Why COE premiums are surging when showrooms are not crowded

The chatter after the tender exercise for certificates of entitlement (COEs) closed on Aug 19 was surprisingly uniform. Motor bosses were wondering how the price of Category A COEs could surge $4,611 to hit $128,501.

Footfall at flagship showrooms, they said, had been steady but unexceptional over the past fortnight, yet COE premiums rocketed.

Category A certificates, meant for mass-market cars and electric vehicles (EVs), are now priced $2,500 below Category B, which had edged up to $131,001 from $129,910. There have been three tender exercises so far in 2026 where the Category A COE premium was higher than Category B.

The drivers behind the upward trajectory of COE premiums are clear.

The looming expiry of the EV Early Adoption Incentive at the end of 2026 and the revised Vehicular Emissions Scheme (VES) taking effect on Jan 1, 2027, are stoking the panic.

Mass-market EVs will cost $10,000 more in the new year. Non-electric cars face an extra $7,500 in VES surcharge if registered after Dec 31.

FOMO, or the fear of missing out, runs high. Yet major motor showrooms in Leng Kee and Ubi, where they have been located for decades, do not reflect this level of buying frenzy. So where are the bids coming from?

Count the diners at Suntec City and the families visiting IMM in Jurong among those bidders. Motor retail has decentralised. There are now 13 car showrooms in malls and commercial buildings spread across Singapore – including in Tampines, Ayer Rajah, Punggol and Balestier. Most of them opened in 2025.

Casual shoppers grabbing groceries and dinner at malls are suddenly finding themselves going on test drives and discussing trade-in values. These mall showrooms do not always look crowded, but they are definitely adding to total sales numbers.

Authorised distributors are also expanding through sub-dealers, partnering with parallel importers and used-car sellers.

Regardless of footprint, every satellite store needs its own demonstrator fleet, which is refreshed every three to 12 months.

Multiply the brand’s model portfolio across the number of sales locations and the demand for COEs to support the diversified strategy adds up. Anticipating further COE premium increases, savvy dealers are registering demo units now, rather than later when it will cost more.

As resale values are highly influenced by prevailing COE prices, when the time comes for these demo units to be replaced with new ones in a few months, dealers may be able to turn a profit if the COE price is higher then.

Dealers are also under pressure to clear backlogs in their order banks. Unsuccessful bids dropped from 1,671 in August’s first tender exercise to 1,126 at the most recent round. Over-subscription is still excessive, though, since this is more than half of the total number of car certificates available.

Depending on the contract, dealers can have up to six bids, or three months, to secure COEs to deliver sold cars. The latest tender exercise would be the final chance for dealers to secure COEs for cars sold at May’s Car Expo event.

New model launches add further pressure. Leading up to the Mercedes-Benz GLB debut in June, aggressive promotions to clear the outgoing model triggered retaliatory sales campaigns across competing brands. The GLB is among the most significant and highly anticipated among the 30 new models that have debuted so far in Singapore in 2026.

The question remains: Who are the buyers behind the bids?

Private-hire fleet owners, often labelled as the powerful corporate interests behind rising COE premiums, have not been actively adding new cars in 2026, sources said. Credit lines to finance fleet expansions have been hard to come by since the collapse of Autobahn Rent A Car in January. Financial institutions are still reeling from the $300 million owed by the company, which ran a fleet of 1,700 vehicles.

To cope, some car leasing companies are converting existing private cars into private-hire cars, rather than bidding for fresh COEs.

The bulk of demand for fresh COEs comes from owners of cars that are nearing expiry. As at July 31, nearly one in five cars on the road – 161,422 out of 652,830 cars – are within 24 months of the end of their 10-year COEs.

Industry veterans know that persistently rising COE premiums spur buying interest, rather than cool it. Consumers fear that prices will climb further, becoming a self-fulfilling prophecy powered by FOMO.

We have seen this play out before. In 2023, the Land Transport Authority announced that rebates for hybrids will be cut by $10,000 in 2024, along with the adoption of a stricter emissions test standard that will push some models into poorer bandings and incur higher surcharges. COE premiums spiked to record highs in the closing months of 2023, only to run out of steam in the first quarter of 2024.

Owners of cars with expiring COEs may feel the urgency to take the plunge now. But if your COE is up only in 2027 or beyond, order food delivery if you must. Buy your groceries online, if you have to. You do not want to risk wandering into a mall showroom and end up being swayed to replace your existing car which still has plenty of life left.