How financing trends are impacting the Certificate of Entitlement (COE) system in Singapore
As private-hire and corporate vehicles continue to surge, Certificate of Entitlement (COE) prices are being significantly influenced by easy financing options, particularly for businesses and private-hire car drivers. According to Aaron Tan, CEO of Carro and Genie Financial Services, 70% to 80% of buyers at Carro take out loans to finance their vehicle purchases, with most of these cars registered as private-hire or corporate vehicles.
Unlike buyers of privately owned cars, who can only borrow up to 60% to 70% of a vehicle’s value, businesses and private-hire car drivers can borrow 90% to 100%, making it easier for them to afford vehicles. This trend is contributing to higher demand for COEs, as private-hire vehicles now make up 37% of all car registrations from January to September 2023, while the number of privately owned cars has declined.
With the growing reliance on easy financing, some drivers, including civil servants, are taking advantage of the system to purchase vehicles for private-hire services, raising concerns about the influx of for-hire cars competing with privately owned vehicles for COE quotas. The impact of this shift has led to discussions about whether private-hire vehicles should be treated similarly to taxis, as they contribute significantly to COE price inflation.
Industry experts also warn that the expansion of private-hire fleets could lead to increased congestion and carbon emissions. Moreover, higher interest rates on private-hire vehicle loans are pushing drivers to undertake more for-hire trips to cover their car instalments.
As the COE system continues to evolve, transport experts emphasize the need for a comprehensive review to ensure that COE prices reflect the true social and economic value of different vehicle types in Singapore’s urban landscape.
