COE and Car Prices

[FFNow]

Rising COE prices might be a boon for VICOM

[Musicwhiz]

Rising COE prices might be a boon for VICOM

I guess you have a valid point since higher COEs means people will change cars less, hence they use their current cars longer and these will need more frequent and regular R&M, which would involve VICOM. But would it be possible to quantify the extent of the revenue increase?

Technically, this should come under VICOM thread but it does overlap this thread too.

[aspeed]

According to a report, we will see the next round of mass deregistration of cars in about two to three years time. That is when those who bought their cars in between 2005 to 2009 will start to deregister their car for new one, and during those years there were many buyers as COE was cheap then. When more cars are being taken out from the road, the supply of COE will increase, and COE prices will drop. By then, people who buy now will not hesitate to trade in their car for a new car as it is more worthwile for them to do so. This will further increase the supply of COE and lead to further decline of COE prices.

Actually, heard this many time but I don't really understand the logic. While we expect many cars to be de-registered 2 to 3 years time, but it also mean there will be many more buyers for new cars at that time. This is assuming majority continue to drive, with a very small percentage switch to public transport. So "NET" supply from COE de-registration and demand for new COE remains relatively the same.

The reason why we see low COE for past years is due to govt method in determining number COE to be released, that is by over forecasting number of car to be de-registered. With actual number of car de-registration much lesser than forecasted figure, this had resulted in a real over-supply of COE. Do you think this will happen again?

[pianist]

Just never forget that we are living in a high price risk market economy! And even though we have paid all the various types of taxes (including COE), don't expect a bailout from our government if we screw up in our financial affairs!

may i ask what do u mean by a high price risk market economy?

[Musicwhiz]

I think what he means (and what I take it to mean) is that Singapore is a high-cost of living country, and there is a high risk of prices moving even higher due to market forces and inflation.

A simple consumption item such as a car is also tightly controlled, and no other Government in the world imposes such draconian taxes on car ownership, and stands to reap so much from it.

Methinks that many young people committed to a car too early, and using easy and cheap leverage, not knowing that they are mortgaging away part of their (financial) freedom for instant gratification. The consequences 10-20 years down the road would be detrimental.

And oh yes, this also includes runaway property prices!

[pianist]

i see thanks musicwhiz for the insight...it seems like is the high-end cars dealers indirectly inflate the COEs' prices..just like an influx of high-end new residents from overseas suddenly inflates the island's property price.

Recently Asian Deveopment Bank also said that real-estate lending accounts for more than half of total loans in the banking system in singapore, while the share of property-related loans in total loans is as low as 9 per cent in South Korea, 15 per cent or less in Indonesia and the Philippines, and below 20 per cent in Hong Kong, Thailand and China.

[Musicwhiz]

Business Times - 10 Dec 2010

COMMENTARY
COE premiums take the high road fast

Some expect them to climb even higher but some new factors are in play

By SAMUEL EE

IF YOU had thought that this week's spike in COE premiums was shocking, here's an even more frightening scenario: they could go much higher. Unless you're a recluse with no interest in conveyances that require the burning of fossil fuels, you may have heard how premiums for passenger car certificates of entitlement jumped to 13-year highs.

A Category A COE for a small car now costs $47,604 (up $8,604 from the previous round), while a Cat B COE for a big car is $62,502 (up $14,612). The last time an equivalent COE for a big car was higher was in November 1997.

So the question now is, whither premiums? Some believe that COEs will stabilise or even sink slightly for two reasons. One is that most consumers will be so shell-shocked by the sudden jump that they will exit the new-car market, causing demand to fall.

Another is that Wednesday's price hikes were caused by some vehicle distributors eager to end 2010 on a high note by presenting their principals with a good sales report. In particular, a handful of luxury makes were said to have pushed the Cat B premium up because of competition among themselves - they want to beat one another in the year-end rankings.

So if this is the case, such COE-raising behaviour should cease, come January, when all sales and competitive pressures subside. It may be temporary, but it should help to check the speed of premium increases.

But most people are of the opinion that premiums will continue rising. Some even say that they will increase more than when the new-car market was about the same size.

This year, slightly over 41,000 new cars should be registered, down almost 40 per cent from the 68,862 units in 2009. For 2011, not more than 25,000 passenger car COEs are expected to be released, with a total of up to 30,000 new cars registered - after factoring in the spillover from 2010's COE quota - or a roughly 28 per cent contraction.

When Singapore's new market size was last at about 30,000 units, the economy was similarly robust. About 31,000 new cars were registered in 1995, a year which saw the equivalent big car premium peak in June at $75,002. Incidentally, the all-time record for a big car premium of $110,500 was achieved shortly before that in December 1994, and Mercedes-Benz was the country's No 1 make for two years - 1995 and 1996 (it is currently No 2 today).

Little wonder that some pessimists see current premiums on track for a repeat of those boom years. Worse, they point to the fact that Singapore's population is now much higher at five million compared with 3.5 million in 1995, with more and wealthier foreigners as well as a wider range of more attractive premium models to choose from.

But can premiums cross the six-figure mark as easily today, amid the very different market dynamics? When COEs hit a high 15 years ago, each monthly bidding exercise was closed and subject to much speculation. Today, there is transparency with two open tenders every month. Passenger car COEs are no longer transferrable, and the open category COE only has half the validity period.

There is no doubt that premiums will continue to climb in a boom year and there should be no surprise that a tightening new-car market will see a shake-up in the industry. But today's conditions are also very different from a decade and a half ago. For one, the public transport system has become a better alternative for those who choose not to buy a car. Certainly, some things have changed for the better. Maybe the pattern of COE premiums will too.

[Musicwhiz]

Prices of new & used cars rise after surge in COE premiums
By Liang Kaixin | Posted: 11 December 2010 2304 hrs

SINGAPORE: Prices for both new and used cars have gone up, following the surge in COE premiums to 10-year high recently.

Prices of new cars rose 10 percent while second-hand cars are S$3,000-S$8,000 more expensive than before the results of the latest round of COE bidding were announced on 8 December.

COE premiums skyrocketed in the latest round of bidding, with a staggering jump of S$14,612 for cars over 1,600cc. This brings the total premium for that category to S$62,502.

Prices for the Open Category was up S$15,010 to S$64,900. For smaller cars 1,600cc and below, the COE price rose S$8,604 to S$47,604.

These latest COE prices are the highest since 2000.

Following the COE price surge, dealers of new cars see less business over the last few days.

They say the price of big cars is now up by about S$15,000, while small cars are costing some S$9,000 more.

Dealers say the sudden surge in prices has had a huge impact on customers but they believe business will bounce back.

Dexter Tang, manager of sales & operations at Prime Cars, said: "We need time for the customers to digest and accept the price but for consumers who are thinking of buying cheaper cars, I think that is history already. From now on I think the price will be stable or moving upwards."

With the impending cut to the COE supply next year, dealers say premiums may go even higher.

They say some customers may view small cars as having less resale value than big cars, should COE premiums rise further.

Meanwhile, business at second-hand car showrooms is looking good. Motorists may save S$20,000 to S$30,000 if they opt for a used car.

Generally, the used car industry saw business double this October compared to the same month last year.

"Nowadays we can see more people are selling, trading in their cars when they buy a used car....I think that's because more people are focusing themselves on the used car market," said Raymond Tang, honorary secretary of Singapore Vehicle Traders Association.

- CNA/ir

[Musicwhiz]

Dec 12, 2010
High COE prices put brakes on car sales
Few walk-in customers after latest COE price spike; some see better value in German makes
By Goh Chin Lian

Car prices may have shot up by $8,000 to $15,000 last week, but some people were still out at car showrooms shopping for new cars yesterday.

They were among the few people who turned up at the showrooms lining Alexandra Road when The Sunday Times visited the area from noon to 3pm.

Some had eyes for the sturdier German makes. A relatively weak euro and a strong yen this year narrowed the price difference between these cars and the traditionally cheaper and popular Japanese brands.

Showrooms for Volkswagen and Audi saw a small but steady flow of walk-ins, including parents with young children. Some visitors sat in the new cars for some time, while others went for a test drive.

Next door, distributors for Toyota, Mitsubishi and Honda had barely a trickle of visitors, a situation compounded by families going away during the year-end school holidays.

Some visitors were opportunists of another kind.

They believe that certificate of entitlement (COE) premiums, which rose by up to 30 per cent last Wednesday, could go up further.

Bidders expect a tighter COE quota next year, estimated at below 40,000 certificates. This is fewer than one-third the average annual supply between 2003 and 2008.

Design engineer Tan Wei Chang, 28, reckons the COE price for cars of up to 1,600cc, which rose from $39,000 more than three weeks ago to $47,604 last Wednesday, could go up to $60,000 soon.

'If we buy a car now, we won't lose that much even if we sell it one to two years later at a loss of $20,000,' said Mr Tan, who was at the showroom for South Korean make Kia.

Engineer Rajoo Souri, 50, who went to the showroom for French make Citroen, wanted to tap what he thought could be a growing demand for second-hand cars, now that prices of new cars have gone up.

He thought he could sell his six-year-old, 2.7-litre Hyundai Santa Fe for $50,000 and buy a new and smaller 1.6-litre Citroen Grand C4 Picasso.

But at $129,988, the new car is too costly for Mr Rajoo, who works in the oil industry. He lives in a five-room Housing Board flat in Bedok.

He said: 'Most likely, we'll just keep the car for another 10 years.'

Most car dealers expect a quiet end to a year of slowing business.

Latest figures from the Land Transport Authority show that there were just 16,714 newly registered cars in the first 10 months of this year. This full year is set to fall far short of the 38,395 newly registered cars for the whole of last year and the 53,335 in 2008.

chinlian@sph.com.sg

[lonewolf]

Of the discussions in this thread, one of the things that stood out for me was the call for govt to do away with the 0% downpayment.

I for one does not agree that this should be do away with - but probably not for the reasons you are thinking about.

We keep getting teased by people from other countries that we are a 'nanny state'; that Sporean gives up too much of our personal liberty in exchange for many of the good things Spore has become known for.

So think about it, a lot of the govt policies were loosened (including many of the financial restrictions) by the GCT era because people were clamouring for it.

Personally I think its great that the govt is not imposing so many restrictions and regulations. This allows all of us to make a choice on how we want to manage our finances and our lives. Of cos this also means that we need to exercise personal responsibilities and not engage in reckless behaviour. Such as borrowing on 0% downpayment on a 10 year car loan you cannot hope to finance.

If someone is stupid enough to do that, then we should let him suffers the fate of his decision; and let him learnt his lessons. We should not be saying that to protect stupid people like him, let put in restriction in place so that people cannot borrow with 0% downpayment.

Ask yourself this question. Do you want to remain in the cage forever and having the govt to always looking after your every needs? Or would you rather be set free with the knowledge that the world outside the cage can be a dangerous place and precaution must be taken? I dun know about the rest of you but I would prefer to be set free.

Remembered what happened with Lehman minibonds or the more recent Profitable Plots saga. A lot of people keep asking why is the govt not doing anything about it?? Or why did it allow such things to happen in the first place? Why?? Because the govt has taken a 'hands off' approach and individuals must do their own due diligence before parting with the money. And dun expect the govt to bail you out if you choose to be reckless.