COE Renewal for 5 Year or 10 Years?

You would like to keep your car on the road, but do you apply for a 5 year or 10 year COE renewal? Does the interest rate on available loans affect your decision? Some other factors are even more important and will outweigh the cost of 0.5 or 1.0%% difference in interest!

First and foremost is the LTA rule that after a 5 year renewal for cars (Cat A and Cat B and cars originally registered under Cat E), there is no further renewal allowed, even if your vehicle is in good running condition. If you didn’t know this, then it must come as quite a shock, and so your decision would have to be carefully made. But besides that, these are some of the other factors that you may have to consider before making that decision.

Price of the PQP

Can’t believe, I missed this one out and only came back to this after writing the below points! Of course the current PQP level (you can check it online by clicking the link)  plays a big part in your renewal consideration.

If the PQP is higher than a new COE, then maybe a new car makes sense? Yes, sometimes it happens when the COE for new cars drop, but don’t forget, a new car COE is yours only if you have already secured it – if not secured, then by the time you run to the dealers and bid the next round, you are likely to be facing an increase in the COE levels prompted by the rise in sales generated from the news of the COE having fallen. Know also this fact, PQP need not be bid for, you only need to pay it and it is calculated from the past 6 bids (3 full months).

So don’t be too quick to decide to jump to the new car side! Some people regret it later on.

However, if the current PQP is high, and you foresee a sustained reduction in the COE values in your category, then by all means, go to new cars. Then again, COE levels are like the stock market, never predictable. Just look at Cat C jumped from a recent low of $26k level to the $40k level within 4 bids, jumping $4-8k per bid even with the threefold announced increase in Cat C quota by the LTA.

Mileage and Condition of the Vehicle

No-brainer, but yes, if the car has only 30,000km on the speedometer (unbelievably low for 10 year old vehicle, but yes, we have encountered this before), then it’s quite clear that most items should be in good order and that you do not foresee many problems in the coming years. To be safe, find a trusted mechanic to assess the car and tell you about the possible items that you need to change on it should you go ahead with COE renewal.

One more point, if it is renewed, then in our experience, the local workshops we have are able to source for Japanese car parts more readily and cheaply than for most continentals, making overall maintenance cheaper. So if your’s is a Japanese sedan, give yourself a one point in the “To Renew” column. If your car is a continental, then Mercedes-Benz’s are known for lower parts cost compared with BMW and Audi (Audi, generally speaking, being most expensive). So Mercedes tend to be alright for renewal from a reliability and maintenance cost perspective as well.

Car versus Van or Lorry and Collectors Value

Mostly by default, commercial vehicles will go for a 5 year PQP. This is because the LTA allows them to be further renewed when they come to 15 years old. So most commercial vehicles should go for the 5 year choice, unless the PQP for Cat C goes to a ridiculously low level that you do not foresee will be the case 5 years down the road.

However, very important to note is that cars are not allowed any further renewal once they are renewed for only 5 years. If you choose a 5 year renewal, at the end of the 5 years, you are legally required to scrap the vehicle. So if you intend to keep it for good and maybe one day becoming a collectors item (like the Jaguar E-Type, Volkswagen Beetle or Kombi or more recent examples like the RX7 or NSX and even Civic EK9), then you must go for the 10 year renewal. Some of these rise in value over time!

PARF Value

Many are aware that once the car is renewed and goes past the 10 year mark, the PARF value of the car is lost (or considered paid) as part of the cost of renewal.

Then you need to consider for what reason you are renewing the car – collectors’ value or budget savings. Most Porsche owners don’t bat and eyelid and consider 10 year renewal a foregone conclusion, giving up the PARF freely. However, if the car has not such a strong brand image and following, then would you lose, say, $20,000 for an Odyssey 2.4A?

Or if you are the fortunate few who own a budget OPC car, your OMV can be as low as $3k or thereabouts, it is easy to take the plunge and renew because the loss is minimal. Alternatively, if you are not sentimental towards your car, then you can look around for a similar OPC one and renew with that and scrap the one with the higher PARF value, saving thousands in the process! OPC cars also tend to be lower in mileage, but a caveat here, when you switch cars there is a chance you get one with some faults that are not fixed, and the vehicle may not be as well maintained as your own. So do look around carefully when you shop.

Super-duper Low Budget Car

We always calculate a COE car’s (cars above 10 years are called COE cars) depreciation by this:

[COE PQP + PARF]/No. of Years COE left = Depreciation

So how do you get a super low depreciation car? By not having any PARF value to give up! How is that possible? Well, renew it for 10 year and then renew it again when the car turns 20 years old. I’m sure you have seen some old Mercedes E200 (W211 generation) on the road, still running around. Those are now so cheap to run, even with older engines and higher fuel consumption, it still makes more money sense than buying a new or used car that is less than 10 years old!

One, you have to really like the car to keep it so long, or two, see it only as an appliance and be someone who has no desires whatever towards new cars – you only want to get from point A to B (with air-conditioning, otherwise a motorcycle will do!)

There you have it… And If You Need More Info

Those above are the main considerations you have to go through before making a decision, these above often outweigh the few dollars a month 0.3% interest will affect your installment when you look around for a car loan for COE renewal.

We’ve done so many cases of COE renewals for our customers that I can tell you, the difference of 0.3% right now for a 5 year renewal, five year loan is less than $10 per month.

But did you know that the lower interest rate loan may end up costing you more than the higher interest rate loan? That’s a story for another article, if you are interested, click here.

Hope this helps! Have fun discussing this with your friends and family before taking up the renewal! Need any assistance to have it done for you? We are here to assist you for your COE renewal!