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The Wheel Deal? Making Sense of the COE!
- Tan Ding Rui and Harry Lee
- Dec 24, 2025
- 8 min read
In this Explainer, find out...
What is the Certificate of Entitlement (COE) system, and why was it implemented?
How many categories of COE are there?
What are some proposed reforms to the COE system?
Introduction
Singapore is the most expensive place in the world to own a car. In the United States, a Toyota Camry Hybrid costs 6 times less than in Singapore, at S$40,000 to S$250,000. These sky-high prices are the result of the Certificate of Entitlement, or the COE.
The COE has long been a point of contention for prospective car owners in Singapore. Parliamentarians have also brought up valid concerns about the affordability of car ownership from their constituents, given the additional premiums needed to own a car.
When we consider Singapore’s limited land space and high population density, one question comes to mind: Is there a more efficient method of managing car ownership in Singapore?
This Policy Explainer aims to simplify the COE system, discuss the history behind its implementation, and cover the proposed reforms to the current system.
Understanding Singapore’s Car Ownership Needs
Since its independence, Singapore has had to navigate its geographical constraints. With limited land to spare, the Government could not allocate much for transport infrastructure, prompting it to push for the management of car ownership.
Moreover, Singapore experienced high economic growth from the 1960s to the 1990s, riding the waves of globalisation and rapid industrialisation. With the growth in personal incomes, car ownership in Singapore skyrocketed in the 1980s, growing by as much as 12 per cent annually. This unprecedented growth burdened Singapore’s fledgling transportation system, causing numerous complaints of traffic congestion.
Usage Restrictions
Prior to the introduction of the COE, the Government experimented with usage restrictions, such as the Area Licensing Scheme and the Park-and-Ride Scheme, in an attempt to mitigate traffic congestion.
Area Licensing Scheme
The Area Licensing Scheme was launched in 1975, and was the world’s first attempt at urban traffic congestion pricing. This scheme became the precursor to the Electronic Road Pricing (ERP) that we know of today.
The Government realised it could not continue to increase road capacity at the same rate as car growth, especially in the dense Central Business District (CBD). Additionally, the slowing traffic speeds in the CBD during peak hours resulted in reduced business efficiency and increased commuting stress.
To mitigate this, the Government identified areas within the CBD that contained the densest commercial and financial activity, and gazetted them as Restricted Zones. To enter Restricted Zones during peak hours, drivers had to purchase and display a special paper licence to enter. Once vehicles crossed over into Restricted Zones, they would incur a fee. This aimed to dissuade drivers from entering the CBD during peak hours, and manage traffic congestion.
Park-and-Ride Scheme
A Park-and-Ride scheme was also implemented to encourage motorists to take public transport. This system gets commuters to park their vehicles at the outskirts of the city centre, and make use of public transport to travel the rest of the way. It was inspired by global best practices in urban transport planning and congestion management.
Limitations of Usage Restriction Measures
Although usage restrictions did manage traffic congestion during peak hours, it only did so by shifting the problem in time and place. Motorists resorted to using their vehicles before and after peak hours, or simply found alternative routes around the Restricted Zones. This caused congestion in other areas instead.
Further, the Park-and-Ride scheme was heavily underused, averaging at less than 2,000 monthly users. This largely stemmed from its inconvenience, as well as improvements in transport connectivity throughout Singapore. Additionally, the Land Transport Authority discovered that many users of the scheme still opted not to use public transport to enter the CBD, suggesting that some merely used the scheme as a cheaper way to park. This severely limited the effectiveness of such schemes in reducing traffic congestion, leading to the scheme’s discontinuation on December 1, 2016.
Ownership Restrictions
Taxes & Fees
The Government also imposed heavy financial levies on car owners to limit car ownership, implementing measures such as an import tax, registration fees, and an annual road tax based on vehicle engine capacity.
Limitations of Ownership Restrictions
Theoretically, heavy financial penalties were meant to curb car ownership by increasing the costs of owning a car. However, the growth in incomes outpaced the costs and taxes of car ownership. Many could still afford a car, and such restrictions could not control the growth of vehicle ownership in Singapore.
The only answer to this was to create a quota for the number of vehicles on the road. This would be later conceptualised as the Certificate of Entitlement.
Features of the COE
Introduced in May 1990, the Certificate of Entitlement (COE) was presented as a license that allowed one to register their vehicle in Singapore. It was decided that a COE would give vehicle owners the right to own a vehicle on the road for 10 years. This was to ensure that existing vehicle owners did not have an unfair advantage, as they could otherwise keep their cars for as long as they wished.
Vehicle Quota System
A COE may be obtained through an open bidding exercise twice a month. The number of COEs on bid is provided by the Vehicle Quota System (VQS), which determines the exact number of vehicles of various categories allowed on the road.
The quantity of vehicles made available by the VQS accounts for multiple factors, including the projected number of vehicles deregistered from the previous year, and the addition of new COEs based on the allowable growth in vehicle population. Deregistration also occurs for various reasons, such as when a vehicle owner decides not to renew their expiring COE, or when the vehicle is scrapped after an accident.
Categories of Vehicles
New Vehicles
The VQS classifies vehicles into five different categories based on a vehicle’s engine capacity and maximum power output. Since May 2022, COE bidding exercises have also included similar requirements for fully electric vehicles.
Existing Vehicles
Unlike buying a new vehicle, vehicle owners do not need to bid for COE again when buying a used vehicle or renewing ownership. Instead, they can extend their vehicle’s lifespan by renewing their COE, priced at the Prevailing Quota Premium (PQP). The PQP is the moving average of COE prices in the last three months.
Allowable Vehicle Growth Rate
When it was first introduced in 1990, Singapore’s car population was allowed to grow at a maximum of three per cent annually. Since then, the rate has been lowered, with the Government halving it to 1.5 per cent in 2009. Currently, in an effort to manage extreme land scarcity and traffic congestion, the Ministry Of Transport (MOT) has maintained a zero per cent vehicle growth rate for all COE Categories, except Category C. These rates will be maintained until at least 31 January 2028. Under a zero-growth policy, the number of COEs available for bidding is based on the number of deregistered vehicles.
Ultimately, the COE scheme, in tandem with other policies, helps to manage the vehicle population in Singapore, while allocating car ownership in an equitable manner. The revenue from the COE is used to benefit the wider public, including improving the quality and affordability of public transport.
Challenging and Considerations in Implementing the COE
Difficulty of Attaining a Vehicle
COE premiums hit new highs in 2023. While the cost is increasing, the demand for vehicles is unlikely to subside given our corresponding increase in affluence. This trend could continue to mark up prices. Further levies such as the Additional Registration Fee also contribute to the unaffordability of owning a car for the average Singaporean.
As of 2023, only 33 per cent of Singaporean resident households own cars, down from 40 per cent in 2013. Some have argued that the ever-fluctuating prices of the COE have made obtaining a car less attainable for the average Singaporean, especially for families or those who require a vehicle for their livelihood. Consequently, restricting car ownership could restrict mobility for households, particularly those with children, elderly dependents, or work that requires travel. More broadly, this could exacerbate inequalities and place a strain on existing public transport infrastructure.
Responses to Fluctuating Prices
In response to sustained price pressures, the MOT implemented a one-off injection of 20,000 COEs in 2024, using a ‘cut-and-fill’ approach to bring forward quotas from future peak years. This is done by borrowing from future peak supply years and injecting it into current years with lower supply. This smooths out the fluctuations in prices by reducing the discrepancy between the supply of COEs across different months, making COE prices more consistent while adhering to the zero-vehicle growth policy.
Yet, while the intervention provided temporary price moderation, its effects were limited. By September 2025, COE prices had risen again. This was partly fuelled by the increase in cheaper electric vehicles imported from China, which widened access to the COE market and intensified bidding competition.
Equitable Allocation of COEs
Private Hire Vehicles
Many vehicle owners are concerned that Private Hire Vehicles (PHVs) are taking up too many COE licenses. This reduces the number of COEs available for other purposes, such as private vehicle ownership, due to the strict overall quota limiting total COEs.
With the rise in ride-hailing services such as Grab, some have called for a separate PHV COE category. However, PHVs already win less than 10 per cent of the bids every year. Should this proportion be lowered further, the supply of PHVs would fall short of customer demand, leading to higher PHV fares and higher rentals for drivers. As Acting Transport Minister Jeffrey Siow concluded, placing PHVs in a different category would “disadvantage Singaporeans who cannot afford a car” and rely on PHVs to get around.
Additional Buyer’s Stamp Duty (ABSD)
Some have argued for an Additional Buyer’s Stamp Duty (ABSD) tax for those who buy more than one car. Currently, however, only five per cent of households in Singapore own more than one car. It would be difficult to implement a surcharge on multi-car ownership based on residential address. For instance, in multigenerational households, this could affect those who genuinely require more than one car for various reasons such as caregiving responsibilities. Furthermore, a flat-out surcharge would impact poorer families the most, as wealthier households could easily absorb the higher charges or register cars under different residential addresses. Hence, this would be unlikely to affect COE prices significantly.
Proposed Reforms to the COE
Needs-based COE
In September 2025, proposals for a potential “COE 2.0” were mooted in Parliament, suggesting a needs-based COE system based on the concept of fairness. Under this proposed reform, certain groups who might have greater practical uses for a vehicle than others, such as families with young children, or those who need to send their elderly parents to medical appointments, are able to have greater access when bidding for COEs.
However, Acting Transport Minister Jeffrey Siow mentioned that a needs-based COE system would be divisive, leading to a policy that only benefits a few. For instance, it would be difficult to justify whether a particular group would be more deserving than another. Further, creating a separate COE category specifically for these groups would lead to quotas being taken away from other categories.
COE Credit System
Another proposed scheme raised in Parliament involves replacing cash bidding with a credit‑based system. Under this proposal, credits would be distributed monthly to adult citizens and PRs, with the amounts being adjusted for need-based factors, including the number of children, age or disabilities. Theoretically, more credits would be allocated to those with greater transport needs, and families can also pool, trade, or sell credits.
In response, Former Senior Minister of State for Transport Amy Khor argued that, although the proposed COE credit system was well-intentioned, it is “unlikely to be effective in practice”, possibly driving credit prices underground while exposing uninformed consumers to exploitation. She also noted that while allocating credits based on individual needs may seem appealing, such needs are highly subjective.
Conclusion
Since 1990, the COE has been the prevailing system that manages Singapore’s vehicle population in a highly land-scarce city. Although affordability and equitable access have proven to be challenging, with careful policy design, the COE framework can continue to manage traffic congestion. Ultimately, the COE represents the balance that underpins the Government’s approach to national development — a system that balances the needs of the people with the needs of the nation.
This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation.
By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.
The citations to our Policy Explainers can be found in the PDF appended to this webpage.
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