Singapore’s car ownership system could be heading for a major overhaul, with proposed COE changes potentially giving mass-market car buyers rebates while adding surcharges for higher-value vehicles. But will the changes actually make cars cheaper?
Singapore’s Certificate of Entitlement (COE) system could undergo a significant transformation as the Land Transport Authority (LTA) considers merging Categories A and B into a single passenger-car category and introducing rebates or surcharges based on vehicle value.
The preliminary proposal, announced on October 8, 2026, aims to restore a clearer distinction between mass-market cars and luxury models at a time when COE premiums for the two existing categories have increasingly converged.
However, motorists hoping for an across-the-board drop in car prices may need to temper their expectations. The proposed changes are designed primarily to differentiate what buyers pay for different types of vehicles, not to guarantee lower COE premiums.
Why Singapore Is Considering a Major COE Overhaul
Under the current system, Category A generally covers smaller, less powerful cars, while Category B is intended for larger or more powerful vehicles.
But advances in vehicle technology, particularly electric vehicles, have made engine capacity and power output less effective as measures of a car’s market position.
Some higher-value models can now be configured to meet Category A eligibility requirements, increasing competition for certificates traditionally intended for mass-market vehicles.
The price gap between the two categories has consequently narrowed. In three bidding exercises between February and June 2026, Category A premiums even exceeded Category B premiums.
At the October 7 bidding exercise, Category A COEs closed at S$130,001, just S$99 below Category B’s S$130,100.
This narrowing gap has raised questions about whether the existing classification system still achieves its original purpose.
How the Proposed COE Rebate and Surcharge System Would Work
Under the LTA’s preliminary plan, Categories A and B would be combined into a single pool for passenger cars. Instead of relying primarily on engine specifications, the system would introduce a fee-and-rebate mechanism, known as a “feebate”, based on a vehicle’s value.
The authority is considering two possible structures: a three-band system and a five-band system.
Under the proposed three-band option:
- Lower-value cars: Eligible for a S$15,000 rebate on the prevailing COE premium.
- Mid-range cars: Pay the prevailing COE premium without an additional rebate or surcharge.
- Higher-value cars: Face a S$15,000 surcharge on the prevailing COE premium.
The five-band alternative would introduce smaller adjustments, including rebates or surcharges of S$7,500 in the additional bands.
Under either approach, the maximum difference between the rebate and surcharge ends could reach S$30,000.
The objective is to ensure that buyers of higher-value vehicles pay more than buyers of mass-market models, even if both compete within the same COE category.
Will the Proposed Changes Make Cars Cheaper?
That is the question many prospective car buyers will want answered.
The proposed rebates could reduce the COE amount paid for eligible lower-value cars, while surcharges could increase the cost for buyers of higher-value models.
However, the reform does not guarantee that the overall cost of owning a car in Singapore will fall.
COE premiums will continue to be determined by market demand and the available supply of certificates. If competition for COEs remains intense, the underlying premium could stay high even after rebates or surcharges are applied.
The proposal is therefore aimed at creating a more meaningful price distinction between mass-market and luxury vehicles rather than directly lowering the market-wide cost of car ownership.
Car Value Could Become the Key Factor
The LTA is considering using a vehicle model’s median open market value (OMV) to determine which rebate or surcharge band applies.
OMV refers to the basic value of a vehicle before taxes and other charges.
For established models, the median OMV would be calculated using historical data. For new models, the specific vehicle’s OMV could be used.
This approach is intended to reduce the effect of temporary fluctuations caused by exchange rates, supply-chain changes and differences in import arrangements.
The LTA has also indicated that the bands assigned to vehicle models would be reviewed annually to reflect changes in the car market.
Based on 2025 registration figures, the authority estimated that about half of all cars would either qualify for a rebate or face no additional COE adjustment under the proposed framework. The remaining cars would incur a surcharge.
What Happens to Category E and COE Renewals?
The review extends beyond Categories A and B.
The LTA is also seeking public feedback on the future of Category E, the Open Category that can be used for vehicles other than motorcycles.
One option is to remove Category E altogether. Another is to retain it for passenger cars only, allowing buyers with urgent needs to continue accessing an alternative COE route.
COE renewals are also under review. The LTA is considering whether the proposed rebate-and-surcharge framework should apply to renewals, although it noted that this may not be necessary given the narrowing price gap between Categories A and B.
If the merger proceeds, transitional arrangements may be considered for existing car owners approaching renewal.
When Could the New COE Rules Take Effect?
For now, the proposed changes are still under consultation and have not been finalised.
The LTA opened its public consultation on October 8, 2026, and is inviting feedback from motorists, industry stakeholders and other interested parties until November 2, 2026, at 11.59pm.
The authority expects to complete its review by the end of 2026 and share its findings and recommendations in the first half of 2027.
The Bigger Question for Singapore Car Buyers
The proposed COE overhaul could change how Singapore differentiates between everyday cars and more expensive models. By shifting the focus from engine specifications to vehicle value, the LTA hopes to make the system more relevant to today’s automotive market.
Yet the central issue remains unresolved: will combining the two categories improve affordability, or simply change how the cost is distributed among different buyers?
Until the consultation concludes and the final framework is announced, motorists should treat the proposed rebates and surcharges as possible changes—not guaranteed savings.
For anyone planning to buy a car, the eventual details could matter considerably. The rebate bands, surcharge levels, COE market conditions and treatment of renewals will all influence how the new system affects individual buyers.
WWC ONE MEDIA G,A
