Used car sales slow down; more cars to be scrapped with falling resale prices

The car-cooling measures are starting to have a tangible impact on the used-car market, slowing down sales which had been growing steadily in the last decade.

In the first quarter, the number of second-hand cars sold fell to 17,407 units - a 9.5 per cent drop from the corresponding period last year.

Market players expect sales to slide further as the cooling measures continue to sink in.

Singapore Vehicle Traders Association secretary Raymond Tang said that while sales this month and next should still be relatively stable, it "will definitely slow down" after that.

This is when a 60-day reprieve from the cooling measures that the Government had granted the used-car market will end.

The cooling measures announced on Feb 25 include restricting loans for cars to no more than 60 per cent of their purchase prices, to be repaid in no more than five years.

But after repeated appeals from traders, the Government lifted the restrictions for used vehicles that were acquired before Feb 25. The 60-day reprieve began on April 6.

Industry watchers expect sales to be higher than average during the reprieve period, but say it could plunge immediately afterwards. Mr Tang agreed, saying "we are now doing future sales".

Meanwhile, he said the association is "writing to the Government" to ask for more concessions, such as capping used-car loans at 80 per cent of the purchase price, instead of 60 per cent.

Because of certificate of entitlement (COE) prices climbing continuously in the last five to six years on the back of a shrinking supply, more and more car buyers have been turning to the second-hand market.

From barely 21,000 used cars sold in 2006, the figure soared to 77,727 last year - the highest in over a decade.

But the cooling measures are likely to reverse the trend.

On the bright side, this may be good news to new car buyers, as more cars will now be scrapped because of plummeting resale prices.

This, in turn, will mean a growing supply of fresh COEs ahead.

In the first quarter, 4,240 cars were scrapped - 19 per cent more than the October to December period last year.

If the rate of scrappage continues or quickens in the second quarter, the COE supply for the next quota period from August to January could rise by 25 to 30 per cent - the first increase in seven years. This is despite the Government planning to cut back supply, to make up for an oversupply of COEs in the 2008-2009 period.

The Government last year deferred the clawback to relieve the crunch on the number of COEs.

Because of the clawback, dealers said any growth in COE supply will be measured. But they are relieved that a further shrinkage is now unlikely.

Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said: "I think we should have seen the bottom already."