Car prices expected to slide with 21% more COEs for Feb-April

The growth in COE supply in the coming months comes amid renewed buying interest as crowds return to car showrooms after last week's fall of nearly $10,000 in COE prices for cars up to 1,600cc and 130bhp.
The growth in COE supply in the coming months comes amid renewed buying interest as crowds return to car showrooms after last week's fall of nearly $10,000 in COE prices for cars up to 1,600cc and 130bhp.ST PHOTO: KUA CHEE SIONG

Traders expect car prices to slide in the next two to three months when bigger quota kicks in

Car buyers can expect prices to slide further when an expanded certificate of entitlement (COE) quota kicks in from next month.

From February to April, there will be 7,366 certificates - or 21.1 per cent more - available for cars, the Land Transport Authority announced yesterday.

The growth comes largely on the back of more vehicles being scrapped as they reach their 10-year statutory lifespan. The supply consists of 4,057 COEs for cars up to 1,600cc and 130bhp, 2,417 for cars above 1,600cc or 130bhp, and 892 Open certificates. The last category can be used for any vehicle type but ends up being used almost exclusively by buyers of bigger cars.

Motorcycle COE prices have reached an all-time high of $6,889, and their supply will grow further by 9 per cent to 713 certificates a month.

The commercial vehicle COE is the only category in which supply will shrink.

Buyers of vans, trucks and buses will have 324 certificates a month - 32.6 per cent fewer than the previous quota period. This is because more vehicle owners are subscribing to the Early Turnover Scheme, which offers incentives to owners to replace their old models with new, less polluting ones.

Motor traders expect car prices to head south with the enlarged supply of COEs, although not immediately. Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said the substantial drop in premiums in the last tender had "generated a lot of of renewed buying interest".

Hence, he said, the bigger supply is unlikely to reduce premiums "in the short term" for Category A (cars up to 1,600cc).

As for Category B (cars above 1,600cc), prices should fall, although not "significantly", he added.

COE prices have been sliding in the last three years, but the single biggest fall took place last week when the Category A premium tumbled by nearly $10,000 to $45,002 - its lowest in nearly half a decade.

This drove crowds back to showrooms, although it is unclear how many more sales it had resulted in.

Mr Neo Nam Heng, chairman of diversified motor group Prime, said: "There may be a rebound (in COE premiums) in the next two, three months. But after that, prices will fall."

He added: "Along with the weaker economic outlook, there will be added downward pressure on prices.

"This is great news for the motor industry, consumers and banks."

A version of this article appeared in the print edition of The Straits Times on January 15, 2016, with the headline '21% more COEs for Feb-April'. Print Edition | Subscribe