COE Crisis: The $107k Cost of a Singaporean Dream

This surge is not an isolated event but the culmination of persistent market pressures. Premiums for larger cars in Category B also climbed to SGD 127,501, the highest since December 2023. The Open Category E, predominantly used for larger vehicles, mirrored this trend, settling at SGD 127,901. This sustained inflation in the cost of car ownership is creating a new socioeconomic divide, where mobility is increasingly dictated by wealth, challenging the nation's long-held principles of accessibility and meritocracy.

The financial commitment of purchasing a car extends far beyond the initial COE and purchase price. A mid-range sedan can easily cost around SGD 120,000, while luxury models surpass SGD 190,000 before adding recurring expenses. Owners must contend with a barrage of additional costs including a one-time registration fee of SGD 220, a tiered Additional Registration Fee (ARF) that can exceed 100% of the car's Open Market Value (OMV), a 20% excise duty, and a 9% Goods & Services Tax (GST). Annually, costs such as road tax, insurance, petrol, parking, and Electronic Road Pricing (ERP) can accumulate to thousands of dollars, making the total cost of ownership over a 10-year COE lifespan a monumental financial undertaking.

This surge in demand, however, has intensified competition for a limited pool of COEs. In the first half of 2025, Chinese EV manufacturer BYD became the top-selling car brand in Singapore, capturing a remarkable 19.5% of the market share. This dominance highlights a significant market shift, with consumers rushing to capitalize on the available rebates before they expire at the end of 2025. Dealers have noted that this fear of missing out is a primary driver behind the willingness of buyers to accept, and subsequently bid for, higher COE premiums.

The result is a crowded market where subsidies intended to encourage green adoption are instead being absorbed into the ever-increasing cost of the COE. This has led to a situation where the affordability of mass-market cars is being eroded, as EVs and traditional internal combustion engine (ICE) vehicles are pitted against each other in the same COE categories. The influx of mass-market Chinese EVs has particularly intensified the bidding war in Category A, traditionally the segment for more affordable cars.

This increase in automotive-related debt is occurring at a time when household liabilities are already on the rise. While the overall household debt situation in Singapore is considered manageable, there are pockets of vulnerability. The pressure to secure a vehicle, whether for necessity or aspiration, can lead individuals to take on financial risks that may impact their ability to achieve other long-term goals, such as purchasing a home or saving for retirement. Financial experts often advise that total monthly debt obligations should not exceed 40% of one's monthly income, a threshold that is easily breached when factoring in a large car loan.

Furthermore, the decision to purchase a car can have a ripple effect on other major financial decisions. For instance, having a car loan can negatively impact an individual's Total Debt Servicing Ratio (TDSR), which is a critical factor in securing a home loan. This creates a difficult choice for many Singaporeans, who must prioritize between two of the most significant financial commitments they will ever make.

This financial pressure is accelerating a cultural shift, particularly among younger Singaporeans who are redefining what it means to be successful. In a hyper-connected city with a world-class public transportation network, the necessity of a private car is diminishing. The convenience of ride-hailing services and the growing emphasis on sustainable living are making a "car-lite" lifestyle not just a practical choice, but an increasingly aspirational one. Status is now increasingly found in financial freedom, diverse investment portfolios, and the ability to afford experiences, rather than being tied to the depreciating asset sitting in the carpark.

This creates a volatile market that operates in predictable cycles, largely dictated by the number of cars deregistered a decade prior. While the government has made minor adjustments, such as tweaking the quota calculation methods to reduce volatility, the fundamental boom-and-bust nature of COE pricing remains. This has led to persistent calls for a more comprehensive review of the system, with suggestions ranging from tying COE rights to individuals instead of vehicles to implementing policies that could more effectively shield lower-income households from the sharpest impacts of the price swings.

For prospective car buyers, the current climate demands meticulous financial planning and a clear-eyed assessment of needs versus wants. This may involve exploring alternatives to traditional car ownership, such as long-term leasing or car-sharing services, which can provide the convenience of a private vehicle without the burdensome financial commitment. It also requires a deeper consideration of the total cost of ownership, looking beyond the monthly loan repayment to factor in all associated running costs.