Rationale for Current COE Validity Period
Ministry of TransportSpeakers
Summary
This question concerns the rationale for fixed five and 10-year Certificate of Entitlement (COE) renewal periods and whether owners can choose their own renewal durations. Mr Muhamad Faisal Bin Abdul Manap raised these points for motorcycle owners, but Minister Khaw Boon Wan explained the five-year option was a concession for older vehicles. Minister Khaw Boon Wan noted that flexibility exists via pro-rated refunds for early deregistration, though five-year renewals require mandatory deregistration at the term’s end. He emphasized balancing the interests of existing owners with prospective buyers, as total flexibility would favor current owners and disadvantage those buying new vehicles. Finally, fixed periods help avoid supply and demand uncertainty and prevent greater price volatility in the COE market.
Transcript
87 Mr Muhamad Faisal Bin Abdul Manap asked the Minister for Transport (a) what is the reason for the Certificate of Entitlement (COE) renewal period to be fixed at five years and 10 years; and (b) whether the Ministry will allow flexibility for vehicle owners, in particular motorcycle owners, to choose the period of renewal of their choice.
Mr Khaw Boon Wan: The validity period of COEs, whether first-time COEs or renewal COEs, was originally set at 10 years.
However, in response to appeals from vehicle owners, including motorcycle owners, whose COEs are expiring but feel that their vehicles might not last beyond another five years, we changed the policy in 1992 to allow them to renew their COEs for five years, as a concession. The vehicles must then be deregistered at the end of the five years. If, however, the vehicle is deregistered before five years, the amount paid for the remaining COE validity period will be refunded. In that sense, the vehicle owner already has some flexibility to keep the vehicle for less than five years.
Allowing vehicle owners to renew their COEs for any number of years they choose favours, in effect, existing vehicle owners over those who wish to buy a new vehicle. We have to strike a fair balance between the two groups and, therefore, are not inclined to extend such a concession to existing vehicle owners. Such a move could also give rise to more uncertainty over the supply and demand of COEs, and introduce more volatility into the prices, compared to the current situation where the validity period is fixed at five or 10 years.