# Certificate of Entitlement

The Certificate of Entitlement or COE is the quota license received from a successful winning bid in a sealed bid uniform price auction which grants the legal right of the holder to register, own and use a vehicle in Singapore for a period of 10 years.

## History

On 1 May 1990, the then transportation unit of Singapore's Public Works Department (PWD) instituted a quota limit to vehicles called the COE when rising affluence in the city-state catapulted land transport network usage and previous measure to curb vehicle ownership by simply increasing road taxes was ineffective in controlling vehicle population growth. The premise was that the small city-state had limited land resources and with demand for vehicle ownership spiralling out of control, would result in traffic conditions exceeding the criterion of a healthy road network that is sustainable by developments in land transport infrastructure resulting in gridlock. Along with a congestion tax called Electronic Road Pricing, the COE system is one of the key pillars in Singapore's traffic management strategies that aims to provide a sustainable urban quality of life for her citizens.

## System

Before buying a new vehicle, potential owners in Singapore are required by the Land Transport Authority (LTA) to first place a monetary bid for a Certificate of Entitlement. The number of available COEs is governed by a quota system called the Vehicle Quota System (VQS) and is announced by LTA in April of each year with a review in October for possible adjustments for the period of one year starting from May. Approximately one-twelfth of the yearly quota is auctioned off each month in a sealed-bid, uniform price auction system and successful bidders pay the lowest winning bid.

### Vehicle Quota System (VQS)

The number of COEs available to the public is regulated by the Vehicle Quota System (VQS) that is calculated every 6 months based on the following conditions:[1]

1. Actual number of vehicles taken off the roads (i.e. number of vehicles de-registered)
2. Allowable growth in vehicle population
3. Adjustments arising from temporary COEs that have expired or were cancelled.

#### Formula

Since the change in the total motor vehicle population is given by the number of registrations minus the number of de-registrations and any unallocated quota in a given year may be carried over to the following year, the quota formula[2] is as follows:

$(\text{Total COE Quota})_{qy} = g.(\text{Motor vehicle population})_{y-1} + (\text{Projected de-registrations})_{y} + (\text{Unallocated quota})_{qy-1}$

In the formula above, the subscript $y$ denotes calendar year and the subscript $qy$ denotes quota year (May to April). Initially, projected deregistrations for (calendar) year $y$ were simply taken to be equal to actual deregistrations in $y-1$ but from quota year 1999-2000 onwards, a projected number of deregistrations has been used.

Each year, the quota is set to allow for a targeted $g$ percent growth in the total motor vehicle population, plus additional quota licenses to cover the number of motor vehicles that will be deregistered during the (calendar) year, plus any unallocated quota licenses from the previous quota year.

### Validity

The holder of a COE is allowed to own a car for an initial period of 10 years, after which they must scrap or export their car or bid for another COE at the prevailing rate if they wish to continue using their car for a further 5 or 10 years.

At the end of the 10-year COE period, vehicle owners may choose to deregister their vehicle or to revalidate their COEs for another 5 or 10-year period by paying the Prevailing Quota Premium, which is the three-month moving average of the Quota Premium for the respective vehicle category.. You do not need to bid for a COE to renew the existing COE of your vehicle. A 5-year COE cannot be further renewed, which means that at the end of a 5-year COE, the vehicle will have to be de-registered.

### Auction Process

COE biddings starts on the first and third Monday of the month and typically lasts for three days to the following Wednesday. Bidding duration will be pushed further in some circumstances, including public holidays. Bidding results can be obtained through the local media on the same day or on a website.[1]

All COE bids made in the two car categories (Cat A and B COEs) and the motorcycle category (Cat D COEs) must be made in the name of the buyer. Once COE is obtained, the vehicle has to be registered in the name of the bidder, i.e. Cat A, B and D COEs are non-transferable. To provide flexibility, successful COE bids in the Cat C (Goods vehicles and Buses) and Cat E (Open Category) in the name of the individuals are transferable. However these can only be transferred once within the first 3 months, while successful bids by companies are not transferable at all.

An additional restriction on car ownership is the requirement that motor vehicles more than ten years old, known as 'time expired' vehicles, must be either renew the COE for either 5 or 10 years or de-register the vehicle for scrapping or exporting from Singapore, usually to neighbouring countries. For vehicles which have a renewed COE for 5 years the owner of the vehicle has to scrap the vehicle at the end of the period with no option to renew the COE.

Some of these vehicles have been exported farther to other right hand drive countries like New Zealand, which has traditionally imported such vehicles from Japan. The result of the peculiarities of the Singapore car market has resulted in Singapore being the second largest exporter of used cars in the world after Japan. Cars are exported to many countries, including Libya and Trinidad.[3]

Owners of such vehicles are given financial incentives to do this, which include a Preferential Additional Registration Fee (PARF). This program was implemented to reduce traffic congestion and it complements other measures to curb road usage such as the Electronic Road Pricing (ERP) program.

### Categories

Initially, COEs were divided into 8 categories but after many revisions, the system has been simplified to just five categories. Categories A, B & D are non-transferable. Taxis used to be classed under category A but issuance of COEs became unrestricted from August 2012 onwards.[4]

Prior to May 1999

Category Vehicle Class
Cat 1 Cars 1000cc & below
Cat 2 Cars 1001-1600cc & Taxis
Cat 3 Cars 1601-2000cc
Cat 4 Cars above 2000cc
Cat 5 Goods Vehicles & Buses
Cat 6 Motorcycles
Cat 7 "Open" (for any kind of vehicle)

Current Categories

Category Vehicle Class
Cat A Cars 1600cc & below
Cat B Cars 1600cc & above
Cat C Goods Vehicles & Buses
Cat D Motorcycles
Cat E "Open" (for any kind of vehicle)

## Historical Records

March 2009 2nd Open Bidding

A (1600cc and below), taxi S$5,116 S$4,890 S$226 B (1601cc and above) S$5,001 S$5,101 S$100
C (Goods Vehicle and Bus) S$5,600 S$5,300 S$300 D (Motorcycles) S$912 S$958 S$46
E (Open) S$5,982 S$5,700 S$282 April 2010 1st Open Bidding Category Current Quota Premium Previous Quota Premium / Difference A (1600cc and below), taxi S$34,001 S$28,389 S$5,612
B (1601cc and above) S$45,501 S$36,089 S$9,412 E (Open) S$49,000 S$42,001 S$6,999

December 2011 1st Open Bidding [5]

A (1600cc and below), taxi S$50,001 S$52,357 S$2,356 B (1601cc and above) S$70,003 S$72,317 S$2,314
E (Open) S$71,000 S$74,345 S3,345 ### Vehicle growth rate Period % Remark May 1990 to May 2009 3.0 3.0% + deregistrations as per last annum Jun 2009 to Jun 2010 1.5 Reduced to 1.5% + deregistrations as per last annum, partly due to low price COE Jul 2010 to Jul 2012 1.5% as per last annum + recent half-yearly deregistrations, rate are extended to July Aug 2012 to Jan 2013 1.0 Taxi are moved to Cat E Feb 2013 onwards 0.5 Expected to last till Jan 2015 From April 2010, the COE quota calculation was amended. Under the new methodology, the Land Transport Authority (LTA) recycles the COE quota from the actual vehicle deregistrations in the most recent six-month period back into the system. Instead of an annual quota, figures will be revised every six months. For example, there are 800,000 vehicles as of January. Based on the allowable growth rate of 1.5 percent, there will be an additional 6000 COEs for sale every six months. On top of the number of vehicles deregistered in the same period (for example, 20,000) this means the COE quota for July to December will be 26,000. In early October 2011, Singapore Minister for Transport Lui Tuck Yew has said that Singapore's annual vehicle growth cap would be cut further from 2012. The annual vehicle population growth rate will be lowered from the current 1.5% to 1.0% in 2012, and then to 0.5% in 2013 and 2014. The lower vehicle growth rate will be more closely aligned to the pace of road growth going forward. However, in May 2012, Lui Tuck Yew did an about turn and said that more COE may be released and the plans to quotas cut car growth would be delayed. ### COE range Previous Category Highest Lowest1 Current Category Highest Lowest Remarks May 1990 - Apr 1999 SGD Period SGD Period From May 1999 SGD Period SGD Period Cat 1 (1000 cc & below) 41,008 Jul 1997 210 Feb 1991 Cat A3 92,100 Jan 2013 2 Nov 2008a a. Major historical plunge partly due to 2008 financial crisis and over-projections of vehicle de-registrations in 2008/09 b. Major historical plunge partly due to 1997 Asian financial crisis Cat 2 (1001 - 1600 cc) & taxi 62,208 Jul 1997 909 Mar 1991 Cat 3 (1601 - 2000 cc) 83,500 Dec 1994 50 Jan 1998b Cat B 96,210 Jan 2013 200 Jan 2009a Cat 4 (2001 cc & above) 110,500 Dec 1994 800 Apr 1991 Cat 5 (Goods Vehicle & Bus) 39,000 Dec 1994 1 Apr 1991 Cat C 63,035 Dec 2012 1 Dec 2006- Mar 2007c c. Partly due to strict emission standards from Oct 2006 Cat 6 (Motorcycle) 3,506 Aug 1997 1 Jan 1994, Feb 1994d Cat D 2,604 Mar 2011 1 Nov 2002- Mar 2003d d. Mainly due to higher quota and lower than minimum bidders Cat 7 (Open) 95,986 Dec 1994 998 Mar 1991 Cat E 97,889 Jan 2013 3,200 Jan 2009 - Cat 8 (Weekend Car)2 45,300 Sep 1994 1,110 Oct 1991 OPC COE rebate up to17,000

1. Excluded initial quote for first 3 months (May~Jul'90). Previous lowest record due to higher quota for year 1991
2. It was stopped on Sep 1994, the scheme was replaced by the Off-Peak Car rebate
3. Taxi are moved to Cat E from Aug 2012

### Average vehicle pricing

Detailed cost structures when buying a car can be found at this site.[2]
All prices are in Singapore dollars dated March 2012

## Criticism

The COE system has received the following criticisms:

• The auction-style system that the COE system is based on favors the wealthy who can afford to bid with higher prices for COEs and the wealthy elite who can even afford a few COEs for multiple cars they own, while lower income families, which need a car more, are forced to pay the COE prices that are driven up by demand.
• The COE prices vary from month to month and the differences can be in the tens of thousands of dollars.
• Critics have suggested that the system could be changed to a pay-as-you-bid model such that successful bidders would pay the same figure they bid rather than pay the lowest bid among all the successful bidders.
• The COE system discourages car owners from keeping road-worthy cars, because COEs expires after 10 years and needs to be renewed by paying a Prevailing Quota Premium. In addition, there are financial incentives for scrapping or exporting a car before it's COE expires. As a result, Singapore roads are overwhelmingly populated by models under 10 years old, and this causes the nation to have a very low population of classic cars that are valuable from a historic standpoint, compared to the high proportion of culturally insignificant economy cars.
• The COE system does not factor into account why the person wishes to own a car by need. For example if a businessman was using the car to drive for business purposes then the usage of the vehicle becomes an element of the business model. Having high COE prices discourages growth of a business which is reliant on vehicular transport, although land transport costs typically form only a small component (about 1.5%) of business costs for manufacturing companies in Singapore.
• COE also impacts transportation businesses which have a fleet of vehicles.
• Only by addressing why the owner of the car needs the vehicle can a more robust system be developed to cater for the public. If the vehicle was required for the person to commute in from Malaysia, for example, the person may end up having to pay a COE sum which amounts to more than the value of the car.
• COE system also discourages growth markets such as accessories for cars and car restoration projects.

## References

1. ^ "Overview of a Vehicle Quota System". Land Transport Authority of Singapore. Retrieved 24 January 2013.
2. ^ Ling, Hui Tan (September 2001). "Rationing Rules and Outcomes: The Experience of Singapore's Vehicle Quota System". IMF Working Paper: 5.
3. ^ Farah Abdul Rahim (2005-10-23). "100,000 used Singapore cars expected to be exported this year". Channel NewsAsia.
4. ^ "Taxis out of COE bidding process from August". Channel News Asia. 27 July 2012. Retrieved 27 February 2013.
5. ^ Royston Sim (2011-12-21). "Certificate of Entitlement premiums fall for all categories". Straits Times: Motoring, A Singapore Press Holdings Website.