The Easy Guide to the Singapore Car Market (COE, OMV, ARF, Paper Value etc explained)

When you have been immersed in the Singapore Automotive market as long as I have, it is easy to lose sight of what a daunting market it can be for the unacquainted, particularly if you are one of the one million or so expats who are in Singapore for a short stint and are contemplating car ownership .

My first car in 2011

And my current (15th) in 2024

And that of my Better Half

There are the sheer numbers, since ordinary family cars cost as much as supercars. There is the still complexity of how car pricing is determined with a deadly cocktail of taxes that one almost requires a PhD to decipher. And then there is the financial uncertainty akin to playing the stock market, as due to variable demand based pricing and the large numbers at play, mistakes or bad luck could result in losses in 10s of the thousands.

Lest I have painted a picture of doom and gloom, let me assure you things are not as bad or complex as they seem. And this article (and accompanying video) shall aim to demystify this entire affair. There was a maxim that was often thrown about in my previous career in Corporate Senior Leadership, of making ideas simple enough for a five year old to understand. I will attempt to do that here.

The first step is to understand how car pricing is determined in Singapore together with how car registration works. These two are interconnected.

We begin with the problem, the original sin. Singapore is a very prosperous but very population dense island. If things were left entirely to market forces, the prosperous population of 5.9 people would probably have 10-15 million vehicles in an area of 734 km2 (slightly smaller than New York). And all 10-15 million vehicles would never move more than 10-15m as there would be gridlock.

As things stand, the Singapore Government tries to ensure that there are no more than 996,000 vehicles in Singapore (this includes all vehicles. Passengers cars are at 651,000, Motorcycles at 144,000, Good Vehicles at about 143,000 and so on). The current system of COE and ARF (we will get into what these terms means) is the method employed by the Government to achieve this goal. Is this the best system, the best way to do it? I have a point of view but that is not the purview of this article.

COE:

Let's start off with the most infamous term. COE. Certificate of Entitlement. All cars in Singapore can only be registered for a period of 10 years, at a time. They do so by bidding for a COE, the pricing of which is determined by the open market (not entirely open as only registered car dealers can bid for it).

COE bidding happens once every two weeks and there are different categories depending on the kind of car (we'll explain that shortly)

The COE once procured is then attached to a new car and sticks to it, regardless of ownership for the duration of the 10 years. That said, the car doesn't have to be in Singapore for 10 years. If you de-register the car from Singapore before 10 years, you get back a portion of COE. Straight line depreciation, calculated daily. So if you bought a COE for $100,000, and deregistered the car after 5 years, you will get back $50,000. Also, if a car's COE ends as in it finishes 10 years, it doesn't mean that the car has to be registered. You can buy a new COE, at market price (essentially the average of the past 3 month COE prices) and have a fresh new 10 year tenure for the car. You can also choose to buy a 5 year COE (at half the price) but the implication is that once the 5 years is up, you have to de-register the car. There is no renewing COE then.

What are the different categories of COE?

There is Category A, which is 'Small Cars', which is an inaccurate term at best, as it doesn't relate to the size of the car, but the size and power of the engine (Up to 1600cc, 130 bhp). Category B is big cars, which is above 1600cc, 130 bhp. Category C is goods vehicle and buses. Category D is Motorcycles. Category E is an open Category that can be for any vehicle, other than motorcycles. You can see a history of COE prices here.

A couple of things to note. One is that private hire cars (the Uber equivalent which is Grab in Singapore) compete with regular cars for COEs. Also for electric cars, their category is determined by their horsepower number. If an Electric car makes over 130 bhp (as most do), they will be categorised as Cat B.

This can be a little disadvantageous for electric cars, as Electric cars being heavier than ICE (Internal Combustion Engine) cars require more power for the same level for performance, so they are more likely than not to get into the usually more expensive Cat B

Beyond these technical definitions, COE has an outsized effect on both car pricing as well as the sentiment of the car market. COE , being a market determined value, has proven to be very variable. It had fallen to as little as $1 in the wake of the 2009 Financial crisis and as high as $152,000 in Oct'23. The variability in COE can often lead to strange consequences where people make money owning cars if they are lucky enough to buy when COE is very low and then COE rises rapidly. We will cover all these nuances separately, including the story of my first car.

OMV, ARF, PARF, Paper Value and Car Pricing:

If there is one section out of all my resources I recommend reading, it is this paragraph. For it will give you an basic understanding of the car market works that no amount of memorising terms will.

Let's start with how a new car is priced and work our way from there.

We start off with OMV (Open Market Value) which is like the ex-factory price of the car. It is the cost of goods for the dealer or importer who is selling you the car. The OMV is then used as a basis to calculate the taxes paid on the car.

The first one is ARF or Additional Registration Fee. This is based on a tiered system following the table below.

Vehicle OMV	ARF Rate
First $20,000 of OMV	100% of OMV
Next $20,000 of OMV (i.e. $20,001 to $40,000)	140% of OMV
[NEW] Next $20,000 of OMV (i.e. $40,001 to $60,000)	190% of OMV
[NEW] Next $20,000 of OMV (i.e. $60,001 to $80,000)	250% of OMV
[NEW] Above $80,000 of OMV (i.e. $80,001 and above)	320% of OM

Let's illustrate with two examples, a more basic car and a more premium car to illustrate how this is in effect a Wealth Tax, disproportionately taxing more expensive cars.

Exhibit A: A Toyota Corolla Altis, with an OMV of S$19,402. You pay an ARF of also $19,402 since you duck right below the 20,000 mark . Happy Days

But let's just say you like to travel in style. Or you are a footballer. Only a Range Rover will do. The full fat one. That is Exhibit B: Range Rover 3.0 Plug In Hybrid in Autobiography trim. Very nice, except this one comes with an OMV of $150,520. And an eye watering ARF of $361,664. Even Christiano Ronaldo doesn't earn that in a day. Or does he? I actually don't know because football is about as interesting to me as taking out the trash

Jokes apart, ARF increases exponentially for more expensive cars. There is more than what meets the eye here, but we will talk it when we talk depreciation.

How are new cars priced?

We'll stick to the Range Rover though to illustrate the point on New Car pricing. I'm using an extreme example of a fairly premium car but bear with me.

So far, your components are an OMV of $150,520, and an ARF of $361,664. We are already looking at more than half a million dollars but there is still some way to go.

Add excise duty and GST. Excise duty is 20% of OMV so $30,104. It amazing how thirty thousand dollars almost looks like pocket change compared to some of the other numbers we are playing with. And GST, which is 9% of (OMV + excise duty) or $16,256 looks positively puny.

We are now at $558,544. But we are not done. Step in COE, priced at $108,601 as I write this. Adding all this, the total basic cost of the vehicle, for the dealer , before they sell it to you is $667,145.

But of course the dealer also needs to make money. Any decent business needs to make a 20-25% premium over their costs just to be viable (there are many reasons for this which we won't get into, cost of capital, variable costs etc). Land Rover in this case choose to go on the higher end of this spectrum and try and make a 34% premium, pricing the new car at ~$895,000, before discounts.

This is, it is not clickbait to say that a Range Rover costs close to a million dollars in Singapore. And the dealer margin on it alone (S$228,000, US$171,000, £132,000) could easily buy you a Brand New Range Rover in say, the USA or Europe.

Welcome, Ladies and Gentlemen, to Singapore

A note on VES and EEAI

You may have noticed I skipped over these two acronyms. VES (Vehicle Emissions Scheme) and EEAI (Electric Vehicle Early Adoption Incentive). These are essentially rebates on the ARF, designed to encourage certain behaviour (buying lower emission vehicles, buying electric cars). These schemes are not fixed and vary constantly depending (You can see the history and details here). A key thing to note, and we will talk this more when they talk Paper Value, is that they deduct from the Paper Value and effectively the future resale value of the car. So while you may think you are getting a 15,000 or a 10,000 discount, reality is that it may come back for you at Resale time.

Paper Value: The most important thing you need to understand about the Singapore Market

In most countries, car prices depreciate as a function of the new cars price. In Singapore, there is an additional factor called Paper Value. Remember all the taxes that we paid on the car in the previous section. Turns out that they are not all lost, and there is scope to recoup a portion of them when the car is de-registered from Singapore. That value recouped at de-registeration is called Paper Value

And whether you actually de-register the car or not, this theoretical value of taxes (the Paper Value) you get back at de-registration affects the price of the car, as it represents a bottom ceiling, a value one will assuredly get back from the car regardless of the condition of the vehicle itself. I have used Paper Value to my advantage several times during my car journey but we'll get to that in due time

First let us understand how Paper Value works numerically and then we'll get into implications.

How to Calculate Paper Value:

Paper Value consists of two components, the PARF Rebate and the COE Rebate. Sounds complicated, but surprisingly easy to understand.

COE Rebate is simple. It's a straight line. De-register the car with 9 years remaining, you get back 90% of the COE paid. De-register with 1 year left , you get back 10%. First grade math.

For PARF rebate, maybe you need to go to the second grade. Or at least know how to read a table. The below one.

Age of Vehicle at Deregistration	Previous PARF Rebate Amount (for cars registered with COEs obtained before the second COE bidding exercise in February 2023, or cars that do not need to bid for COEs (e.g. taxis) registered before 15 February 2023)	Current PARF Rebate Amount (for cars registered with COEs obtained from the second COE bidding exercise in February 2023 onwards, or cars that do not need to bid for COEs (e.g. taxis) registered on or after 15 February 2023)
Not more than 5 years	75% of ARF paid	75% of ARF paid or,  S$60,000 (whichever is lower)
Above 5 but not more than 6 years	70% of ARF paid	70% of ARF paid or,  S$60,000 (whichever is lower)
Above 6 but not more than 7 years	65% of ARF paid	65% of ARF paid or,  S$60,000 (whichever is lower)
Above 7 but not more than 8 years	60% of ARF paid	60% of ARF paid or,  S$60,000 (whichever is lower)
Above 8 but not more than 9 years	55% of ARF paid	55% of ARF paid or,  S$60,000 (whichever is lower)
Above 9 but not more than 10 years	50% of ARF paid	50% of ARF paid or,  S$60,000 (whichever is lower)
More than 10 years	Nil	Nil

A lot of numbers. Maybe you should get the Math Tuition after all. I'll attach some practical examples of calculating it here on other websites.

Beyond the table, the main thing I want you to take away is PARF value at end of life. At the end of the 10 year life of the car, you are guaranteed 50% of ARF paid, or $60,000 whichever is lower (for most cars, 50% of ARF will be lower than 60,000).

Now to the more important implication of paper value. The second hand value of your car.

How to think of and use Paper Value:

Paper Value is essentially the least amount of money you can get for your car, regardless of what happens to it. Unlike in most countries, where if a car's 'body' is rendered useless either by an accident or other circumstances (say a flood), in Singapore, Paper Value, which is portion of the Tax paid on the car, is rebatable regardless of whatever happens to the car's body.

In the initial first five years of a car's life, Paper Value is something to keep an eye on but not entirely significant. Car Pricing is more determined by market forces (where the COE is which affects what new car prices are at). However in the latter five years, particularly in the last 2-3 years before it reaches COE expiry, the Paper Value is highly indicative of the trade-in price of your car. With very few exceptions, a 8-9 year old cars trade in value will be the Paper Value plus a token amount (not more than few thousand dollars) for the Car's Body (the Body value often called the Scrap Value or Export Value).

This has significant implications when you are buying Used Cars, as I recommend when it come to the Singapore Market (see my rationale here). If you are buying say a 4- 6 year old car, with an intended usage of 3-4 years, Paper Value is highly critical. Two similarly priced cars of similar age may have completely divergent paper values and hence very different implications on depreciation.

I will be illustrating this live with examples as I do my weekly series on Singapore Used Car Picks. I recommend a watch of one or two of the episodes to get a feel of Paper Value

COE Cars and should you renew your COE after 10 years:

The last term I'd like to explain here are COE Cars. COE Cars are essentially cars that are more than 10 years old that have had their COEs renewed after the first 10 year COE expired. To note, if you renew a car's COE after 10 years, you give up that 50% PARF rebate.

Nonetheless COE cars are usually more cost effective than new cars, as the taxes paid on it are lower (it's only COE and the 50% of ARF that is theoretically given up) and given the lower wear and tear of cars in Singapore (as I detail here), it is perfectly feasible to run a car up to its 20th birthday. Traditionally the market for COE cars used to be less liquid than that for normal (<10 year old) cars but due to incredibly high COE prices and significant increases in ARF taxes in the past 5 years, this market is now thriving, as it does ultimately represent the cheapest way to own a car in Singapore.

You can also get all of this information in video format here. As always, hope this was helpful