There are several things you should know before you decide to renew your COE -
1. You will have to forgo your PARF Rebate
The Parf Rebate is the the amount of money you get back from the Government once you deregister your car, and is also known as the scrap value. This is something to consider if your car's PARF value is fairly significant.
2. You will need to pay the PQP
This is the moving average of the COE prices over the last three months. Your PQP will be based on the respective category that your vehicle belongs in.
3. You can renew your COE for 5 years, but that makes it non-renewable.
There is an option of renewing your car's COE for just five years instead of 10, for which you simply pay half of the PQP at the point of renewal. This might be a more financially sound option for those who may not have as much ready cash for a full 10-year COE renewal, but bear in mind that if you opt for a five-year renewal, you will be unable to extend the car's lifespan any further once the COE's tenure is up. A 10-year COE can be renewed in perpetuity, however. Do take note that commercial vehicles have a statutory lifespan of 20 years, and you cannot renew its COE for any further than that.
4. There is an additional surcharge on Road Tax for cars over 10 years.
This amount is chargeable at an amount of 10 percent over the car's regular road tax rate per annum, up to a maximum of 50 percent. For a car with a large capacity engine, the increase in costs can grow to be quite significant.
5. You will suffer less depreciation on your car after renewal
Renewing your car's COE will always be more financially accessible than buying a new car, as you'll only pay the cost of the new COE. Therefore, the resulting depreciation over the next 10 years will be significantly less than if you've purchased a new car.
6. You will forfeit the remaining balance of your COE rebate upon renewal
Aside from the PARF value, the LTA also offers a rebate on any 'unused' value of your current COE if you deregister it before the full 10-year tenure is up. However, should you renew your COE before it reaches its expiry date, you will forfeit any COE rebate that you are eligible for. It is for this reason that most people tend to renew their COEs very close to the expiry date, or even on the day itself, in order to minimise the 'loss' of this rebate.
7. Your renewed COE car is still eligible for COE rebates upon deregistration
While a car with a revalidated COE is no longer eligible for PARF rebates, it is still eligible for a rebate on the renewed COE. What this means is that, should you scrap or deregister your car before your renewed COE is up, you will be refunded the pro-rated amount of the COE remaining.
For example, if you renew your car's COE for 10 years at $50,000, and you decide to scrap it exactly five years later, you will get back $25,000 in COE rebates upon deregistration. It is a point worth considering as it means your COE-renewed car does have some residual value even after renewal.
8. You can take a loan for COE renewal
There are banks and financial institutions that allow you to take loans to renew your COE. They aren't that common, but a quick search reveals that some do offer loan quantum of up to 70 percent over seven years, at an interest rate of 3.25 percent, for COE re-validations. Financial institutions, such as Hong Leong Finance, Tokyo Century Leasing and United Overseas Bank, may offer different rates so it pays to do your research.
9. You can get comprehensive insurance coverage for a COE car
A common myth is that COE-renewed cars (or COE cars) are ineligible for comprehensive insurance coverage. In actual fact, it is actually possible to get comprehensive insurance for such cars, although it is indeed harder to source. However, if you take a loan for COE renewal from some finance companies, they may require that you obtain comprehensive insurance cover for your car as part of their terms and conditions.