Should you Renew Your COE or Buy a New Car?
Is your car reaching its 10-year mark and you find yourself justifying what are the options – Whether to go through the process of renewing your COE or a seemingly easier alternative – to scrap the vehicle to buy a new one?
In most cases, car owners choose the latter route. Besides, who wouldn’t be happy and excited to drive a brand new car? However, here comes the complication – There is a progressive increase in car prices, taxes and additional surcharges over the years. In this case, the option of renewing your COE might be more practical and pocket-friendly.
Whether your car is reaching its expiration date or if you’re just curious, we hope this article guides you on considerations that renewing your COE may not be a bad option after all. Moreover, it is always better to access your choices – Matching your driving needs with your budget is important, and who knows? Your vehicle could work for a few more years longer than expected!
Let’s look at 5 factors to consider when considering whether to renew your COE or buy a new car
1. Buying a New Car Might Burn a Hole in your Pocket
Firstly, one of the most recognizable reasons why people choose to renew their COE rather than buy a new car is because it is a relatively cheaper option. Buying a new car requires one to bid for a new COE and fork out the vehicle’s full price, including the interest rates of taking a car loan. On the flip side, renewing COE only requires the payment for Prevailing Quota Premium (PQP), which is determined by the moving average of the COE prices during the last three months.
Nevertheless, to renew your COE, it means forfeiting your PARF rebates which could be valued at a few thousands of dollars. The PARF rebate (which also includes COE rebate) could possibly be used to pay off a fraction of the new car’s price.
All things considered, one should decide for themselves if their current car is sustainable enough to last through the new COE period. To put it objectively, it is pointless to renew a car’s COE if the vehicle is breaking down all the time and you end up having to spend more money paying off your repair bills. In short, remember to consider the long-term effects and don’t just renew your COE because of its seemingly lower upfront costs.
2. Lower Car Depreciation
The calculation of vehicle depreciation could be complexed; hence we have summarized with a table below. Let’s assume both vehicles are the exact same (price, make and model) and for COE and PQP values, this month’s COE bidding results would be used to illustrate.
New Car | Renew COE for your current Car | |
| Car Purchase | $79,988* (with COE) | NA |
| PQP | NA | $26,175 |
| PARF Rebate (Scrap Value) | Exclude : $6695* | Include: $6695 |
| Years of ownership | 10 | 10 |
| Depreciation per Year | $7329 | $3287 |
$4042 difference | ||
*based on estimated ARF of $13,390
To put things simply, vehicle depreciation refers to the value that your car loses along time as per which, the lower it is, the more ideal situation for you as the car owner. From the table above, it is clear to see that the annual depreciation is lower than buying a brand new car, considering the purchase prices and COE bidding.
The amount for car purchase and COE does not apply to a car with COE renewed since it has already been paid for, and only the PQP and PARF rebates that were given up will be used to calculate for depreciation yearly.
3. Should you look at 5 or 10 years for COE Renewal?
Now that we have covered the cost aspect, we look at the duration of renewing COE. To decide on the length of the renewal, ask yourself this question, “How much longer do I intend to drive this car?”
As explained in the previous point, you would only need to pay for the PQP when renewing your COE. This means, the amount is reduced by half when you choose to renew your COE for five years – A more workable option for the people who are not prepared for another 10 years of commitment or those who are anticipating to change their cars in a few years time.
4. You can still get COE rebates after your COE Renewal
It is possible to receive COE rebates after renewal! Although your car may not be eligible for PARF rebates anymore, you would still receive COE rebates if you decide to scrap or deregister it before its new COE term is due. Also, the rebate amount depends on your COE term balance, very much similar to a PARF vehicle.
For illustration, if you renewed your car’s COE for 10 years at $26,000 but decide to scrap it at its 5th year mark, you will receive $13,000 back in COE rebates upon deregistration. This essentially means, even after renewing your car’s COE, it does not mean your vehicle has completely lost its value.
5. 100% Loan for COE Renewal
It is possible to obtain a loan from banks or financial institutions like MoneyMax Leasing to renew your COE? You could fully cover your COE renewal with a 100% loan and unlike a regular car loan, where you can only get a 60-80% loan at most.
Logically, the repayment term for the loans differs according on how long you plan to renew your COE. For 10 years renewal, the maximum term is 7 years and for 5 years renewal, it is 4 years.
We hope these factors above have helped you recognise why renewing your COE might be a better option versus buying a new car. Ultimately, it is important to do an in-depth evaluation on your own needs and wants, and access what is within your reach.
At Money Max Leasing, we would be able to assist you with your COE Renewal Loan and Motor Insurance, to find out more, please contact us at 6280 0808 or 8133 3568. You can also email us via [email protected].
