Singapore COE Surge Hits Personal Finance Hard

In August 2025, Singapore’s Certificate of Entitlement (COE) premiums for Category B vehicles, covering larger cars and electric vehicles (EVs), surged 3.7% to $123,498, marking the highest level since December 2023. Despite a 2.6% increase in COE supply to 18,701 for the August–October period, demand outstripped availability, with 4,592 bids reflecting a 12.8% rise in bidding for larger vehicles. This escalation, set against a backdrop of a downgraded GDP growth forecast of 0.0–2.0% for 2025, underscores a critical challenge for Singaporeans: balancing the soaring costs of car ownership with long-term financial goals like retirement planning and debt management. The persistent rise in COE premiums is reshaping personal finance strategies, pushing Singaporeans to rethink spending, savings, and investment priorities in a high-cost, inflation-sensitive environment.

The COE system, a cornerstone of Singapore’s vehicle regulation, has driven the cost of car ownership to unprecedented levels, with a mid-range EV like the BYD Atto 3 now exceeding $180,000 when factoring in premiums. This surge is driven by robust demand, particularly for EVs, fueled by up to $40,000 in rebates and new model launches from brands like BYD and Mercedes-Benz. The narrowing price gap between Category B and Category A COEs, now at $21,489, has also spurred buyers to opt for larger, more powerful vehicles, further intensifying bidding. For many households, this translates into significant financial commitments, often requiring loans that stretch budgets already strained by a high cost of living, with consumer price indices projected to reach 130.10 by 2029.

The escalating cost of car ownership is reshaping Singaporeans’ saving habits, with many households reallocating budgets to accommodate vehicle-related expenses. A 2023 survey indicated that 52% of Singaporeans are unaware of their monthly spending, a trend particularly pronounced among younger adults aged 18–24. The high cost of COEs exacerbates this issue, as families divert funds from emergency savings or retirement accounts to cover car loans or upfront costs. With the average car loan tenure now extending to seven years and interest rates hovering around 2.8%, debt burdens are increasing, particularly for middle-income households earning $4,001–$8,000 monthly, who report a 42% rise in retirement uncertainty compared to 2021.

The rising cost of COEs underscores the urgent need for enhanced financial literacy to help Singaporeans navigate complex financial decisions. The Ministry of Education has integrated financial education into school curricula, recognizing that early exposure to budgeting, saving, and debt management can prevent poor habits. However, with only 20% of Singaporeans feeling knowledgeable about investing, many lack the skills to optimize their financial portfolios in response to rising costs. Digital tools, such as DBS’s NAV Planner, which leverages spending patterns to forecast cash flow, are gaining traction, yet adoption remains uneven, particularly among younger generations prone to “doom spending” to cope with economic uncertainty.

Some argue that the surge in COE premiums reflects Singapore’s economic resilience, with strong consumer demand signaling confidence despite global uncertainties. The Straits Times Index gained 28% in the fiscal year ending June 2025, and foreign direct investment inflows reached 31.8% of GDP in 2023, suggesting a robust economic foundation. High COE bids, particularly for EVs, could indicate a shift toward sustainable investments, supported by government incentives, aligning with Singapore’s carbon tax increase to $18.50 per ton in 2025.

The financial strain of COE premiums is particularly evident in retirement planning, where competing priorities challenge Singaporeans’ ability to save adequately. The CPF system, bolstered by a 2025 salary ceiling increase to $7,400, ensures higher contributions, yet high living costs, including vehicle ownership, reduce disposable income for voluntary top-ups. In 2022, CPF top-ups hit a record $3.5 billion, but only 54% of Singaporeans have started retirement planning, down from 60% in 2021. Middle-income households, facing a 24.1% rise in private transport costs, are particularly vulnerable, with 79% either lacking a retirement plan or falling behind.

The persistent rise in COE premiums highlights the need for Singaporeans to adopt strategic financial planning to safeguard their long-term well-being. As vehicle ownership costs escalate, individuals must prioritize budgeting and debt management to maintain financial resilience. Creating a detailed budget, tracking monthly expenses, and allocating at least 10% of income to retirement savings, as recommended by financial planners, can help offset the impact of high COE costs. Leveraging digital tools like SingSaver for comparing loan options or DBS’s NAV Planner for cash flow analysis can provide clarity and control, particularly for younger Singaporeans prone to overspending.