Singapore has been seeing a continuous increase in the cost of Certificate of Entitlement (“COE”) since last year, with premiums reaching all-time highs in 2023. Based on the first bidding exercise this month (October 2023), COE premiums closed at S$106,000 for smaller (Category A) cars and $150,001 for bigger (Category B) cars. This is the sixth consecutive time that records were broken for the bigger car category this year.
For aspiring drivers or expats who are new to Singapore, COE prices affect the movement of the entire market, both new and used cars. This surge not only impacts the selling prices, but also the availability of cars. In the face of escalating COE prices, an alternative solution is gaining popularity in the form of car rentals. In this article, we explore the rising COE costs, the supply of entry-level models, and the benefits of opting for car rentals in Singapore.
Rising COE Costs
The Certificate of Entitlement (“COE”) system in Singapore was first introduced in 1990 as a mechanism to regulate the number of vehicles on the road. The COE grants the legal right to register, own, and use a vehicle in Singapore for 10 years. Over the years, the demand for COEs has increased, resulting in a surge in prices. The escalating cost of COEs has made car ownership a considerable financial commitment, prompting car buyers to reconsider their choices and explore alternative options.
Availability of Smaller Mass-Market Models
Smaller mass-market cars are the most affected when COE peaks. For some of the most budget-friendly car models like the Suzuki Swift 1.2 Standard, for example, the Category A COE would easily account for about 75% of the total car price. As COE continues to rise, some dealers are no longer keen to hold stock for such cars, which are becoming harder to sell as potential buyers are being priced out of the market. Therefore, it is becoming more difficult for car buyers who are considering compact cars during this time.
(Image credit: Suzuki Singapore)
Shift Towards Car Rentals
For individuals who need a car to fit their unique lifestyle but find the rising cost of car ownership in Singapore prohibitive, the best alternative is to rent a car. Though the car rental industry is not spared from the ongoing changes in the market, it can still provide a much more flexible and practical solution to driving. Renting a car long-term can protect the hirer from COE fluctuations, supply issues, as well as the increased cost of maintenance. Here are some notable benefits to choosing car rentals in Singapore:
1. Financial Flexibility: Renting a car gives financial flexibility in the form of allowing individuals to access their vehicle without the hefty upfront costs associated with purchasing a car and obtaining a COE. Long-term hirers pay a fixed monthly rental rate, eliminating the worry over sky-high COE prices or market fluctuations.
2. Variety of Models: Car rental services provide their customers with a diverse range of vehicles, from compact cars to larger SUVs, providing choices that would best suit the renter’s requirements.
3. Maintenance & Insurance: One of the major advantages of renting a car long-term is that the maintenance and motor insurance are covered by the rental company. This eliminates the burden of the increasing cost of maintenance and any unexpected expenses. By paying a fixed rate throughout your rental period, there is greater ease in planning for your outgoing expenses.
4. No Depreciation Concerns: Unlike owning a car, individuals opting for car rentals do not need to worry about depreciation. Once you have no use for the vehicle any longer, you may simply return the car once the rental period is over. This is especially beneficial in today’s volatile market, because other than the natural depreciation of a vehicle, the future value of COE premiums will also affect a car’s overall market value. Renting a car shields the hirer from such market movements, making it a unique solution that provides both stability and flexibility.
5. Environmental Considerations: With a growing emphasis on sustainability, car rentals also allow individuals to opt for eco-friendly models, contributing to environmental conservation without the financial commitment associated with purchasing a car.
Conclusion
As Singapore grapples with the escalating costs of COE and dealerships are pivoting their strategies to cater to changing consumer preferences, car rentals emerge as a viable alternative for individuals seeking transportation without the burden of ownership. The flexibility, financial advantages, and diverse options offered by car rental services such as Prime & Section Car Rental can make them an attractive choice for those navigating the challenges of the Singapore automotive landscape.
