COE revalidations fuelled by car fans
For more and more car buyers, old is gold, as they drive around Singapore in cars with revalidated certificates of entitlement (COEs).
A COE for a new car lasts 10 years, but a car owner or buyer can choose to keep it for longer. He can do so by paying the prevailing quota premium (PQP) - an average of a COE premium over three months - to keep it for 10 years, or half that amount for a five-year extension.
According to the Land Transport Authority, revalidations have soared - especially those for five years.
In the first eight months of this year, there were 3,520 five-year revalidations, mostly for cars up to 1,600cc. This is more than double last year's 12-month figure, and six times the average number of annual revalidations of the past five years.
There were 982 10-year revalidations from January to August, with those for bigger cars slightly outnumbering ones for smaller ones. This is one-third more than last year's 12-month figure, and almost double the average of the past five years.
Motorists are resorting to these old cars as they are far more affordable than newer models. And going by the huge number of five-year revalidations, they may also be waiting for COE premiums to fall and using the cars as a stop- gap measure.
Transport expert Park Byung Joon, an adjunct associate professor at SIM University, said: "The belief is that COE prices will go down over the next two years, and perhaps hit a low near the first half of 2018. Many people want to ride out the high COE prices, so to speak."
COE premiums have fallen from a high of around $90,000 21/2 years ago to about $60,000 today on the back of a growing supply of certificates. Prices are expected to continue to fall as COE supply peaks towards 2018. Outgoing Transport Minister Lui Tuck Yew said there are no plans to curtail the expected surge in supply - which is good news to both buyers and sellers.
A number of motor traders are already catering to the rising demand for cars with revalidated COEs. Pang's Motor Trading is one. It has a line-up of such cars, as well as those nearing 10 years old. Sole proprietor Steve Pang said buying "a COE car" - a term for such old cars - makes economic sense. "If you compare the annual depreciation of a seven- or eight-year-old car and a COE car, the older car is worth it," he said.
For instance, a 2008 Toyota Corolla Altis 1.6 currently has an average depreciation of $12,000 to $14,000 a year. But the same model which is 10 years old and packaged with a five-year PQP is going for $44,000, according to Mr Pang.
The price includes a PQP of $29,608, around $9,000 in forgone scrap rebate, some $2,000 in new parts and profit margin. "That works out to be less than $9,000 a year in depreciation," he noted.
"Furthermore, it is easier to get a loan for such a car because of the high COE value... it's low risk," Mr Pang said, explaining that in an accident write-off, the lender can recoup the remaining COE rebate.
As for the components that need to be replaced in such an old car, he said there are plenty of parts from scrapped cars on the market.
Some COE revalidations are fuelled by car fans who do not want to part with their treasured wheels. Dentist Andre Lam, 57, said he will probably revalidate the COE for his Honda Civic Type R, a collectible which turns 10 in July 2017. "If a new replacement model is far too expensive, or if COE dips below $20,000, I might just do it."
The trend has bolstered the number of cars between 10 and 11 years old. As of the end of July, there were 4,911 such cars on the road - nine times the population in 2010.