WHAT is thought to be impossible in an open bidding system has happened: COE has crashed.

At the close of the latest tender on Wednesday, COE premium for cars up to 1,600cc - the mainstay of car buyers - closed at an unprecedented $2.

Motor traders were shocked. All said the market was soft, but no one expected the price to crash.

The number of bids submitted exceeded the COE supply of 1,851 by only one.

The other categories all ended much lower as well.

COE for cars above 1,600cc closed at $4,889 - almost half the previous value. The Open COE, which can be used for any vehicle type, ended at $6,889 - down from $10,490 before.

COE for commercial vehicles finished at $6,189, from $8,889; and motorbike COE dipped to $1,012, from $1,509 previously.

It is the first time that a COE premium for cars has fallen to rock-bottom. The last time car COE came this close was in December 1997, when the premium for big cars plunged to $50.

Observers, however, pointed out that that was during a closed bidding system, when bidders could not see what the prevailing bids in a tender were. In a way, they were bidding blind, they said.

Soon after the $50 result, the system was changed to an open-bidding platform. In this system, bidders could see the value of bids being submitted, and thus could base their decision on the prevailing demand.

The other time when the market witnessed a COE crash was in early 2007, when premium for commercial vehicles hit $1 for six consecutive tenders.

This was because many commercial vehicle sellers could not get their supply of new models that would meet a new emission standard the Government pushed through.

Sales of new commercial vehicles almost ground to a halt, resulting in the COE crashes.

The latest crash may not benefit everyone though. Car owners planning to sell their vehicles will have to stomach much lower resale values. Used car dealers, already jittery over a high inventory, will not be willing to take in more cars.

This will create a vicious circle, as folks who cannot sell their existing cars won't be looking for a new one any time soon.