Second-hand car market in high gear

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From new cars to used cars, so how is the car population going to drop? Roads are already crowded enough as it is......

Apr 16, 2011
Second-hand car market in high gear

Tight COE supply sees used-car sales on track to hit 10-year high
By Christopher Tan, Senior Correspondent

POWERED by a meagre COE supply, used-car sales are continuing to rev up.

In the first quarter of this year, 15,441 cars changed hands, a figure that is more than twice the 6,900 new cars sold, going by figures from the Land Transport Authority.

At this rate, the number of used-car transactions this year is likely to hit a 10-year high, with some industry players predicting that the growth will continue over the next two years.

They say it is because Certificates Of Entitlement (COEs), for which buyers of new vehicles need to bid, are now in short supply - a situation that has driven up premiums and, consequently, the prices of new cars.

The number of COEs is expected to hit rock-bottom between this year and 2013, with an estimated 30,000 to 50,000 available for car buyers each year. This is a marked contrast from the years 2003 to 2008, when annual quotas averaged 100,000 or more.

Mr Y.W. Liew, for instance, has ditched the idea of buying a new car, going instead for a second-hand vehicle, which comes with an existing COE.

The 39-year-old lawyer, who got himself a pre-owned BMW for about $105,000 recently, said: 'It has to do with price and depreciation. The car is coming to six years old, and the annual depreciation is about $16,000, versus more than $20,000 for a new car.

'In terms of dollars and cents, it just doesn't make sense to buy new now.'

LTA figures indicate that Toyota, Honda and Nissan are the top second-hand picks, followed by BMW, Mitsubishi and Hyundai.

The swift pick-up in used-car sales has encouraged even new-car agents to start or ramp up their used-car business. The latest to do so is multi-franchise group Wearnes, which will set up a pre-owned centre next to its Renault showroom in Leng Kee Road.

Mr Andre Roy, the group managing director of Wearnes' automotive division, said the facility will deal even in brands it does not represent.

He said: 'We increasingly see German and Japanese cars being traded in, and an opportunity to retail these cars ourselves as the demand for pre-owned cars grows.'

Mr Karsono Kwee, executive chairman of the Eurokars Group, whose brands include Rolls-Royce and Porsche, said sales at its 18-month-old pre-owned car business are brisk.

'We're doing very well,' he said. 'We average 10 to 15 cars a month, mostly Porsches.'

But some players are treading carefully. Toyota agent Borneo Motors has been mulling over starting a used-car division for several months now, and has gone no further than merely dipping its toes into selling a few pre-owned Lexus cars.

'Officially, we've not started,' a senior Borneo Motors executive said.

Ironically, the flourishing used-car trade may hamper new-car sales in the near term, motor traders said.

This is because the demand for pre-owned cars will encourage motorists to sell their used vehicles on the local market instead of scrapping or re-exporting them. This, in turn, will lead to fewer COEs being released, since the supply of COEs is determined largely by the number of cars taken off the road.

Singapore Vehicle Traders Association secretary Raymond Tang said: 'I think only the very old cars, like those nearing 20 years, will be scrapped.'

christan@sph.com.sg

My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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