Fewer keeping cars beyond 10 years, as COE renewals plunge for second year in a row to six-year low

According to LTA figures, there are 25,987 cars between eight and 10 years of age. PHOTO: ST FILE

SINGAPORE - The number of people extending the lifespan of their cars has fallen sharply, which may turn out to be good news for those looking to buy a new car.

Last year, the number of car certificate of entitlement (COE) revalidations plunged by 44 per cent to 11,305 - the lowest since 2015, according to Land Transport Authority (LTA) figures. This followed a drop of more than 50 per cent in 2020.

This is a stark reversal of a trend that started in 2015, when motorists turned to revalidating their aging car's COE by paying a three-month average of the prevailing premium instead of buying a new one.

The phenomenon has resulted in more than 180,000 cars having had their COEs revalidated since, or the equivalent of one-quarter of the car population here.

But the trend is slowing down. Motor traders said one reason was near-record high COE prices.

COE for cars up to 1,600cc and 130bhp last closed at $63,000, while the COE for cars above 1,600cc or 130bhp breached $93,000 - close to record levels.

The prevailing quota premium (a moving average of the past three months' prices) for small and big cars ended 2021 at $54,039 and $79,034, respectively. This compared with $32,368 and $39,463 respectively at end-2019, the height of the COE revalidation trend.

Mazda Singapore managing director Steven Teo said besides cost, revalidation is also dependent on the population of older vehicles, which is shrinking.

"Hence there is a likelihood of a reduction in revalidations this year," he added.

Mr Pang Cheong Yan, managing director of Singapore, Thailand and South-east Asia Development at Sime Darby Motor Holdings, noted that revalidations in recent past years were also driven by the private-hire industry.

"The private-hire operators have shifted to new cars, especially hybrid models, which have better fuel efficiency and are more attractive to driver-hirers also because they are new," Mr Pang said.

He added that this should bode well for COE supply, which is determined largely by the number of cars scrapped, which will rise when fewer car COEs are revalidated.

According to LTA figures, there were 25,987 cars between eight and 10 years of age, and 21,747 cars which had their COEs extended by five years in 2017 that will have to be scrapped this year.

Together, they translate to a potential supply of 47,734 fresh car COEs. Assuming the number of revalidations halves to 5,650 this year, there will be 42,084 COEs available, compared with around last year's quota of around 37,000.

This bodes well for new car sales, but according to one dealer, consumers hoping for prices to plunge should not hold their breath.

Ms Tracy Teo, marketing director of Hyundai agent Komoco, said: "While the supply (of COEs) may be more... we anticipate premiums will continue to climb."

Another development may throw a spanner in the works. If sky-high COE prices persist, car owners may decide to go for five-year extensions instead of 10. This way, they pay half the prevailing quota premium. If so, this year's COE supply will be smaller than last year's.

Of the COEs revalidated last year, 5,068 were for cars up to 1,600cc and 130bhp, and 6,237 were for cars above 1,600cc or 130bhp. Of the lot, 2,912 were five-year extensions, and 8,393 were 10-year extensions.

Mr Ron Lim, head of sales and marketing at Nissan agent Tan Chong Motor, said the verdict is still out on whether revalidations will fade completely.

"Personally, I don't think it's a fad," he said. "We have to watch the revalidation rate once COE quota improves and premiums start coming down."

ST ILLUSTRATION: LEE YU HUI

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