Saving On COE Renewal PQP
The statistics out there is telling us that at this point and in the past ten to twelve months, there have been a record number of cars being renewed or revalidated. Reasons for this are varied and mostly perhaps linked to the need to rein in spending with the slow economy, but that is for another post at a later date maybe.
What Many People Do Not Realise…
Is this: that the COE on your existing car can be renewed before it expires. And you can take advantage of the fact that the going rate for COE renewal, called PQP (or Prevailing Quota Payable – this is the correct term for renewal amount payable for existing registered vehicles because no bidding is required), fluctuates from month to month.
Since there is a fluctuation, that means that in the months approaching your COE expiry, there will be higher and lower PQP. This is where you can choose to renew at a lower month as opposed to the month where your COE expires and paying the inevitable price. You have some control over what price to pay.
The Limited Window Period
The PQP of each month is calculated using the average of 6 previous (3 months of) COE bidding prices. Hence, the month of December is made up of the bids of September, October and November. It can be calculated the moment the second COE bid is completed for the month of November.
If you are not keen on using the calculator, you can also use this link here to check the PQP rates, however, the next month’s PQP is not immediately released here once the second bid closes. Our own calculators are faster.
Since the second bid is always on the 3rd week of the month, you have till the end of the month to decide if it is wiser to pay December’s price (if it is lower) instead of January 2017 prices.
Other examples from past months:
Clearly, it would have been wiser to renew a Cat A car expiring in the month of September in the month of July 2016. Same applies for a Cat A car expiring in the month of August, it’s better to renew in the month of July. The same also applies for Cat B Cars during those months.
(Note: It is odd then, according to the statistics, the renewals in July and August were lower compared to preceding months.)
When the difference in pricing is small, then it should be compared to the long term per month COE cost when you should renew in an earlier month or not.
Long term per month COE cost we define as: 10-year PQP rate/120 months.
If per month cost is $400, and the price savings between the two month of choice is greater than $400, and you lose exactly 30 days, then it is worth to renew earlier. Do factor in the fact that if you only lose, say only 14 days, then it is even more beneficial to renew early.
And this is why – you don’t really get your cake and eat it. If you do choose to renew earlier, the new COE period (whether 5 or 10 years) that you paid for will begin counting down on the 1st of the month following the month of payment.
E.g.: Payment for PQP made in Novemeber means new COE starts counting down on 1st of December.
Because of this I find that car owners who have had their cars registered in the early part of the month (first week of the month) have a benefit of choice of which month they renew, and forsake less of the existing COE when they renew one month prior, since the new COE starts on the 1st of the following month.
So What Do I Do If I Want To Renew?
If the intention is to renew, I would strongly recommend that you standby the funds and be ready for the payment when the PQP is low, this can save you thousands, as seen in the above example Cat A and B for months of July and August 2016 compared with the months after.
For the same reason, I would recommend if you intend to get financing for this, you should apply with us and get approval prior to the most optimal time to pay the PQP – the window to take advantage of the lower price is that small one week period after the second COE bid at the end of each month, before the next month.
We also carry out a free PQP price monitoring service for all who have applied and have loans approved with us. Our admin will call you to inform of the price difference so you can renew in the month of your choice for the most savings. So do apply early!
Cheers and happy driving!