Car buyers want COE system reviewed

[Musicwhiz]

The Straits Times
www.straitstimes.com
Published on Dec 25, 2012
Car buyers want COE system reviewed
Some suggest priority for first-timers, doing away with engine capacity tiers

By Hoe Pei Shan

WITH certificates of entitlement (COEs) for small cars breaching the $80,000 mark, some are renewing the call for the current quota system to be reviewed.

Suggestions include using measures other than engine capacity to distinguish the COE categories for car ownership and a bidding system that gives preferential treatment to first-time owners.

COE premiums for Category A cars up to 1,600cc - which comprise the most affordable cars in the market - rose to an all-time high of $81,889 late last week.

That has put most new cars just beyond the reach of many car buyers interviewed by The Straits Times at car showrooms last weekend. "With COE premiums this high, I haven't seen any within my budget," said SAF regular Thomas Tan, 32, after emerging from the Hyundai showroom on Alexandra Road on Sunday.

Mr Tan added that he needs a car to shuttle between work and the home of his 15-month-old son's babysitter and has spent the last few weeks looking for a car to replace his second-hand Peugeot 308, which has developed gearbox and suspension problems.

Mrs Zuby Smith, 47, who was shopping for a new car to replace her eight-year-old Hyundai Santa Fe, also could not find a new car that would fit within her budget of "about $100,000". "The small car COE price is too high," she said, adding that she has been left with a choice of servicing a hefty car loan or waiting a long time for the COE premiums to fall.

"We're just average people who need only one car. The Government has to do something to change this," added the mother of three who runs a beauty business.

Mr Tan said that while he supports the Government's overall goals in managing the car population, the COE system could be tweaked to integrate a needs-based assessment similar to that of HDB flat applications.

He suggested that car buyers with children that need one family car should be given priority. Owners of two or more cars could be moved to the bottom of the COE eligibility list or made to pay additional fees, he added.

Another suggestion that has surfaced over the years is to replace the COE engine capacity tiers with an indicator that more accurately distinguishes luxury cars from more affordable ones.

NUS civil engineering associate professor and transport systems specialist Lee Der Horng said engine capacity used to be a decent indicator until recently.

He noted that top brands such as Mercedes-Benz, BMW and Audi have rolled out models with engine capacities that fall into Category A rules, pushing up premiums there as a result.

Distributors of cheaper Korean and Japanese cars do not have the profit margins to vie against continental brands. They therefore lose out when attracting customers with rebates and overtrades.

"Transportation management is a social issue so public desire and reactions are things the policymaker has to consider," said Dr Lee, adding that the amount of horsepower in a car could be a more reliable guide.

In the meantime, dealers said there is no short-term respite on the horizon for COE prices.

Singapore Vehicle Traders Association secretary Raymond Tang said last week that prices for small cars will hover around the current mark for a while. They are likely to continue moving north until about 2015, when more vehicles are due to be scrapped.

COEs, which give buyers the right to purchase a car, enable the Government to control the growth of the vehicle population and road congestion. Their supply is calibrated by the rate the Government sets for annual vehicle growth, and is largely tied to the number of vehicles taken off the road each month.

Category A has borne the sharpest decline of close to 40 per cent for the period of August this year to next January, as far fewer cars were scrapped in the preceding six months.

This has caused prices to spike, despite other government moves to reduce competitive bidding for COEs. These include removing taxis from the bidding process.

The Government has, in recent years, announced plans to boost public transport infrastructure to reduce the nation's reliance on cars. These include building several new train lines as well as financing the addition of bus services nationwide.

hpeishan@sph.com.sg

[freedom]

I believe that COE is a good way of showing that capitalism is working well. Those who can't afford COEs, please don't drive. It is not a must-have.

[corydorus]

Agreed. Personally this is the best form of luxury tax in a larger perspectives. It's effectiveness is awesome.
We need to use the money more effectively to further improve public transport such that family travel can be easier.

[wee]

With roads being the scarce resource, we can either allocate the resource via free market mechanism, via quota, or some balance in between. There are no other solutions. No one way is perfect, and whatever choice taken by the government is going to make certain segment of the population unhappy.

Often ordinary folks will cite having young kids, aging parents etc as reasons why they need a car, and want the government to help them. They have vested interest; they want preferential treatment.

For these people, I would argue that many of them merely want the convenience of owning a car. I can understand that it can be highly inconvenient travelling on public transport with young kids or babies. I can also understand that it can be difficult at times to get a cab when needed. Without a car, some people feel that a lot of adjustments have to be made, it can be highly inconvenient and it can be quite frustrating.

But to argue that its a need would be a stretch.

Convenience is luxury in life, like some forummers has put it. With limited tax dollars, and the government would need to consider whether its wise to subsidise such a luxury. However imperfect the COE/ERP system it, it seems logical to me that the government continue to work on improving the public transport system (MRT/bus/taxi) as that is where the highest returns on the tax dollars will be gained. To move away from a market system which generally allocate resources better would, in my view, be a mistake. Whether we tune it with higher front loading of the cost of ownership, back loading, or usage based, we are still facing high costs. Its unlikely to please people who are arguing that its expensive to own cars now.

[Musicwhiz]

I agree with wee's views - a car ultimately acts as a convenience rather than a "need", especially in Singapore which is just a small island and which is well-connected by public transportation.

For the guy who is arguing that he "needs" a car to shuttle between his nanny's place (where his baby is) and his workplace, it is more a matter of convenience to be able to get there faster and sooner. To relate my own experience, I also had a baby a few years back and placed her with my parents and in-laws while both of us were working. My work place was in Central while my in-laws place was in Jurong (far west), yet I took the train daily after work to visit my girl. We also managed to push the pram all over the place, on MRT trains and carried it up buses. True, it is difficult, cramped sometimes and inconvenient but purchasing a car would have been a huge financial commitment which I was not ready to bear, especially since I was still building up my asset base for investing.

Ultimately, I feel it boils down to what you can live with - Thomas Tan in the article already owned a 2nd-hand Peugeot, so he would already be "used to" the convenience of a car, hence he is now shopping for a replacement. I would argue that those who are used to sitting in cars and have been "spoilt" would find it much harder to give up this luxury and convenience and switch back to public transport. Of all my friends who own cars, I have never seen the switch BACK to public transport!

Though the Government has stratified the population into distinct categories based on "needs" when it comes to property, I do not think they should do so for cars as cars are still a luxury convenience item, rather than a necessity.

[LionFlyer]

I agree with wee's views - a car ultimately acts as a convenience rather than a "need", especially in Singapore which is just a small island and which is well-connected by public transportation.

For the guy who is arguing that he "needs" a car to shuttle between his nanny's place (where his baby is) and his workplace, it is more a matter of convenience to be able to get there faster and sooner. To relate my own experience, I also had a baby a few years back and placed her with my parents and in-laws while both of us were working. My work place was in Central while my in-laws place was in Jurong (far west), yet I took the train daily after work to visit my girl. We also managed to push the pram all over the place, on MRT trains and carried it up buses. True, it is difficult, cramped sometimes and inconvenient but purchasing a car would have been a huge financial commitment which I was not ready to bear, especially since I was still building up my asset base for investing.

Ultimately, I feel it boils down to what you can live with - Thomas Tan in the article already owned a 2nd-hand Peugeot, so he would already be "used to" the convenience of a car, hence he is now shopping for a replacement. I would argue that those who are used to sitting in cars and have been "spoilt" would find it much harder to give up this luxury and convenience and switch back to public transport. Of all my friends who own cars, I have never seen the switch BACK to public transport!

Though the Government has stratified the population into distinct categories based on "needs" when it comes to property, I do not think they should do so for cars as cars are still a luxury convenience item, rather than a necessity.

I feel it is quality of life issue that cannot be put into either needs or luxury. Basically, people here feel that their quality of life have been compromised without a car. It is no longer a luxury but a basic necessity for the middle class, as much as a 99-year condominium/30 year loan in a suburbs. As long as the electorate thinks that way, the Government have to do something about it to retain their votes. Besides, quality of life would also affect the willingness of foreign talents to relocate and stay in Singapore. Driving is very common overseas and the high cost of cars would deter them to some degree.

Personally, I don't encourage the car or the condo; I used to own one and I have given it up. It's a huge waste of money. Public transport sucks here but I'll rather have money in the pocket. But this is not how people feel now.

I do think they have to tweak the COE system for commercial vehicles; there is a cost to doing business as a result of the high COE and it does not help companies.

[Greenrookie]

I own a car for I have a young kid, yes, it's not a need and no I am not rich. While I agree that we need to regulate the population of cars and but I felt that we motorists are taken for a ride. First, 3 years ago, pm lee says during rally we have the ERP so that Coe can be affordable for the average families. So much for that. We motorists pay road tax, Coe, and ERP, but where did our money go? Any new roads built? I have been to nanjing, Suzhou shanghai where their traffic is horrible, but look at the highways in town area, ours look more like a kampound? Has the ERP been effective?? Nonsense! Has the widening of cte been effective ? Ya after spending for millions, it has been effective only for a month. Well, when my car is due for the scape yards 5 yrs later, my kid should be old enough, I have prepared my family for a life without cars, and not a life of Robert Cai Tao

[safetyfirst]

I agree with wee's views - a car ultimately acts as a convenience rather than a "need", especially in Singapore which is just a small island and which is well-connected by public transportation.

For the guy who is arguing that he "needs" a car to shuttle between his nanny's place (where his baby is) and his workplace, it is more a matter of convenience to be able to get there faster and sooner. To relate my own experience, I also had a baby a few years back and placed her with my parents and in-laws while both of us were working. My work place was in Central while my in-laws place was in Jurong (far west), yet I took the train daily after work to visit my girl. We also managed to push the pram all over the place, on MRT trains and carried it up buses. True, it is difficult, cramped sometimes and inconvenient but purchasing a car would have been a huge financial commitment which I was not ready to bear, especially since I was still building up my asset base for investing.

Ultimately, I feel it boils down to what you can live with - Thomas Tan in the article already owned a 2nd-hand Peugeot, so he would already be "used to" the convenience of a car, hence he is now shopping for a replacement. I would argue that those who are used to sitting in cars and have been "spoilt" would find it much harder to give up this luxury and convenience and switch back to public transport. Of all my friends who own cars, I have never seen the switch BACK to public transport!

Though the Government has stratified the population into distinct categories based on "needs" when it comes to property, I do not think they should do so for cars as cars are still a luxury convenience item, rather than a necessity.

Hi MW, i admire your wife for not demanding a car when you can afford to. Not many woman nowadays can see the long term benefits of saving; the short-term comfort of having a car seems more important than building a retirement nest egg.

My comments would probably sound like sour grapes by the upper income families but i think it is good to stick to a frugal lifestyle. It is almost impossible to give up the car if you have gotton used to it for like 3 or more years.

[freedom]

COE should never be made affordable for average families. Do you know how many average families in Singapore? If they all can afford a car, the traffic will be even worse.

[Greenrookie]

Hi MW, i admire your wife for not demanding a car when you can afford to. Not many woman nowadays can see the long term benefits of saving; the short-term comfort of having a car seems more important than building a retirement nest egg.

My comments would probably sound like sour grapes by the upper income families but i think it is good to stick to a frugal lifestyle. It is almost impossible to give up the car if you have gotton used to it for like 3 or more years.

Yes, I would very much like to give up my car has it not been my wife. I have been dropping hints and ideas to her that that the 1k we spend every month can be put to better use and that its too much to pay for convience. My wife always say, after a few years, u will not be able to get use without a car, but I felt it has never been a issue with me, I grow up a frugal person and if my wife agree, I can sell my car tomorrow. I think she is getting it after my nagging... She agreed that it might not be necessary when our kid is older. It's those who are used to a car since they are a kids that find it difficult to get rid of a car. When I send my car for servicing, I take the bus and mrt instead of taxi, and I enjoy the ride looking out of the windows and staring into space...