Singapore’s Certificate of Entitlement System Explained
There is a Certificate of Entitlement System, also known as COE, in Singapore which acts as a quota to allow a successful car bidder to own, register, and drive a vehicle for up to 10 years. This system has been in place for almost 30 years, but a lot of residents are unsure about the specific details of it. In order to better understand how this system works, and what constitutes as a COE, check out the following guide below.
The Development of the COE
The COE was first developed in 1990, where a quota limit was established on vehicles in attempt to control an abundance of vehicle growth in affluent areas. Increasing road taxes did not prove to be enough, and therefore a quota system was established to keep vehicle ownership from getting way out of control. Too much gridlock caused residents to be largely unsatisfied, and so Singapore’s Public Works Department knew they had to do something about it.
The Certificate of Entitlement System was created in attempt to help all Singaporeans experience a better quality of life, where they would not be stuck in traffic for hours or be subjected to heavy amounts of road smog. The system has worked for a couple of decades since its establishment.
How it Works
Singaporeans cannot just purchase a new vehicle without placing a bid first. The LTA (Land Transport Authority) requires that all individuals bid for a COE before purchasing a car. The number of COEs given out each year is determined by the Vehicle Quota System, which can adjust according to populations and car use.
The Vehicle Quota System works on a series of conditions to determine how many COEs can be given out every 6 months. Typically, they will take certain things into account such as number of vehicles de-registered, growth in vehicle populations, and any adjustments in the COE system. Cancellations will also be taken into account. Using a specialized formula, the system then determines how you can get a car.
If a vehicle owner is granted a COE, they are allowed to use the vehicle for 10 years initially. After the 10 years has expired, they have to either get rid of their car or try to bid for another COE. If another COE is granted, they are given the remainder of the car’s lifespan, which counts as 7 more years.
When the 10 years has expired, the vehicle owner typically needs to choose between one of two options:
- Deregister the vehicle, meaning they will no longer have a car to drive and the car will no longer be in their name, or
- Bid for a new COE, the cost of which is almost always higher than the market value of the car itself.
It is somewhat of an emotional struggle when this time comes, and owners often think about bidding for new COEs so that they can keep driving.
The Auctioning Process
So now that we know that Singaporeans must go through an auction process to bid on COEs, how does the bidding actually work? The auctioning process is actually quite interesting, and it typically coincides with a regular schedule.
Most COE bids begin promptly on the first and third Mondays of every month. The period lasts for 3 days, ending on Wednesday. If there is a public holiday involved, the auction will be pushed back. Due to advancements in Internet technology, bidders can typically see their results within the same day on the auction website.
Bids are made for two distinct car categories: Cat A and Cat B. There is also a Cat C, which is for buses and goods transportation vehicles, and a Cat D, which is for motorcycles, but those go through separate bidding systems. The bids have to be done in the name of the person who intends on buying the vehicle. Then, they must see if their COE is granted. If it is granted, the vehicle becomes registered to their name and is not transferable.
Breakdown of Categories
Previously, it was explained that most vehicles are categorized between Cat A and Cat B. This is to help determine the age and validity of the car, and based on which, certain specific processes may have to be made. There are five total categories for all kinds of vehicles. Currently, the categories are situated as follows:
- Cat A: Vehicles below 1600cc, with an engine power lower than 97 kW
- Cat B: Vehicles above 1600cc, with an engine power higher than 97 kW
- Cat C: Buses, public transport buses, and goods transportation vehicles
- Cat D: Motorcycles
- Cat E: A free-for-all category, known as open, which includes everything except motorcycles
Historically, people will bid on a category based on what they can afford. Singaporeans must always keep in mind that COE prices are often higher than the market prices of the cars themselves, leading them to make some very difficult decisions about what to do with the car after the 10 year period is over. Bidding on a COE can be a big deal, and it can sometimes be difficult to get the exact vehicle that you want.
A Note on Car Growth
Recently, the past three years has seen a smaller car growth rate, but the increase of COEs has been permanently discontinued. This means that car deregistrations are still encouraged, as they were in 2008 due to the financial crisis, and a larger number of COEs cannot be given out due to the threat of overpopulation and gridlock. As of February 2015, the rate of COEs has not grown, but the bidding system is still in place.
This is especially the case for personal cars and motorbikes. More room must be left for commercial vehicles and goods transportation vehicles. The process of applying for and obtaining cars is constantly in review by the government and will continue to fluctuate based on the economic and population needs of Singapore.
There are financial incentives given to people with cars that are over 10 years old. The financial incentive is to help them deregister their cars, sending them to scrap fields to make room for newer vehicles. This is known as the Preferential Additional Registration Fee (PARF), and it has helped to greatly reduce traffic congestion and make more positive road usage.