Torque Shop

Will COE prices fall further? I am looking to change my car.

Certificate of entitlement (COE) prices are already at their lowest in over eight years.

This is despite a smaller quota and a zero-growth policy, instituted this year.

Although next year's quota is expected to shrink further (going by the age profile of the car population), the shrinkage is not expected to be huge. A rough estimate puts it at 20 per cent or so.

While a smaller supply usually means higher prices, there are other concerns which might dampen buying sentiment.

The ongoing trade war between China and the United States, looming geopolitical tensions and rising interest rates are some of these concerns.

More pertinently, the prevailing low COE environment might also encourage more people to extend the lifespan of their current cars. If more people revalidate their car COEs, replacement demand will dip. That will have some downward pressure on premiums in the year ahead.

In any case, if you are changing cars, whether COE goes up or down is not very material because the trade-in price of your current car will be similarly affected as new car prices.

Christopher Tan

A version of this article appeared in the print edition of The Straits Times on December 15, 2018, with the headline 'Torque Shop'. Print Edition | Subscribe