TWO weeks after hitting an all-time low of $2, certificate of entitlement (COE) prices for small cars rebounded yesterday as drivers flocked to showrooms looking for deals.

The premium for cars with engines 1,600cc and below ended at $7,721 - the highest out of all five vehicle categories.

But dealers were quick to point out that the increase does not necessarily mean the labouring car market is back on track.

'The overall weakness in the passenger car market is still there,' said Mr Vincent Ng, product manager of authorised Honda agent Kah Motor.

The latest rise in demand came only after dealers slashed prices on small cars, with discounts of over $3,000 on some. Buyers could even get a weekend car for $10,999 - an all-time low.

This is also traditionally a busy period for car sales, with Singaporeans looking for a new ride to usher in Chinese New Year, which is next month.

While dealers have seen bookings rise, the reservations are not necessarily money in the bank. The global financial turmoil has caused banks and finance houses to tighten credit lines.

'We have a stack of our customers' loan rejections from banks. It's not funny,' said Mr Glenn Tan, chief executive of Subaru agent MotorImage.

While customers are hoping for 100 per cent financing, banks seem to be approving only those opting for loans up to 70 per cent of the purchase price, said one dealer.

Since the initial discounts two weeks ago, dealers have increased prices slightly, but many are wary of damaging what is a fragile market.

'We (dealers) will all have to think hard on how to price the cars again. It's all a matter of sentiment now,' said Mr Ng.

Still, the industry remains light years ahead of where it was two weeks ago. The most recent COE exercise saw about 3,200 bids for small cars, slightly less than twice the number of available permits. During the last tender, there was only one more bid than COEs available.

All COE prices, except those for commercial vehicles, ended higher yesterday. COEs for cars above 1,600cc closed at $6,501, up from $4,889.

Motorcycle COEs ended slightly higher at $1,102, compared to $1,012, while COEs for the open category, which can be used for any vehicle, ended at $7,589 up from $6,889. Only the COE price of commercial vehicles ended lower at $5,212, down from $6,189.

Despite the gains, most COEs remain well below the levels of even three months ago. Industry analysts say the prices are likely to remain at these levels until Chinese New Year.

mariaa@sph.com.sg