE premiums will remain at the current high levels.
“So car owners who want to continue having access to a car would consider revalidating the COE, given the high car prices,” he noted.
A new Toyota Corolla Altis cost more than S$158,000 in May 2024, compared with S$84,550 to revalidate the COE for a comparable family car that has already been on the road for 10 years.
Walter Theseira, head of the urban transportation programme at the Singapore University of Social Sciences, called COE revalidation a “no-loss bet” because the owner can get a refund on the value left on the COE if the revalidated car is scrapped at any point.
“In contrast, you lose a lot due to depreciation on the market value for a new car, so even though the scrap strategy also exists for a new car – as in, you scrap the car if COE prices fall a lot – it doesn’t make as much financial sense,” Theseira added.
Taking a broader view, Theseira said revalidations reduce the turnover of cars, so it will directly prevent the supply of COEs from increasing.
Under the current method, the COE supply for a given three-month period is mainly determined by the average deregistration rate over a rolling four-quarter period.
This means that any speed hump that slows the recovery of the COE supply – like rising revalidations – will also dampen the chance of COE prices coming down. The impact may be felt only months later because of the delay between deregistration and the COE being added to the new supply period.
Consultant Ng believes that some “stumbling blocks” should be introduced to discourage perpetual 10-year revalidations, like more tax penalties on older cars or setting a statutory age limit for passenger cars.
This would make it less attractive to keep cars that are older than 10 years old. In this way, there is a certainty that the COE will be returned into the system for bidding.
Cars with five-year revalidated COEs have to be deregistered at the end of that term.
Currently, owners of cars that are 10 years or older have to pay a surcharge on the standard road tax, increasing by 10 per cent every year. The increase is capped at 50 per cent.
Jeremy Soh, chief executive of Ricardo Group, an automotive after-sales specialist, described the situation as a “vicious circle”, as revalidations effectively delay the recycling of COEs that go into the supply for bidding.
This tends to keep COE prices up, which then nudges more owners to revalidate their certificates.
Agreeing with Ng that more COE revalidations are to come, Soh noted that a scheme updated in 2015 was to give as much as S$20,000 in rebates to incentivise cleaner emission vehicles. Owners of such vehicles would forfeit very little scrap rebate when extending the use of a car beyond 10 years.
For example, a 2015 Toyota Prius will only qualify for a scrap benefit of S$2,500 if it is deregistered in its 10th year because of the generous incentives given when it was registered. Without the incentives, the scrap rebate would have been S$12,000.
Soh, whose company also offers car maintenance and vehicle financing, projects that there will be more cars with low scrap rebate values that are due to expire in the coming years, and it is not unreasonable to expect their owners to consider revalidating, especially as new car prices continue to be unaffordable for many.
Modern vehicles, Soh added, are also robust enough to easily last beyond their first COEs.
He considers cars with revalidated COEs as part of the overall landscape because they are just more affordable than new cars.
Despite the increase, Theseira said that COE revalidations are uncommon overall.
This is not just because of financial considerations like forfeiting the scrap benefit and paying higher road tax, but also the social image of having an older car. THE STRAITS TIMES
