Frequently Asked Questions

COE prices are determined by the interaction between demand and supply at each bidding exercise.

Demand can be affected by factors like the economic climate (whether the economy is rapidly growing or in financial recession), launch of new vehicle models, and competition among vehicle manufacturers among others. Supply of COEs is influenced by the allowable vehicle growth rate and the number of replacement COEs from vehicle deregistrations. The latter forms the bulk of the COE quota. Supply and demand are also related in that a significant portion of the demand will come from existing car owners who have or will deregister their existing cars around the same time.

The COE system helps prevent our roads from being gridlocked by setting a quota on the number of new vehicles to be registered in Singapore each year.  Once the COE quota is fixed, the COE price is determined by market forces such that demand can match the supply available. The lower the demand, the lower the COE price and vice versa. To intervene and manage the price of COEs will lead to a situation where we would have to release more COEs if COE prices rise significantly. Doing so would undermine the larger transport aim of having the vehicle population grow at a sustainable rate and preventing gridlock.

The objective of the COE system is to control the growth of the vehicle population by limiting the number of COEs available each year. It already has progressive elements. For example, there are separate COE categories for small cars and big cars, so that buyers of small cars and big cars do not bid against each other. Purchasers of bigger or more expensive cars also pay more in Additional Registration Fee (ARF) and Road Tax than other buyers.

The COE system does not judge which households deserve to own cars. Any administrative allocation or preference for COE allocation would have to take into account the diverse and varied circumstances of each household.  For instance, a certain household may be buying their second car but it could be for the wife to send her sickly elderly mother for medical checkups. With the many possible variations of reasons, such a system would be difficult to administer as every household will deem that they are more deserving of a COE than others. To keep the system simple and meet the objective of managing the vehicle population, we let market forces determine the allocation of individual COEs in an open and transparent way.

LTA determines the number of COEs to release for bidding based on a 6-monthly cycle. The 6-monthly COE quota consists of:

a. Provision for vehicle growth, which is currently 1.5%
b. Replacement COEs for vehicles de-registered over the preceding 6 months
c. Adjustment for over-projections of vehicle de-registrations in 2008/2009 (up to January
 2014 only)

The bulk of the quota comes from the replacement COEs, and LTA provides monthly updates on the de-registration figures. Click here for the latest 6-monthly quota.

The current open bidding system for COE gives all bidders the same access to the prevailing bid price (otherwise known as current COE price) so as to allow them to make informed decisions on their bid.

Vehicle buyers can already bid for the COE themselves under the current system. However, most buyers choose to get motor dealers bid on their behalf. They may do so for various reasons, such as convenience, and possibly a better overall package deal for the vehicle.

Even when a buyer decides to bid through the motor dealer, he would ultimately be in control as the dealer cannot simply pass on any increase in COE premiums to the buyer unless the buyer agrees to an increase in the purchase price of the car.

Given the land constraint in Singapore, there is insufficient space to accommodate a high level of car ownership. In fact, the land area currently taken up by the road network is already about 12%, comparable to that used for housing (14%). 

If the VQS were to be discarded and we were to rely only on road pricing to manage traffic congestion, ERP charges would have to be very much higher than today’s rates in order to achieve the same level of traffic restraint. A much more extensive coverage of ERP would also be needed. These would have an adverse impact on businesses, especially transportation or freight forwarding companies and retail businesses in the Central Business District (CBD). Being recurrent and charged on a daily basis, high ERP charges may be more unacceptable than a one-time high upfront ownership cost.

Therefore, a two-pronged approach should be retained i.e. VQS to control the growth rate of the vehicle population and hence the overall demand for road space; while ERP manages congestion on specific roads/areas by restraining vehicle usage.