COE premiums for smaller cars increase further to new six-year high

SINGAPORE - Car buyers can expect to pay more for certificates of entitlement (COE) in the coming years, said motor dealers, as premiums across most categories shot up in the latest bidding exercise that closed on Wednesday (Dec 22). 

Demand will continue to outstrip supply, they said, given that the Land Transport Authority has said that there will be zero vehicle population growth for at least another four years. 

How much they grow for each round of bidding will depend on the quota. The next quota is set to be announced in January. 

In the latest round of bidding - the last for this year - a total of 2,522 bids were received for a quota of 1,822 COEs available.

Cat A premiums for cars up to 1,600cc and 130bhp closed at $58,801, which is $1,791 above the previous six-year high set two weeks ago.

This is the highest price in that category since November 2015 when it was $59,200.

Premiums for motorcycles also climbed further from $9,401 to $9,601, a 2.1 per cent increase. This is the second highest COE price for the category to date, second only to the $9,689 logged after the Sept 8 bid.

Cat B COE prices also rose to $80,989 for larger cars above 1,600cc or 130bhp, continuing an aggressive increase in the past three months.

This was $588 higher than the result of the previous bidding exercise, which had seen an $800 hike in premiums two weeks ago.

Premiums fell in both the goods vehicles and buses category and in the Open COE category.

COE prices for goods vehicles and buses fell by 2.2 per cent, from $45,000 to $44,000.

Closing 1.3 per cent lower at $83,889, from $85,000 previously, were premiums in the Open category, which can be used for any vehicle type but usually ends up being used for bigger cars.

Mr Neo Nam Heng, chairman of diversified motor group Prime, said premiums for Cat A could exceed $60,000, although it will rise “progressively and gradually”, given that buyers of smaller cars are more price sensitive. 

Only 534 COEs in this category were available this round, a figure that is just a fraction of the actual demand for smaller cars. 

“There will continue to be a supply shortage even after the holiday season. Demand will always exceed supply and the gap between the two will never be closed again,” he said. “Consumers cannot expect a big drop.”

Mr Raymond Tang, honorary secretary of the Singapore Vehicle Traders Association, agreed, saying that with fewer cars scrapped, fewer COEs will be issued. 

“If quota remains low, a bit of movement in the market will cause premiums to shoot up. When new models are launched every few months, demand will shoot up.”

He added that buyers of larger cars – using Cat B and Open category COEs – are also willing to pay more since they are luxury buyers with deep pockets. 

In October, the Cat B COE price increased by around $10,000, from $70,200 to $80,210.

“An increase of more than $5,000 does not necessarily mean a lot to them. Many are buying cars like Teslas to keep at home, to show that they can own an electric vehicle,” Mr Tang said. 

He said the increase in Cat A and B premiums, in contrast to a fall in Open category premiums, showed that orders for vehicles remain high, since motor dealers are more certain about the types of vehicles they are selling. 

“Every one in the industry is saying that the market is slow, but prices are still going up. A lot of order intent remains unfulfilled. My bet is that prices will likely keep going up for the next few years.”