Should you go for a shorter or longer renewal period?

When your car is coming to the end of its decade’s worth of service, you have the option to either renew its COE or deregister it for the scrapyard or the export market. If you decide to renew the COE, should you opt for a five- or 10-year extension? What are the considerations and issues involved?

DO YOU KNOW THE LIMITATIONS OF A FIVE-YEAR COE?
First off, should you opt to extend your car’s COE by five years, that will be the last COE extension ever. You have no further option to extend its COE again, and will have to deregister your car at the end of that extension. For a 10-year COE extension, you have the option to extend the COE for multiple 10-year extensions if you feel certain that your car can still give you a beneficial experience for many years to come. If you have been treating your car well and have regularly maintained it, this could be a better option.DO YOU PLAN TO SELL OR SCRAP YOUR CAR IN THE FUTURE?
If you need your car for only a few more years, then opt for a five-year extension; if you want to hold on to your car with the intention of selling it later, it makes sense to opt for a 10-year extension. Few buyers will be willing to pay for a car into its 12th year, knowing that its COE lifespan is only for another three years. A 10-year extension also makes it easier for you to scrap your car to get back the pro-rated COE value if you wish.

ARE THERE COST CONSTRAINTS?
But looking at a five-year extension has its merits, the most obvious of which is upfront cost. When you renew your car’s COE, you have to pay the Prevailing Quota Premium (PQP) for your car’s class category. The PQP is the three-month average of the COE premiums, which you can easily check on LTA’s OneMotoring website. Suppose the three-month average prior to your car’s COE expiration date is $32,000, for a five-year extension you only pay half of that as opposed to the full amount for a 10-year extension. If your car falls under the Weekend or Off-Peak Car schemes, you will still be expected to pay the PQP of a normal car in the relevant class category. Your car will also still remain in its current scheme unless you pay for it to be converted to a normal car.

The road tax surcharge also increases by 10% each year until a maximum of 50% in the fifth to the 10th year. So if you opt for a 10-year COE extension, you will be facing a 50% tax surcharge every year from the fifth year onwards — that’s quite a hefty bill, especially if you are driving a car in the higher road tax bracket. If you are paying a road tax of $1,682, the additional surcharge over the first five years is $2,530, but the surcharge over the next five years shoots up to $4,210! On top of that, you have to deal with higher insurance premiums for an older car. As your car goes over its 15th year and beyond, there’s no guarantee that the premiums won’t increase further as age takes its toll.

Even if you feel that you have maintained your car well, it would be advisable to get a good assessment of your car to determine its true condition prior to extending your car’s COE. It may have served you well so far but a professional assessment, such as AA Singapore’s Car Evaluation service, will be able to advise you if your car is likely to pose any problems down the road. Be realistic: if your car has been giving you problems, it would be wise to release it rather than renew its COE; otherwise, you will be saddled with mounting repair bills.

As your decision can have significant repercussions, do weigh the costs and reasons for a 5- or 10-year COE extension carefully.