How LTA Quota Cuts in 2020 Triggered Record COE Prices

The Chain Reaction That Broke the COE Market

COE quotas are not arbitrary numbers plucked from thin air by bureaucrats. They are mechanically linked to vehicle deregistrations through a formula that, most of the time, keeps the vehicle population in check. But when COVID-19 hit Singapore in early 2020, it set off a chain reaction that the formula was never designed to handle. Deregistrations collapsed, quotas shrank, prices surged, and the feedback loop that followed pushed COE premiums to levels that would have seemed absurd just two years earlier. Track the current quarterly allocations on our Quota Watch page to see where things stand today.

How Quotas Are Calculated: A Primer

Before diving into what went wrong, it helps to understand how the system is supposed to work. LTA determines the number of COEs available each quarter using a formula with three main components:

• Replacement COEs: This is the dominant component, typically making up 80-90% of the total quota. For every vehicle that leaves the road (scrapped, exported, or otherwise deregistered), one new certificate is created. Since February 2023, this figure has been based on the rolling average of deregistrations over the previous four quarters. Before that change, LTA used projected deregistrations, which introduced additional forecasting risk.
• Growth COEs: These are based on the allowable vehicle population growth rate. For Categories A, B, and D, the growth rate has been pegged at 0% since 2018. Category C (goods vehicles and buses) enjoys a slightly higher rate of 0.25%, set to remain in place until January 2028. In practice, the growth component contributes only a handful of certificates each quarter.
• Adjustments: A catch-all category that includes certificates for taxi replacements, expired Temporary COEs (TCOEs) that were never converted, transfers under the Early Turnover Scheme (ETS), and any additional government injections. These adjustments can swing the total by a few hundred certificates in either direction.

The key takeaway is that deregistrations drive the vast majority of new supply. When deregistrations are healthy, quotas are adequate and prices tend to stay manageable. When deregistrations fall, the entire system tightens.

April 2020: Circuit Breaker Shuts Down the Market

When Singapore entered its Circuit Breaker on 7 April 2020, the immediate impact on the car market was total paralysis. Workshops closed. LTA suspended COE bidding exercises entirely for April and May. Showrooms were shuttered. Even if a car owner wanted to deregister their vehicle, the logistical infrastructure to do so was largely unavailable.

Monthly deregistrations, which typically ran in the range of 5,000-6,000 across all categories combined, cratered to fewer than 2,000. Some months saw barely 1,500. The freeze was not confined to a single category — it hit every segment, from small cars in Cat A to luxury vehicles in Cat B, motorcycles in Cat D, and the open category.

At the time, the immediate concern was demand. With the economy in freefall and unemployment rising, who would buy a car? But the supply-side damage was quietly accumulating in the background, embedded in the deregistration statistics that would feed into quota calculations for the next several quarters.

The Quota Numbers Tell the Story

Because quotas are derived from deregistrations with a lag, the impact unfolded in slow motion. Here is how total quarterly certificate availability changed across all categories:

• Q1 2020 (Jan-Mar): Approximately 7,200 total certificates — this was the last "normal" quarter before COVID.
• Q3 2020 (Jul-Sep): Roughly 5,800 certificates — a 19% drop, reflecting the partial deregistration freeze from Circuit Breaker.
• Q1 2021 (Jan-Mar): About 5,100 certificates — down 29% from Q1 2020, as the full weight of collapsed 2020 deregistrations fed through.
• Q1 2022 (Jan-Mar): Approximately 4,800 certificates — a 33% decline from the pre-COVID baseline, and the trough of the cycle.

A one-third reduction in supply would be dramatic in any market. In a market where thousands of buyers compete for a fixed pool of certificates twice a month, it was devastating. You can explore the full historical dataset on our long-range trends page.

The Self-Reinforcing Spiral

What made the 2020-2023 period so painful was not just the initial shock but the feedback loop that followed. The COE system, by design, contains a mechanism that amplifies supply constraints rather than dampening them. Here is how it works:

1. Quotas fall because deregistrations have dropped.
2. Prices rise because fewer certificates are available for the same (or recovering) demand.
3. Owners choose to renew rather than scrap, because the cost of a new COE has become prohibitively expensive. Paying the Prevailing Quota Premium (PQP) to extend an existing vehicle for 5 or 10 years looks far more attractive than paying a record-breaking premium for a brand-new car.
4. Fewer vehicles are deregistered because more owners are renewing.
5. Future quotas fall further because deregistrations have declined again.
6. Return to step 2. The cycle intensifies.

This is a textbook positive feedback loop, and it ran essentially unchecked from mid-2021 through 2023. Each quarter of rising prices made the next quarter's supply situation worse. Cat A premiums, which sat around $35,000-$40,000 before COVID, climbed to $60,000 by mid-2022, then $90,000 by early 2023, and eventually exceeded $110,000 by late 2023 — nearly triple the pre-pandemic level.

Quantifying the Spiral

The numbers reveal just how severe the feedback loop became. In a typical pre-COVID quarter, about 35-40% of expiring COEs were renewed rather than scrapped. By Q2 2023, that renewal rate had climbed above 55%. Each percentage point increase in renewal rates translated to roughly 150-200 fewer deregistrations per quarter across all categories, which in turn meant 150-200 fewer replacement COEs in the following quarter's allocation.

Put differently, the renewal-driven supply loss compounded quarter over quarter. It was not a one-time shock but a persistent drain. Even after the initial COVID disruption passed, the elevated renewal rate kept deregistrations suppressed for years. The system had entered a new equilibrium — one characterised by structurally lower supply and structurally higher prices. For a detailed look at how PQP interacts with renewal decisions, see our COE guide.

Why the Recovery Took So Long

In theory, the spiral should eventually break. At some point, enough 10-year COEs expire without renewal, or enough car owners decide the scrap value plus PARF rebate makes deregistration worthwhile. But several factors delayed this correction:

• The 10-year COE cycle: Singapore's vehicle fleet has a natural replacement cycle tied to the 10-year COE lifespan. The 2020-era shortfall in deregistrations meant there was a smaller-than-usual cohort of vehicles reaching their 10-year mark in the 2023-2025 window. The missing deregistrations of 2020 created a gap in the pipeline that took years to fill.
• PQP staying elevated: Because PQP is based on the moving average of recent COE premiums, high premiums feed into high PQPs, which in turn keep the cost of renewal elevated — but still cheaper than a new COE for most owners. This kept renewal rates above historical norms throughout 2022-2024.
• Semiconductor shortages: Global supply chain disruptions meant that new cars were harder to obtain even if you won a COE. Delivery times stretched to 6-12 months for popular models. Some buyers who won COEs could not register vehicles in time and had to let their certificates lapse, adding administrative complexity without meaningfully increasing the vehicle population.
• Pent-up demand: As the economy recovered from COVID, there was a surge of buyers who had deferred purchases during the downturn. This demand wave coincided with the tightest supply period, producing the worst possible timing for buyers.

The System Is Pro-Cyclical by Design

The fundamental lesson of the 2020-2023 episode is that the COE quota mechanism is pro-cyclical. It amplifies both downturns and recoveries rather than smoothing them out. When the economy contracts and fewer cars are scrapped, the system restricts future supply — which pushes prices higher just as demand begins to recover. When times are good and many cars are being scrapped, the system creates abundant supply that can push prices down further than the market might otherwise dictate.

LTA recognised this structural vulnerability and announced a significant intervention in early 2025: an injection of 20,000 additional COEs to be released over several years starting from February 2025. The justification was compelling — vehicle mileage in Singapore had decreased approximately 6% from 2019 to 2023, while the rail network expanded 18% from 228km to 270km. Fewer kilometres driven per vehicle and better public transport options meant the road network could accommodate more cars without worsening congestion.

Early results have been promising. The Feb-Apr 2025 quota stood at 17,133, rising to 18,701 for Aug-Oct 2025, and reaching 18,824 for the Feb-Apr 2026 period. Whether this additional supply will be sufficient to break the renewal-driven feedback loop remains an open question. Check our price prediction tool for forward-looking estimates.

What This Means for Buyers Today

If you are currently in the market for a car, the 2020 quota crisis offers several practical lessons:

• Watch deregistration trends, not just prices. Deregistrations are a leading indicator of future quotas. A sustained drop in monthly deregistrations signals tighter supply 3-6 months down the line. Our Quota Watch page tracks these figures in real time.
• Understand the renewal dynamic. When PQP is significantly lower than new COE premiums, expect high renewal rates and constrained future quotas. Use the PQP tracker to compare current PQP levels against spot premiums.
• Don't assume supply shocks are temporary. The 2020 shock took nearly four years to work through the system. If another major disruption hits deregistrations, the impact will be similarly prolonged.
• Factor in your total cost of ownership. Whether premiums are at $80,000 or $120,000, the decision to buy should be based on your personal financial situation and transport needs, not on trying to time a market that is influenced by factors no individual can predict. Use our Total Cost of Ownership calculator to model the full 10-year cost.

The 2020 quota crisis was not an anomaly. It was the system working exactly as designed, just under conditions no one anticipated. The structural features that created the spiral — deregistration-based quotas, the renewal option, and the lag between cause and effect — are all still in place. The next shock may come from a different source, but the dynamics will be familiar.