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.

Strict measures are built into the COE system to deter speculation.

All COE bids made in the two car categories (Cat A and B) and the motorcycle category (Cat D) must be made in the name of the buyers. Once the COE is obtained, the vehicle has to be registered in the name of the bidder.  Therefore, there must be a genuine buyer behind each bid for these 3 COE Categories, and the buyer cannot subsequently re-sell the COE to another buyer to profit from a rising COE market. And to further prevent possible speculation, LTA’s regulations also specify that cars registered using Cat A and B COEs cannot be transferred within the first 3 months. Should the ownership of the car be transferred between the 4th and the 6th months, LTA would impose an additional levy to prevent any possible gain from a rising COE market.  

To provide some flexibility for those who require their vehicles urgently, successful COE bids in Cat C (Good Vehicles and Buses) and Cat E (Open Category) in the name of individuals are transferable. Even then, these can only be transferred once within the first 3 months. Successful bids by companies are not transferable at all.    

To discourage speculation, especially for the Cat E COEs, the COE rebate for vehicles registered using a Cat E COE is based on either the Cat E COE price or the price of the corresponding vehicle category that the deregistered vehicle falls into at the tender exercise that the Cat E COE was purchased, whichever is lower. Any pro-rated COE rebate is also subject to an 80% cap if the vehicle is de-registered for export within 2 years of registration.

Lastly, bidders are required to pay a bid deposit of $200 for category D (motorcycles) and $10,000 for all other categories, upon submission of a bid application. Successful COE bids in Categories A, B and D are valid for 6 months, while successful bids for Categories C and E COEs are valid for 3 months. These are known as "Temporary COEs" or TCOEs. If the TCOE is not utilised by its expiry date, it will lapse and the bid deposit is forfeited.

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.

The 5-year COE is a special concession for vehicle owners who for various reasons, at the point of COE renewal, do not wish to have their existing vehicles extended beyond the next five years. Therefore, the vehicle must be required to be de-registered at the end of the 5-year COE. This condition is clearly communicated to all vehicle owners upfront, and it is up to them to choose between the 5-year or 10-year options.  Allowing those who have renewed for 5 years the option to further renew their vehicles would provide these owners an advantage as they could possibly renew their COEs at lower costs should COE prices come down in 5 years’ time, which would be unfair to those who have chosen the 10-year COE renewal option.

The ARF and Road Tax are ownership taxes. The ARF also helps to keep the car population young as part of it is rebated through the Preferential Additional Registration Fee (PARF) at the point of de-registration if done before the age of 10 years.

In addition, both taxes build progressivity or social equity into car ownership. ARF is levied as a percentage of the Open Market Value (OMV) of the car while Road Tax is imposed based on the engine capacity of the car, which is a proxy for the value of the car.  As a result, buyers of more expensive cars pay more in ARF and Road Tax than buyers of cheaper cars.

Reduction in ARF and Road Tax may lead to a rise in the demand for cars. The COE prices may, as a result,  rise correspondingly or even higher to compensate for any reduction in ARF and Road Tax.

There were calls to replace the current COE system which uses the Lowest Successful Bid (LSB) method with a Pay-as-you-bid (PAYB) system to discourage unduly high bids.

Proponents of the PAYB system believe that some parties drive up COE premiums by submitting very high bids to secure a COE and that the PAYB system will discourage buyers from doing so. The Government Parliamentary Committee for Transport conducted a study on this in 1999 and recommended against implementing a PAYB system.  The feedback gathered from industry members and academics during the review revealed several drawbacks in the PAYB system. First, there could be confusion among buyers, sellers and financiers due to the differing values of cars with the same model and age. This method could also create incentive for motor dealers to collude to ensure that they bid close to the lowest successful price. Lastly, there could be an additional source of discontent among the successful bidders, as no one liked the idea of paying more than another person for the same item. Only the ones who paid the lowest premiums would be happy. This phenomenon is commonly known as the “winner’s curse”.

Success in a ballot is purely determined by chance. It can generate additional demand as those who are not in need of a vehicle may also choose to ballot even if they have no immediate plans to buy a car. This would reduce the chances for those who really need to buy a car.

The Vehicle Quota System (VQS) is part of our holistic approach to deal with congestion. Its objective is to control the growth of the vehicle population at a sustainable rate.

In the three years prior to the implementation of the VQS in 1990, the vehicle growth rate averaged 6.8% per annum. Between 1975 and 1990, the growth rate of the car population soared as high as 12% per annum in some years.

Following the implementation of the VQS, the vehicle population grew at an average annualised growth rate of about 2.8% between 1990 and 2008, which was well within the allowable growth rate of 3.0% set by the VQS for this period. Over the years, the vehicle growth rate has been gradually lowered to 1.5% p.a. in 2009 and 1.0% in August 2012, before being further reduced to 0.5% from February 2013, and 0.25% in 2015. 

In view of Singapore’s land constraints and our commitment to continually improve our public transport system , the vehicle growth rate has been reduced to 0% with effect from February 2018 for COE Categories A, B and D. The existing vehicle growth rate of 0.25% per annum for Category C will remain unchanged until 1Q2021, to provide businesses more time to improve the efficiency of their logistics operations and reduce the number of commercial vehicles that they require.

Without the control on vehicle growth, it is likely that a buoyant economy, coupled with the desire for car ownership, would have led to an explosive demand for car ownership.

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.