Should I renew my COE?

If you car is nearing the 10th year of it’s Certificate of Entitlement (COE), this question probably has crossed your mind.

Should I renew my COE?

If you decide to renew the COE (hence the renewed car is also known as COE car), you'll have to forgo the PARF rebate. Depending on the car’s Open Market Value (OMV), the PARF rebate may be substantial enough to make a downpayment for a new car.

There are also several other factors however, affecting a car owner’s decision whether to change or retain his/her car, such as his/her financial ability, current price of COE, changes in lifestyle (addition of new family members, resulting in the need of a bigger car), condition of existing car, etc.

In this article, we will present a straightforward comparison based solely on fixed financial costs.

At the end of this article, we want to determine 4 outcomes:

1. Initial cash outlay
2. Overall cash outlay
3. Monthly instalment
4. Price difference between a new car and a COE car.

These are the factors NOT included in our calculations:

1. Mileage
2. Exterior & interior condition of the car
3. Routine maintenance cost
4. Insurance

Case study:

Steve (our crew) has a KIA Cerato Forte 1.6 SX bought in 2009. The car’s COE expires in October 2019. If Steve decides to scrap his car in October 2019, he’ll receive a PARF rebate of $7025.

If he renews his car for another 10 years, he’ll have to forgo the PARF rebate of $7025. Steve’s car also has several fundamentally criteria issues that has to be fixed to be road worthy.

(Issues include faulty ABS sensor, handbrake light, air conditioning)

These are the working parameters.

1. COE Car is a KIA Cerato Forte 1.6 SX
2. New Car is a KIA Cerato 1.6 SX 2019 model
3. COE duration 10 years
4. Loan tenure is 7 years
5. Interest rates for New and COE car are 2.5% and 3.18% respectively

Detailed definitions and formulas are at the end of the article. Based on the above scenario, we are able to calculate the cost for the respective options.

These are the rebates available.

With the overall cost of a new KIA Cerato at $91622, and the cost of a renewed KIA Cerato Forte at $48192, the difference in price is $43430.

Looking to renew your car? We offer one of the lowest interest rates in the market. Talk to us today. :)

Calculations:

1. Loan tenure is the maximum duration of 7 years.
2. Initial cash outlay for New Car is the cost of downpayment after deduction of PARF rebate from the previous car.
3. Calculation of Overall cash outlay for New Car is as follows: Price of vehicle + Total interest + Road tax.
4. Price of COE car is based on the Prevailing Quota Premium (PQP) for August 2019. PQP can be obtained from LTA’s website.
5. Price of New car price is obtained from SG Car Mart.
6. Calculation of Initial cash outlay is as follows: Downpayment + PARF rebate from COE car.
7. Calculation of Monthly instalment is as follows: (Loan amount + Total interest) / 84 months.
8. Calculation of Total interest is as follows: Loan amount x interest rate x 7 years.