COE Category Spread Analysis: Q1 2026
While individual COE premiums capture the absolute cost of a certificate, the spreads between categories often reveal more about the underlying market dynamics. A widening spread between Category B and Category A, for instance, signals growing divergence in demand conditions between the luxury and mass-market segments. This analysis examines Q1 2026 spreads in detail and considers their strategic implications.
Q1 2026 Category Spread Summary
| Spread | Q1 2026 Average | Q4 2025 Average | Q1 2025 Average | 5-Year Average |
|---|---|---|---|---|
| Cat B minus Cat A | $28,600 | $26,800 | $22,500 | $18,200 |
| Cat E minus Cat B | $3,800 | $4,100 | $5,200 | $4,500 |
| Cat E minus Cat A | $32,400 | $30,900 | $27,700 | $22,700 |
| Cat A minus Cat C | $23,700 | $22,000 | $20,000 | $15,800 |
The B-A Spread: A Structural Widening
The spread between Category B and Category A averaged $28,600 in Q1 2026, a widening from $26,800 in Q4 2025 and well above the 5-year average of $18,200. This is the most significant spread movement in the current market, and it points to a structural rather than cyclical divergence.
The primary driver is the EV effect on Category B. As documented in our EV adoption tracker, the majority of electric vehicles fall into Category B, adding demand that did not exist in historical periods. Category A, while also seeing growing EV competition from smaller models, has been less affected because most affordable EVs still exceed the Category A power threshold.
A secondary driver is the relative price sensitivity of each segment's buyers. Category A buyers, typically purchasing mass-market vehicles in the $80,000-$120,000 range (before COE), are more budget-conscious and more likely to delay purchases when premiums spike. Category B buyers, purchasing vehicles in the $150,000-$400,000 range, treat the COE as a smaller proportion of their total outlay and are less likely to be deterred by premium increases.
What a Wide B-A Spread Means for Buyers
For buyers choosing between a Category A and Category B vehicle, the widening spread effectively increases the upgrade penalty. Moving from a 1,598cc car (top of Category A) to a 1,999cc car (Category B) now costs an additional $28,600 in COE alone, on top of the higher vehicle price. This premium has historically ranged from $10,000 to $30,000, and we are near the upper end of that range.
For buyers considering downsizing from Category B to Category A to save money, the current spread makes this strategy particularly rewarding. A buyer willing to choose a smaller-engined vehicle can save nearly $29,000 on the COE component alone.
The E-B Spread: Open Category Overflow
The spread between Category E (Open Category) and Category B narrowed slightly to $3,800 in Q1 2026, down from $4,100 in Q4 2025. This spread represents the premium that Category E bidders pay for the flexibility of an open certificate.
A narrow E-B spread, as we are seeing now, suggests that Category B competition is not severe enough to drive large numbers of failed bidders into the Open Category. When Category B is extremely oversubscribed, the E-B spread widens as desperate bidders bid aggressively in Category E to secure any certificate. The relatively modest spread in Q1 suggests an orderly market, even if premiums are high in absolute terms.
For buyers considering whether to bid in Category B or Category E, the narrow spread argues for starting in Category B. The cost of using Category E as a backup is currently modest, but there is an opportunity cost in certificates — Category E certificates used for Category B vehicles reduce the pool available for other categories. Learn more about this trade-off in our Open Category guide.
The A-C Spread: Cars vs Commercial
The spread between Category A and Category C widened to $23,700, reflecting the softer demand environment in the commercial vehicle segment relative to the passenger car market. Historically, during periods of strong economic growth and construction activity, Category C premiums can approach or even exceed Category A, narrowing the spread. The current widening suggests that the commercial sector is not experiencing the same level of demand pressure as the car market.
Historical Spread Patterns and What They Signal
Spread analysis can serve as an early warning system for market turns. Here are some historical patterns worth noting:
- B-A spread compression (2019-2020): When overall demand collapsed during the pandemic, the B-A spread narrowed sharply as both categories fell. The luxury premium effectively shrank because there were fewer marginal buyers in Category B to sustain the premium.
- E-B spread blowout (2023): During the 2023 peak, the E-B spread widened to over $10,000 as Category B competition became extreme and failed bidders flooded into Category E. This was a clear signal of market overheating.
- A-C convergence (2022): During the post-pandemic economic recovery, Category C premiums surged on the back of strong logistics and construction demand, narrowing the A-C spread to below $10,000.
Strategic Implications
For buyers, spread analysis informs several strategic decisions:
- Category selection: If the B-A spread is historically wide (as it is now), buyers on the margin between categories are better off choosing Category A for the cost savings.
- Bidding backup: When the E-B spread is narrow, using Category E as a fallback is cheap. When it is wide, the insurance premium of Category E becomes expensive.
- Timing: Spread movements can precede premium movements. A narrowing B-A spread could signal that Category B is about to soften (as it did in 2020), while a widening spread suggests continued Category B strength.
Frequently Asked Questions
What is a normal spread between Category A and Category B?Over the past decade, the B-A spread has ranged from below $5,000 during market troughs to over $30,000 during peaks. The 5-year average is approximately $18,200. The current $28,600 spread is in the upper quartile of the historical range, indicating elevated Category B demand relative to Category A.
Can I use a Category E COE for any vehicle?Yes, a Category E certificate can be used for any vehicle type — cars of any engine size, goods vehicles, or motorcycles. In practice, it is overwhelmingly used for cars, particularly Category B vehicles, because the premium paid over Category B-specific certificates is usually modest. See our Category E guide for a detailed analysis.
Does the spread data help predict future premiums?Spread data is more useful for understanding relative dynamics than for predicting absolute price levels. However, extreme spreads — either very wide or very narrow relative to historical norms — can signal that a category is overheated or undervalued. We use spread analysis as one input among many in our Bid Advisor algorithm.