The certificate of entitlement (COE) price for smaller cars posted its single biggest fall in over a decade yesterday, jolting the car market out of its post-holiday stupor.
At the first tender of the new year, the COE price for cars up to 1,600cc and 130bhp ended 17.1 per cent - or nearly $10,000 - lower at $45,002. This brings the premium for mass market cars such as the Toyota Corolla and Mazda 3 to its lowest level in nearly five years.
Mr Ron Lim, general manager of Nissan agent Tan Chong Motors, described the result as "really puzzling" and "really unexpected".
"I expected it to rise," he said. "Bookings were actually pretty strong despite the year-end holidays. The only possible reason could be that some brands may not be selling as well as before."
Mr Nicholas Wong, general manager at Honda agent Kah Motor, described the result as "a fluke", even if the market was "quite quiet".
"It is the herd mentality," he said. "People are talking about more
COEs in the next quota period from February, so there may have been mass holding back."
At one point, it seemed the fall for smaller cars could have been even steeper. According to the Land Transport Authority's bidding portal, the premium stayed at $22,000 up to the last five minutes of bidding.
It rose quickly in the final minutes, fuelled by 11th-hour bidders drawn by the low prevailing rate.
But Mr Neo Nam Heng was not surprised. The chairman of diversified motor group Prime had been forecasting a drop in premiums with an increase in COE supply.
"More people are now aware that there will be a huge increase in the COE quota from next month," he said. "But there will now be a rush to showrooms, and there will be a rebound in prices."
He again advised consumers to be patient, as "there will be enough COEs to go around". He also advised buyers to scrutinise the "COE rebate level".
"The rebate level is unrealistically low at some companies so, when the COE falls, the buyer may not get back any rebate, or get a very small one," said Mr Neo.
Retiree Lee Chiu San, 69, who scrapped one of his cars recently, said he is "waiting like a hungry vulture" for premiums to fall further.
"I reckon $30,000 to $40,000 is realistic in the next five to six months," he said.
He added: "I am in no hurry. I have another car and a motorbike to use."
Kah Motor's Mr Wong added that the premium for bigger cars did not fall by as much because "it fell by $5,000 last month", and drew buyers back to showrooms.
The COE price for cars above 1,600cc or 130bhp dipped by 0.1 per cent from three weeks ago to finish at $54,920.
The premium for the open COE, which can be used for any vehicle type but ends up mostly for bigger cars, closed 4.2 per cent lower at $55,089. The commercial vehicle COE price was 8.6 per cent lower at $42,036 - its lowest in 11/2 years.
The motorcycle premium, however, bucked the trend, climbing 4.4 per cent to close at a new high of $6,889.