The true cost of renewing a COE

The six costs of renewing

Most people price a COE renewal by looking up the PQP. That is the biggest number, but it is not the whole bill. Renewing a car at the 10-year mark brings six costs with it, and four of them keep running for as long as you keep the car.

1. The PQP you pay LTA to renew.
2. Financing cost, if you spread the PQP over a loan.
3. The PARF rebate you give up by keeping the car past 10 years.
4. Road tax surcharge, which starts once the car is more than 10 years old.
5. Annual inspection in place of the two-yearly one.
6. Insurance for an older car.

We go through each one below with this month's figures where they exist, then finish with a checklist you can run against your own car.

1. The PQP itself

The Prevailing Quota Premium (PQP) is the average of the COE premiums for your car's category over the previous three calendar months, rounded up. To renew for 10 years you pay the full PQP. To renew for 5 years you pay 50% of it, rounded up to the nearest dollar.

Per year of road time the government charges the same either way. The difference is that for Cat A, B and D vehicles the 5-year renewal can only be taken once. When it ends, the vehicle has to be deregistered. Cat C goods vehicles can take further 5-year renewals up to their statutory lifespan. Aim to renew before the COE expires. LTA allows renewal up to one month after expiry with a late renewal fee, but the car cannot be driven until it is renewed.

If you want to compare the two terms properly, our guide to 5-year vs 10-year COE runs the numbers side by side.

2. Financing cost on a flat-rate loan

Most people finance the PQP rather than pay it in cash. COE renewal loans are quoted as a flat rate: interest is charged on the full amount borrowed for the whole tenure, even as you pay it down. Rates start from 2.58% a year flat, or 2.80% a year if a 10-year renewal is spread over more than 7 years, subject to lender approval. The lender sets the final rate, and the figures on this page use these starting rates. The longest loan on a 10-year renewal is 118 months.

The sum is: interest = amount borrowed × flat rate × years. Add that to the amount borrowed and divide by the number of months to get the monthly.

Look at the 10-year row first. Stretching the loan to 118 months gives the lowest monthly, but interest comes to more than a quarter of the PQP. Paying a 10-year renewal off over 7 years costs about a third less in interest; the trade is a higher monthly.

Flat rate vs effective interest rate

A flat rate looks small because it ignores the fact that you are repaying the loan every month. The effective interest rate (EIR) measures interest on what you still owe, the way a home loan is quoted. For a flat-rate car loan, the EIR works out at roughly 1.8 to 1.9 times the flat rate.

More on how the loans work is in our COE renewal loans guide.

3. The PARF rebate you give up

If you deregister a car within 10 years of registration, LTA pays a PARF rebate based on the ARF you paid. Past 10 years the rebate is nil. Renewing means keeping the car past 10 years, so the PARF rebate is gone for good.

For a car reaching 10 years now (registered around 2016), the schedule that applies pays 50% of the ARF if you deregister in the tenth year. Cars with COEs obtained from February 2023 onward have a capped rebate, and cars with COEs from the second February 2026 bidding exercise onward get lower percentages. You would also get a COE rebate for any unused months on the current COE.

That rebate is money you could have had. Treat it as part of the cost of renewing, not a separate question. Our PARF and COE rebate calculator gives you the figure for your car, and this guide explains the schedules.

4. Road tax surcharge after year 10

Once a car is more than 10 years old, LTA adds a surcharge on top of its normal road tax. It rises each year:

As a worked example, a 1,598cc petrol car pays about $742 a year in road tax under LTA's formula. Over a 5-year renewal the surcharge adds about $1,100 in total. Over a 10-year renewal, with six years at the 50% rate, it adds about $3,000. That is real money, but it is small next to the PQP.

Your exact figure depends on your engine and fuel type. Try our road tax surcharge calculator.

5. Annual inspection

A private car between 3 and 10 years old goes for periodic inspection every 2 years. Once it is more than 10 years old, the inspection becomes annual. The car needs to pass inspection before its road tax can be renewed.

Budget for the inspection fee every year instead of every other year. The bigger cost is usually what the inspection finds: worn parts that a 10-year-old car is due for anyway.

6. Insurance

You must keep the car insured for the whole period you pay road tax. Insurers look at an older car differently. Some will not offer comprehensive cover past a certain age, some ask for an inspection or photos, and premiums can rise. The insured value also changes, since most of a renewed car's value sits in its remaining COE.

Get a renewal quote from your current insurer before you commit to the PQP, and ask at least one other. It is one of the easier lines on this list to reduce.

Your renewal cost checklist

If the total looks heavy against what a replacement car would cost you per year, the answer may be not to renew. Our renew or scrap guide walks through that comparison.

What we'd check for your car

When you send us your car details, we work out the PQP for your expiry month, send you an estimated monthly at a few tenures so you can see the interest trade-off, and set out the PARF and COE rebate figure next to it. Rates start from 2.58% flat (2.80% if a 10-year renewal is spread over more than 7 years), subject to lender approval, and the lender sets the final rate. There is $0 downpayment and no admin fees. We submit your application to lenders the same day and file the renewal with LTA for you. After sign-up you also get a free health check at our partner workshop.

Questions people ask