COE and Car Prices

[Musicwhiz]

A letter to the ST Forum on high COE prices.....

Dec 30, 2010
SOARING COE PRICES
Limit car loan amount

MANY of us are resigned to sticking with our cars a bit longer, hoping that by the time our certificates of entitlement expire, COE premiums will have cooled somewhat.

Motor traders are lamenting the empty showrooms and young drivers have no hope of owning a car in the near future.

The Motor Traders Association asked the Government to help but was pretty much told to bite the bullet. Some bemoan the Government's unwillingness to intervene but, to be fair, is it truly the Government's job to ensure everyone owns a car?

Every new car sold must have a COE - valid for 10 years - and the system is used to cap the growth of the vehicle population. The growth rate was halved to 1.5 per cent last year.

Every six months, the Land Transport Authority (LTA) says how many COEs will be available, based on the number of vehicles taken off the road in the preceding six months.

Singapore's land space is limited and we do need to ensure that there aren't too many cars on the road or we would be in a perpetual gridlock. It is partly thanks to the LTA's long-term planning that we are not experiencing the severe jams seen in the large cities of China and India.

Many of those who buy cars are not really able to afford them. They buy them simply because they get car loans to foot 100 per cent of the amount with no down payment. Many look at cars as a matter of cost per month based on instalment payments, instead of what it really means - a huge hit on their savings.

One way to dampen demand is to limit the loan to a maximum of say 50 per cent to 60 per cent of the car's sale price. Thus when COE prices normalise, only those who can really afford cars and find them essential will head to the showrooms.

Meanwhile, I will be sticking to my car with the wishful thinking that COE premiums will return to below $20,000 before the engine dies on me.

Peter Chen

[cif5000]

Many of those who buy cars are not really able to afford them. They buy them simply because they get car loans to foot 100 per cent of the amount with no down payment. Many look at cars as a matter of cost per month based on instalment payments, instead of what it really means - a huge hit on their savings.

One way to dampen demand is to limit the loan to a maximum of say 50 per cent to 60 per cent of the car's sale price. Thus when COE prices normalise, only those who can really afford cars and find them essential will head to the showrooms.

This is funny. Let me paraphrase.

The "poor" people are buying cars and driving up the demand, and hence price. As a result, the "rich" people cannot buy their cars.

[Ben]

The Motor Traders Association asked the Government to help but was pretty much told to bite the bullet. Some bemoan the Government's unwillingness to intervene but, to be fair, is it truly the Government's job to ensure everyone owns a car?

Few years ago during one of LHL national day speech, I remembered him said that more people owning a car doesn’t mean there will be more cars on the road. Therefore the direction taken is to make it easier for people to buy a car (= lower COE prices, lower ARF, loosen loan financing rules etc) but increase the cost of usage (= increase ERP charges, more ERP gantries, increase parking fees). What happens after that is history and today we are facing the consequences.

---

Singapore's land space is limited and we do need to ensure that there aren't too many cars on the road or we would be in a perpetual gridlock. It is partly thanks to the LTA's long-term planning that we are not experiencing the severe jams seen in the large cities of China and India.

With all sort of taxes and prices we are paying (ARF, COE, road tax, ERP) as compared to other countries, shouldn't our drivers expect a better driving experience than others? I don't really think LTA is doing a good job in this respect. If they do, our car population should maintain at an acceptable level and we should not see COE prices fluctuate more erratic than stock prices.

Unfortunately, given the situation we are in now, I do agree that LTA needs to take hard action to control car population.

[brattzz]

looks like 2nd car onwards taxes are going to be implemented soon...

[Musicwhiz]

looks like 2nd car onwards taxes are going to be implemented soon...

Haha, somehow I doubt it. COE will rise so much that people will find it prohibitive to even purchase their FIRST car!

Those who got away with it and bought multiple cars before the steep rise were lucky lor.....

[Musicwhiz]

Jan 6, 2011
Some relief as COE prices dip slightly
By Goh Chin Lian

THERE was some relief for car buyers yesterday as the latest certificate of entitlement (COE) bid results showed a softening in prices from last month's unprecedented high amounts.

The premiums for cars up to 1,600cc and taxis braked the most - by 15.7 per cent or $7,240 to $38,889, compared to the last round of bidding two weeks ago.

COE prices for cars above 1,600cc slid by 4.2 per cent or $3,001 to $69,000.

Prices of open COEs, for any vehicle type but usually used for bigger cars, fell 0.4 per cent or $313, to $75,789.

COEs, which give one the right to buy a car here, are central to Singapore's Vehicle Quota System, which enables the Government to control the growth of the car population and thence, the level of congestion on the roads. Anyone seeking to buy a car has to bid for a COE in that category of vehicle by engine size.

Motor Traders Association vice-president Michael Wong said of the latest dip in premiums: 'It's an indication that the chase for market share in 2010 is probably over.'

Analysts had previously spoken about car distributors bidding aggressively last month to meet sales quotas.

That was reflected in the COE bidding results on Dec 8, which showed premiums soaring to among the highest levels since the COE system started in 1990 - levels not seen since the late 90s.

Going forward, motor traders do not foresee prices dropping further before Chinese New Year early next month. Traditionally, demand for cars eases at this time as consumers get busy preparing for the festivities.

A key difference this time round is that the new year's quota will start next month instead of in April. It is expected to shrink about 20 per cent to fewer than 40,000 COEs, making it the smallest supply ever.

The supply of COEs is largely determined by the number of cars deregistered; spiralling COE prices are dissuading motorists from scrapping their old cars and buying new ones. The Government has also halved the allowed growth rate of the car population here.

Motor traders said yesterday's rollback in COE prices is temporary as potential buyers were put off by the massive COE price hike on Dec 8.

Nissan agent Tan Chong Motor's general manager Ron Lim said COE prices could go up in the next round of bidding in two weeks.

Yesterday's COE bid results also saw premiums for motorcycles settle at 3.1 per cent or $48 lower at $1,503. Only commercial vehicle premiums went on a gradual increase, ending 4.8 per cent or $1,610 higher at $35,111.

One beneficiary of the lower prices yesterday was taxi company TransCab. It bid at the last moment when COE prices for cars up to 1,600cc and taxis did not seem to be moving up too quickly.

Its general manager Jasmine Tan said: 'The last two rounds' prices were too high for us to go in. Today's prices are still within our budget.'

It secured COEs for 60 taxis.

Dealers are expected to adjust prices today by $4,000 for cars up to 1,600cc.

[la papillion]

The COE talk seems like market talk, haha! If it's up a bit, analyst or experts will say it's because of so and so. If it went down (hardly these days), then there'll be people who would explain it. We should put it up on the open market for trading!!

[Musicwhiz]

Looks who's getting richer as a result of higher COE prices! No prizes for getting it right, though....

Business Times - 08 Jan 2011

Thinner new-car goose lays fatter COE eggs

New car registrations in 2010 fell 39% but revenue from COEs grew 73%, calculations show

By SAMUEL EE

THE new car market turned out to be a strange animal last year: the skinnier it grew, the more it gave back.

A total of only 41,000-plus new cars were registered in 2010, down about 39 per cent from the 68,862 units in 2009. But the revenue collected from certificates of entitlement (COEs) is another matter: it ballooned as the number of new cars shrank, BT's calculations show.

In 2010, the revenue collected from three categories of COE - Cat A (for cars below 1,600cc), Cat B (for cars above 1,600cc) and Cat E (the open category) - amounted to $1,409,673,696 (assuming the full premium was paid for each of the successful COE bids).

For 2009, the equivalent figure is $810,584,166, which means a 73.9 per cent jump in COE revenue collected in 2010.

The amount of Cat C commercial vehicle COE premiums reaped was even higher in 2010. Last year, total Cat C revenue collected amounted to $133,622,359, or 124 per cent more than 2009's $59,572,151.

'For the government, it must be a win-win situation,' said a senior executive in a premium dealership. 'Its coffers are overflowing even with less COEs released, which means it can reduce congestion and still make more money. This can only happen with a booming economy.'

But the head of a motor group said that such a trend could make the car a purely luxury item and many from the mass market could decide to shun private vehicles if the premiums stayed high as quotas shrank. 'The rich will complain a bit but they are not really affected,' he said.

During the boom years from 2005 to 2007, total new car registrations soared above 100,000. Generous allocations of COEs allowed registrations to peak at 117,062 units in 2006, and premiums during these years were mostly in the 'teens of thousands'. From late 2008 until the first half of 2009, they even fell below the $10,000 mark.

But the first COE supply shock was administered in early 2009, with the aim of checking annual vehicle growth. The Land Transport Authority (LTA) announced that the new Quota Year 2009 (from April 2009 to March 2010) would have a total of only 83,789 certificates - or 24.1 per cent less than the previous year's allotment.

In particular, Cat A got 28 per cent fewer COEs, Cat B 30.9 per cent less, and Cat E a 12 per cent decrease. Goods vehicle and motorcycle COEs also saw sharp cuts.

But more reductions were to follow. The mid-quota year review - to adjust the number of COEs released for the second half of the quota year - saw a further overall cut of 15.7 per cent from October 2009 onwards.

From 2010, the method of determining the COE quota changed. A transition quota (April to July 2010) preceded the advent of half-yearly COE quotas - from August to January, and February to July - to be determined largely by the actual number of vehicles deregistered in the preceding six- month period.

This was a departure from the previous method of predicting future deregistrations to calculate the number of new COEs for the next 12 months, with any over-projections corrected in a mid-quota year review.

As a result, COE premiums began spiking up in March 2010 and, last month, they hit a 15-year-high for the equivalent big-car category.

[barista]

it's stange that the loan rates continue to slide when total cost per vehicle went up.

[Musicwhiz]

Jan 11, 2011
Some relief in sight for COE crunch
Cut in supply of COEs to be spread out over three years
By Goh Chin Lian

A LESS drastic than expected cut in the number of certificates of entitlement (COE) for the next six months brought some relief to potential car buyers and motor traders yesterday.

They now expect COE premiums to stabilise, or at least not breach last month's highs which were unprecedented in more than a decade.

The respite came from the Transport Ministry accepting a proposal by motor traders to spread out a one-off adjustment for the over-projection of vehicles taken off the road - and hence the oversupply of COEs - in 2008 and 2009.

An excess of 9,577 COEs that were to be shaved off this year will now be adjusted over three years instead, Transport Minister Raymond Lim told Parliament.

He said this was to give the industry and car buyers more time to adjust. 'These are one-time corrections, and will not affect the long-term growth in the vehicle population,' he added.

What this means is that a total of 22,368 COEs will be available from next month to July, the Land Transport Authority (LTA) said in a press statement.

This is a 3 per cent cut from the previous six months' supply of 23,063 COEs.

The LTA added that the cut would have been 17 per cent if the adjustment was made over a year; in other words, 19,175 instead of 22,368 COEs.

Industry observers had feared even deeper cuts, which would have led to sharper rises in COE prices, deterred more prospective car buyers, and worsened months of slow sales.

A three-year adjustment was fair to motor traders, said Mr Teo Hock Seng, president of the Motor Traders Association (MTA), which proposed the change. 'We're mildly surprised it's not so severe a cut,' he said.

Motor traders also pointed out that the smaller reduction in COEs was skewed by a 35 per cent increase in certificates for goods vehicles and buses. This was because more such vehicles were taken off the road in the second half of last year compared to the preceding period.

COEs for cars up to 1,600cc, the mainstay of drivers here, were still fewer by 15 per cent.

The 12 per cent reduction in COEs for cars above 1,600cc was slightly offset by the release of 7 per cent more open COEs. These can be used for any category of vehicle, but are more commonly used for larger-capacity cars.

MTA vice-president Michael Wong expects COE prices for cars above 1,600cc to stay at the current $69,000 or to rise, as dealers of European makes report strong orders.

Motor traders were less certain about the future COE premiums for smaller capacity cars, now at $38,889.

Nissan agent Tan Chong Motor's general manager Ron Lim noted that their COE supply shrank while demand could pick up with the economy doing well. He said: 'The most optimistic view is it will hover around the same numbers.'

COEs, which give one the right to buy a car here, are central to Singapore's Vehicle Quota System, which enables the Government to control the growth of the vehicle population and road congestion.

Anyone seeking to buy a car has to bid for a COE in that category of vehicle, determined by engine size.

The number of COEs which the Government releases used to be based on its projection of the number of vehicles that would be deregistered. Last year, the formula was tweaked to be based on the actual number of vehicles taken off the road.

Premiums soaring to levels not seen since the late 1990s at the Dec 8 round of bidding stoked worries of runaway prices and speculation.

Among those concerned were Dr Lim Wee Kiak, chairman of the Government Parliamentary Committee for Transport and a Member of Parliament for Sembawang GRC.

He was assured yesterday by Mr Lim that the COE system had been modified many times to curb speculation and attempts to profiteer were not likely to be significant.

For instance, a bid in any of the two car categories or for motorcycles must be made in the name of a buyer, and the COE registered in his name.

He cannot transfer his car in the first three months, and a levy is imposed if it changes hands between the fourth and the sixth months.

Only individuals can transfer open COEs and COEs for goods vehicles and buses, and just once in the first three months.

The minister refrained from proposing any measures to control the surge in COE prices, which he noted were determined by market forces of supply and demand.

Last year's supply of COEs was reduced due to the relatively lower deregistrations and the one-off adjustments.

He said: 'This reduction in supply, together with the rising demand for COEs in a strong economy, naturally pushed prices up.'

chinlian@sph.com.sg