We refer to Mr Kunwar Bir Singh’s letter “Explain narrowing of COE difference’” (The Straits Times, 5 Aug 2014).
Certificate of Entitlement (COE) prices are determined by market forces. There are many factors that affect the demand for COEs, such as economic conditions, drivers' personal choices, the introduction of new models in the market and dealers’ marketing and pricing strategies. The interplay of demand and supply determines the eventual COE prices in each bidding exercise. Ultimately, car buyers consider the total package price of the car and not just the COE prices alone.
This total package price includes the Open Market Value (OMV), dealers’ profit margins as well as the relevant taxes. Other than the COE price, cars are subject to other statutory costs, the bulk of which corresponds directly to the car’s OMV – such as the additional registration fee, excise duties, and goods and services tax.
Category (Cat) A cars are subjected to significantly lower statutory costs compared to Cat B cars. The median statutory cost payable for a Cat A car was $89,049 compared to $129,671 for a Cat B car, based on cars registered using COEs obtained from February to July 2014 bidding exercises. Excluding COE, the corresponding median statutory cost was $18,181 for a Cat A car, compared to $56,581 for a Cat B car.
The COE re-categorisation is useful for retaining Category A COEs primarily for mass-market models. LTA will continue to monitor the market and make the necessary adjustments to retain this policy intent.
We thank Mr Singh for his feedback.
Helen Lim (Ms)
Director, Media Relations
Land Transport Authority