Expect COE prices to dip - but not by much

Expert panel says premiums won't drop drastically unless supply increases

Will certificates of entitlement (COEs) become cheaper?

That was the burning question that readers wanted a panel of three motoring experts to address at The Straits Times' inaugural car forum yesterday, in the light of recent government curbs on loans and hikes in tax for pricier cars.

Other concerns raised include the effects on the used-car market, and whether some motorists would turn to cheaper commercial vehicles.

And the answer to the top question? Yes, COE prices will go down, but not by very much.

"My gut feel is that (the new rules) will ease COE premiums but I don't see them crashing or tumbling down," said Motor Traders Association president Cheah Kim Teck, who was part of the online panel along with Straits Times senior transport correspondent Christopher Tan and former president of the Society of Financial Service Professionals Leong Sze Hian.

Mr Cheah noted that premiums would not move down drastically unless the supply of COEs, which is tied to the vehicle population growth rate, increases.

The number of COEs currently available is at the lowest since the vehicle quota system started in 1990.

From 2009 to 2011, the vehicle population growth rate was set at 1.5 per cent by the Government. But that was cut to 1 per cent last August and to 0.5 per cent last month.

Added Mr Leong: "Fewer people will be able to afford cars, and there will be less demand for COEs.

"But credit companies may come up with more creative (loan) packages. It's hard to say how much COEs will go down by."

As of the most recent bidding exercise, COEs for cars up to 1,600cc was $78,301 while the premium for cars above 1,600cc was $92,667.

Yesterday's hour-long live blogging event was held to help make sense of the measures announced last week by the Government - which included limits on car loans and making it more costly to purchase luxury cars.

Loans are capped at a maximum of 60 per cent of a car's price, and need to be serviced within five years. Previously, buyers could take loans for up to 100 per cent of the purchase price and stretch the tenure to 10 years.

The Additional Registration Fee (ARF) for higher-end cars has also increased. For instance, a BMW 735 will see a 42 per cent rise in its ARF from $74,000 to $105,200 under the new tiered structure.

Over the last three days, readers sent in nearly 50 questions to The Straits Times' Facebook page and e-mail and Twitter accounts.

The panellists agreed that used-car prices will fall.

Mr Tan also noted that car trade-in values will be depressed as traders will be cautious and offer an artificially low price due to the uncertain market.

Another reader asked why car dealers could not separate the price of a car from the COE premium, and noted that some do not refund the difference between the price stated in a contract and actual COE cost.

Mr Tan said that from a business planning perspective, packaging COEs with cars allows dealers to plan for their stock.

He added that consumers have to shop around and beware of dealers that peg rebate levels at an artificially low level to cream off the profits.

Asked what is a reasonable quality of public transport for car users to switch to public transport, the panellists said predictability and accessibility of services have to improve.

For instance, buses have to arrive more frequently.

Mr Leong voiced another concern.

"If you make it harder for people to keep driving, they will be pushed to take public transport," he said. "They should do studies on how this will impact public transport."


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