Car Ownership: How CoE and CEVS Can Affect Your Car Loan
14/01/2016
Tags : Cars, Costs



 

When you want to get a new ride in Singapore, there are a lot of factors to consider when you want to plan out a budget. The car itself may cost SGD 50,000 but there are more things outside of the car that you’ll need to pay for as well.

If you haven’t read our entry on PARF Value: Authorized Distributors VS Parallel Importers, do so by clicking here, as this is a continuation from that article.

Before we begin, allow us to explain what CoE and CEVS are.

 

What is CoE?

Certificate of Entitlement(CoE) is the document that you need to register for a new car. There are 5 categories for CoE for different specifications, which are:

  • Category A – Cars with engine capacity of 1600 CC and below
     
  • Category B – Cars with engine capacity higher than 1600 CC
     
  • Category C – Goods carrying vehicles and buses
     
  • Category D – Motorcycles
     
  • Category E – The ‘Open’ category, which can be used for all of the above.

To obtain the document isn’t as simple as getting permission though, as you need to bid on the limited number of CoE available, and win it. As CoE is limited, the price can go even higher than the car itself if demand is high.

As CoE go hand-in-hand with buying a new car, dealers can package your car purchase with CoE together if you don’t want to face the hassle of bidding it yourself.

 

What is CEVS?

Carbon Emissions-Based Vehicle Scheme(CEVS) was introduced in Singapore to encourage people to adopt environmental-friendly cars. Depending on your car’s carbon emission, you can either get a rebate or a surcharge, which can be viewed from the table below:

 

Band

Existing CEVS (Till 30 Jun 2015)

Revised CEVS (From 1 Jul 2015)

Rebates/
Surcharges

Carbon
Emission
(CO2g/km)

Cars

Taxis

Carbon
Emission (CO2g/km)

Cars

Taxis

A1

Up to 100

$20,000

$30,000

Up to 95

$30,000

$45,000

Rebates

A2

101-120

$15,000

$22,500

96-105

$15,000

$22,500

A3

121-140

$10,000

$15,000

106-120

$10,000

$15,000

A4

141-160

$5,000

$7,500

121-135

$5,000

$7,500

B

161-210

$0

$0

136-185

$0

$0

 

C1

211-230

$5,000

$7,500

186-200

$5,000

$7,500

Surcharges

C2

231-250

$10,000

$15,000

201-215

$10,000

$15,000

C3

251-270

$15,000

$22,500

216-230

$15,000

$22,500

C4

Above 270

$20,000

$30,000

Above 230

$30,000

$45,000

 

If you do get a rebate, it will be in the form of ARF rebate, which will reduce your PARF rebate, so it’s not exactly free money. Additionally, CEVS is subjected to a minimum of SGD 5,000, so your ARF will not dip below 5,000 even if your CEVS is as high as a Rastafarian.

An interesting thing to not is that cars bought from Parallel Importers (PI) will usually have high CEVS rebate. This is because of the Evolution Coefficient (EC), which is set at a rate of 0.92 by the government. Essentially, you take the PI car’s carbon emission and multiply it by the EC rate, 0.92, which will result in a lower carbon emission figure and therefore, higher CEVS rebate.

 

How Will CoE and CEVS Affect Car Loans?


Source: memecrunch

Now we’re back to the original question, how do CoE and CEVS affect car loans? Normally, if a car’s Open Market Value(OMV) is SGD 20,000 or below, you will be eligible for a loan worth up to 60% of the car’s purchase price. However, if the OMV is above SGD 20,000, you will only be eligible for a loan worth up to 50% of the car’s purchase price.

In other words, you can expect a minimum downpayment of either 40% or 50% of the car’s price depending on the OMV. CEVS and CoE comes in when you factor in the amount being loaned to you. As mentioned before, you can choose to let your car dealer handle the CoE bidding process, which allows you to include the CoE costs into your car loan.

However, if you choose to do it yourself, you will need to fork out the cash for CoE yourself. The car loan will then be calculated from the total price of the car without CoE costs. If a car is priced at SGD 50,000 and the CoE cost is SGD 1,000, the car loan will calculate based on SGD 49,000 instead of SGD 50,000. In other words, you have the choice of paying more in the beginning with lower monthly payments or pay less in the beginning and pay more for monthly payments.

CoE costs will not be the only thing removed. Car loans will also consider all your eligible discounts before calculating the final amount, and that includes CEVS rebates. To get a clearer image, let’s take 3 hypothetical scenarios with the same hybrid car and calculate the loan amount:

 

Scenario A

OMV = $60,000
Selling Price = $100,000
CEVS Rebate = $15,000

Car Loan Amount = 50% X ($100,000 - $15,000) = 50% X $85,000 = $42,500
Downpayment required = $42,500

In Scenario A, the downpayment required doesn’t include CoE costs as you will be bidding it yourself, so there’s no set amount that you’ll need to pay. However, that's not to say that the CoE is free, as you'll need to pay for it out of your own pocket. As the car loan amount is 50%, you will have to pay the remaining 50% as downpayment. If you allow the dealer to handle the CoE bidding process, refer to scenario B.

 

Scenario B

OMV = $60,000
Selling Price = $100,000
CEVS Rebate = $15,000
Dealer’s  CoE Cost = $5,000

Car Loan Amount = 50% X ($100,000 + $5,000 - $15,000) = 50% X $90,000 = $45,000
Downpayment required = $45,000

As the dealer is handling the CoE bidding, the amount being loaned to you and the amount you need to pay for downpayment will increase. The good news is that you don’t have to pay a lot out of your pocket, since the CoE bidding costs will be included in the loan but the downside is that you have to pay more every month for instalments.

 

If you have no discounts or rebates, and you choose to let the dealer handle your COE bidding, refer to scenario C:

Scenario C

OMV = $60,000
Selling Price = $100,000
CEVS Rebate = 0
Dealer’s  CoE Cost = $5,000

Car Loan Amount = 50% X ($100,000 + $5,000) = 50% X $105,000 = $52,500
Downpayment required = $52,500

In scenario C, there are no discounts, and you let the dealer handle your CoE bid, which translates to higher downpayment and higher loan amount. Of course, you’ll have to factor in the interest rate to truly know how much you have to pay every month but these figures were made to simplify your calculations.

 


Source: giphy

Clearly, there’s a lot of math in budgeting for cars but it’s not all that confusing. Just remember that an OMV that is higher than $20,000 is eligible for a 50% loan while anything less than that is eligible for 60% loan. If you want to get higher CEVS rebates, go for a more environmental-friendly car. It doesn’t have to be a hybrid.

But do take note; CEVS can either be a rebate or a surcharge, so if you’re using a car with high carbon emissions, you’re going to be losing more of those precious dollars.

 

Not sure which to car to call your own? Check out our take on both the Toyota Harrier and the Mazda CX-5 by clicking here.

 

Did you spot the Honda Vezel? Check out how it fared against the Nissan Qashqai 1.2L Turbo, by clicking here.


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