Low COE: To buy or not to buy

December 3, 2018

| 9 minutes read |

Through my course of Financial Consulting, several clients and friends have been asking me, “Joyce, why don’t you buy a car?”

I usually reply, “It’s tempting, but it doesn’t quite make sense to me right now.” Sometimes, I’ll get the occasional worried look from my clients, “Are you doing ok in this career?”

In Singapore, where a $25,000 COE is considered an all-time low since 2010, owning a car is undeniably a status symbol that reflects a person’s perceived success and aspirations.

I learnt how to drive when I was 20 and since then, I’ve always wanted to own a car. When I was 20, I felt that owning a car was a symbol of success – it would mean that I made it somewhere in life. Like many young adults, I told myself that I would work towards owning a luxury car. The appeal of driving around in a luxury car vis-à-vis squeezing in the MRT during the daily commute was definitely strong.

I remember reality hitting when I entered the Police Force and drew my first pay. I wasn’t as financially-savvy back then but I did a quick calculation of my expenses and liabilities and realised that I wouldn’t be able to own a car anytime within the next couple of years. Furthermore, I had to save up to help with my family expenses and with putting my younger brothers through university.

Years later, I looked around me and noticed that friends and colleagues who were drawing a lower pay were owning cars! I was astounded. How could that be?! At the same time, I was working extremely long hours and going home from Yishun (where I was stationed) at 3am was the most painful experience ever. I quickly succumbed to the social comparisons and pressures of working long hours, and bought my first car.

I quickly succumbed to the social comparisons and pressures of working long hours, and bought my first car.

And that, my friends, was the worst financial decision I have ever made in my life (I’ll go into that shortly). I sold my car shortly after I was posted into a staff department due to the inconvenience of owning a car and having to free up more resources for my family.

Before I carry on, I’d like to clarify that I have nothing against car ownership in Singapore. I have family members and friends who own cars and that works for them as they have prioritised certain needs (that include car ownership) in their lives. The temptation of owning a car is sometimes still overwhelming for me and I have to constantly remind myself that, at this point in my life, I really do not need a car.


Dollars and Cents

If I analyse purely from the financial perspective, it simply doesn’t make sense for me to own a car. Here are how the sums would work out if I own an average sedan car (priced at $100,000, “low” COE included) over 10 years (tenure of COE).


And here are the figures for remaining status quo (public transport, lots of Grab and Taxi rides).


There you have it, that’s a total savings of $153,016! This means that if I eventually decide to own a car, the value that the car brings to me has to be more than $153,016 over 10 years. It is challenging to put a “dollar value” on intangible items and experiences, and this is where the scored pros and cons analysis comes in.


Scored Pros and Cons Analysis

This analysis is something that we’re all familiar with. We list down the pros and cons, and put a “point system” to depict the “value” of the respective pros and cons. You only go ahead with the decision if the pros literally outweigh the cons. This analysis would definitely differ from person-to-person as we prioritise and value things differently. Here’s my analysis:


There will come a day when I value the convenience of owning a car more, or when the extra spending is not as great a deterrent – perhaps I will own a car then. In a city-state well connected by public transport and private hires, it is not essential for me to own a car at this juncture.

I’ve done financial reviews with more than 100 people now and have seen some clients struggle with their expenses due to car ownership. For an individual who earns an average income, owning a car consumes a significant part of that income, leaving him/her with little or no capacity to save for retirement. For now, I can’t bring myself to buy a luxury car to “show others that I’m doing well” while being completely aware that a car only serves as a liability, and never an asset.

 … a car only serves as a liability, and never an asset.

Do I still want to own a car? Yes, I do. The convenience and ability to drive my family and dogs anywhere is really attractive.

Should I own a car? Definitely not at this point in time (even when COEs are at an all-time low). Singapore is too well-connected (it is faster to take the train from Bishan to Orchard than to drive there) and I am not inclined to tie my money down onto a car right now. Furthermore, I work a lot more efficiently in public transport (Whatsapp, Google Calendar, Trello, Outlook and Straits Times are my best commute buddies these days) and most of my appointments are often right by a MRT station. There is little practicality for me to own a car right now.

When I owned a car, I absolutely couldn’t imagine returning to public transport. Even when I was eating up a huge chunk of my income for a really small car. Now that I can quite comfortably own a car, I can’t imagine giving up that significant amount of financial freedom and work efficiency to buy one.

I can't imagine giving up that significant amount o financial freedom and work efficiency to buy one.

As a society, we need to move away from recognising cars as status symbols (especially so in Singapore). The amount you have in your savings and assets is the true status symbol.

 The amount you have in your savings and assets is the true status symbol.

I hope that this sharing helps you in making your assessment as to whether you should hop on the “low-COE” wagon. Feel free to speak to me or your trusted Financial Consultant to do a detailed breakdown and assessment of your monthly expenses to see if it financially viable for you to own a car. The last thing you want is to struggle with your monthly cashflow and park your car two streets away from the shopping centre (that is located right above the MRT station) just to “save” on parking expenses to pay for your weekly petrol.


Disclaimer: The opinions expressed in this article are solely my own. If you require more information, please feel free to PM me or speak to your trusted financial consultant.

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