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The Straits Times
www.straitstimes.com
Published on Jan 16, 2013
COE prices set to rise as supply dips
Premiums may hit $100k when new quota period starts in Feb: Analysts

By Christopher Tan Senior Correspondent

CAR buyers should brace themselves for the prices of certificates of entitlement (COEs) to rise further, even hitting $100,000, as COE availability shrinks further.

Supply will fall by as much as 15 per cent when the new quota period starts next month, according to Land Transport Authority figures released yesterday.

They show the monthly COE supply for cars up to 1,600cc declining by 15.1 per cent to 667, while that for cars above 1,600cc falling by 13.7 per cent to 605.

In the Open category, used almost exclusively by car buyers, the supply will dip 1.9 per cent to 476 a month.

In total, there will be 11.4 per cent fewer COEs for car buyers in the next six months.

The new quota takes into account a lower growth rate allowed for Singapore's vehicle population. At 0.5 per cent a year, it is half the previous rate of 1 per cent and one-third the 1.5 per cent preceding that. Before 2009, the rate was 3 per cent.

The COE supply also takes into account the number of vehicles deregistered. As a result, commercial vehicle and motorcycle buyers will get more COEs in the next six months.

But for cars, deregistrations have been low, and industry players do not see a big change in the first half. So, they expect premiums to hit $100,000 shortly, as they now already hover between $92,000 and $96,000.

Said VW Singapore general manager of sales Daniel Chong: "There is definitely a risk that COE premiums will continue to climb because the demand for new cars... is likely to remain strong throughout this year."

Even when premiums exceed $100,000, drivers may just decide between buying a car with a smaller or bigger engine, said Mr Andre Roy, chief executive of Wearnes Automotive.

Noting that the premium gap between Category A (cars up to 1,600cc) and B (cars above 1,600cc) has closed considerably, he asked: "At what point will people just opt for bigger engines?"

While premiums will rise in the longer term, "there will be months when they will fall to maybe $80,000-plus", said Singapore Vehicle Traders Association secretary Raymond Tang.

But National University of Singapore transport researcher Lee Der-Horng sees the COE premium for cars up to 1,600cc - already at a record $92,100 - continuing to rise because demand will remain strong.

Things are unlikely to change in the second half. Besides deregistrations not picking up much, the Government will also resume its clawback of oversupplied

COEs in the second half.

But relief should arrive next year, when supply is expected to soar on the back of a deluge of deregistrations.

With an eye on this possibility, business development executive Danny Goh, 52, is keeping his nine-year-old Lexus ES300 until then. "Maybe the property cooling measures will help lower car demand too," he said.

christan@sph.com.sg

The Straits Times
www.straitstimes.com
Published on Jan 24, 2013
Open COE price nears $100k but others dip

MOST prices of certificates of entitlement (COEs) took a breather from recent sharp hikes at the latest tender yesterday.

The premium for cars up to 1,600cc dipped by 1.2 per cent to close at $91,010. That for cars above 1,600cc ended 0.7 per cent lower at $95,501.

But the premium for the Open category - used almost exclusively for cars - inched upwards by 1.9 per cent to $97,889, a mere whisker from the $100,000 mark.

Motor traders said sales had slowed after premiums rose sharply two weeks ago.

But motor companies are stocking up on Open certificates, which are transferable and can be held for three months, in case they have orders in the coming weeks.

Mr Chin Kee Min, senior manager of authorised Kia agent Cycle & Carriage Kia, said: "Everybody is storing Open COEs ahead of the supply cut next month."

The quota for the next six months up to July will be down by as much as 15 per cent.

Mr Chin said the market is already expecting car premiums to hit $100,000 and has factored that into its pricing.

Mr Raymond Tang, secretary of the Singapore Vehicle Traders Association, said the market was initially expecting the COE cost for cars up to 1,600cc to go as high as $94,000 yesterday.

This, he said, could also be why companies made more aggressive bids for Open COEs.

Other industry players said the latest round of measures to cool the overheated property market might have dampened the desire for new cars somewhat.

"The wealth factor is affected," said the director of a premium franchise.

In other COE categories, the premium for commercial vehicles fell by 4.9 per cent to finish at $57,051.

The motorcycle COE price ended 7.9 per cent lower at $1,781.

CHRISTOPHER TAN

When BMW and Mercedes become the Top 2 selling brands, you know there's something wrong. I can't step anywhere in Singapore without seeing a BMW - so much for "status" when everyone has one!

The Straits Times
www.straitstimes.com
Published on Feb 06, 2013
COE categories for cars could be reviewed
Govt also studying how to help small businesses deal with rising premiums

By Christopher Tan Senior Correspondent

THE Government could allocate certificates of entitlement (COEs) for cars according to measurements other than engine capacity.

It is also looking at ways to help small businesses cope with rising premiums.

Minister of State for Transport Josephine Teo revealed this yesterday in response to a flurry of questions in Parliament from MPs about soaring COE prices that are now close to $100,000 for cars and about $60,000 for goods vehicles.

The COE supply for the two groups has shrunk to 2,199 per month, from 3,022 two years ago.

To a suggestion from Mr Ang Wei Neng (Jurong GRC) on grouping COEs according to the open-market value instead of the engine capacity of the car, Mrs Teo said that was one valid way "in which we could rethink how COE categorisation can be done".

The open-market value approximates the cost price of a car before taxes.

It was the second time in four weeks that the Government has said the COE system could be reviewed.

Last month, Transport Minister Lui Tuck Yew said his ministry was looking closely at "the many suggestions we receive" to improve the 23-year-old system.

Yesterday, Mr Ang also pointed out that the share of COEs allocated to smaller cars had shrunk considerably in the last 10 years while that for bigger and luxurious cars had grown.

The latter now has a bigger supply of certificates, he said.

Mrs Teo said this was precisely why the Government had recently adjusted how Open category certificates - which are used almost exclusively for bigger cars - are recycled back into the system.

From this month, the Open category will be made up of 15 per cent of COEs from each of the other four categories - down from 25 per cent last year.

Dr Lim Wee Kiak (Nee Soon GRC) noted that when "BMW and Mercedes are the top-selling cars in Singapore, something is wrong". Toyota and Nissan used to be at the top, he said, adding: "It seems that the middle class and the smallest cars are being completely squeezed out of the market."

Mrs Teo said there used to be a wider price gap between category A (cars up to 1,600cc) and category B (cars above 1,600cc) COEs.

But because premium brands have also begun making cars with smaller engines - in response to stricter environmental laws worldwide - these cars end up in Category A and the gap has narrowed.

Category A and B COEs are currently $91,010 and $95,501 respectively. At the same time last year, they were $48,112 and $67,889.

Mr Low Thia Khiang (Aljunied GRC) asked how "hawkers and small-time contractors can afford to renew COEs or buy a replacement vehicle" in order to continue their business.

Mrs Teo said that "we're looking at various ways" to help this group of people, but offered no details.

Last week, the Government said it was studying a plan mooted by the Motor Traders Association that called for a one-off incentive payment of at least $10,000 for a replacement of a pre-Euro 4 vehicle with a model that meets Euro 4 or higher emission standards.

The association said high COE prices were one reason companies were holding on to old, pollutive vans, trucks and buses.

To suggestions that first-time car buyers be given access to cheaper COEs, Mrs Teo said: "It is hard for us to say definitively why a person who is buying a car for a second time is always less deserving."

She added that such a policy would also be easy to circumvent. For instance, someone might simply register a second car in the name of a relative.

christan@sph.com.sg

The Straits Times
www.straitstimes.com
Published on Feb 21, 2013
Big drop in COE price for small cars

CERTIFICATE of entitlement (COE) prices ended lower yesterday, with two categories dropping by more than 10 per cent on the back of a seasonal post-Chinese New Year lull.

But the plunge in COE prices for cars up to 1,600cc - which ended 10.1 per cent lower at $78,301 - was also attributed by industry players to a possible review of how cars are categorised.

Minister of State for Transport Josephine Teo said in Parliament two weeks ago that the Government could rethink COE categorisation. One suggestion was for cars to be grouped according to their open-market value (OMV) instead of engine capacity.

While details of a change are unknown at this stage, the outcome is likely to result in less competition in the up-to-1,600cc COE category, which is now dominated by premium and luxury brands. Consequently, demand might rise in the big-car category.

Hence, COE prices for cars above 1,600cc ended with negligible change yesterday at $92,667, merely 0.3 per cent lower than its previous level two weeks ago.

Open COE, which can be used for any vehicle type but ends up mainly for cars, finished 3.1 per cent lower at $91,910.

Commercial vehicle COE fell by 2.7 per cent to an 11-month low of $53,489 as most small and medium-sized enterprises were closed for a week for Chinese New Year last week.

Motorcycle premium plunged by 15.2 per cent to $1,512 - also an 11-month low.

Besides the traditional post-Chinese New Year lull, which saw some car showrooms shut for nearly a week, motor traders said consumers held back because of the probable COE review.

Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said: "There's no denying that customers are reading a bit into what was said in Parliament, and are holding back."

Mr Chin Kee Min, senior manager of Kia agent Cycle & Carriage Kia, said the wait-and-see stance is more obvious for buyers of smaller cars as "the review seems to be angled more towards the mass market".

CHRISTOPHER TAN

Finally this is being done!

The Straits Times
www.straitstimes.com
Published on Feb 25, 2013
MAS to place cap on motor vehicle loans from Tuesday Feb 26

By Royston Sim

The Monetary Authority of Singapore (MAS) will place a cap on motor vehicle loans from Tuesday Feb 26.

For a motor vehicle with open market value that does not exceed $20,000, the maximum loan-to-value is 60 per cent of the purchase price, including relevant taxes and the price of the Certificate of Entitlement.

For vehicles with an open market value of more than $20,000, the maximum loan will be capped at 50 per cent.

In addition, the tenure of a motor vehicle loan will be capped at 5 years.

In a statement on Monday, the MAS said: "The financing restrictions are necessary to encourage financial prudence among buyers of motor vehicles. In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves on motor vehicles."

The financing restrictions will not apply to loans for the purchase of commercial vehicles or motorcycles.

This is the equivalent of the govt nuking the car market.

Those with cash and want to change car can standby... it might also prompt the early deregistrations needed to normalise the COE supply cycle. Very good move, plus the higher ARF on luxury cars.

(25-02-2013, 09:20 PM)thefarside Wrote: [ -> ]This is the equivalent of the govt nuking the car market.

Those with cash and want to change car can standby... it might also prompt the early deregistrations needed to normalise the COE supply cycle. Very good move, plus the higher ARF on luxury cars.

even for an entry level popular toyota altis costing ard 140k, one will need to cough out 50-60k cash. not a small sum for everyone.

with a subsequent anticipated drastic drop in demand for new cars, i think coe prices should plunge in no time.

I look forward to the day when my Vios cost just $50k.

This loan limit would be a better deterrent than high COE.

The higher ARF is a good move because it will target luxury cars which fall under the Category B, hence distorting the price. The whole measures is also sending a signal that you should only buy a car if you can really 'afford' it.

(25-02-2013, 10:23 PM)LionFlyer Wrote: [ -> ]The higher ARF is a good move because it will target luxury cars which fall under the Category B, hence distorting the price. The whole measures is also sending a signal that you should only buy a car if you can really 'afford' it.

Yes I totally agree. For too long, I've bene preaching about how the rules for financing should be tightened in order to ensure not just any Tom, Dick or Harry can BORROW to buy a car. Now my wish has been answered - you can borrow about 50% of the value of the car (+COE) and you can only take a 5-year loan. Banks will be pretty upset by this, but it encourages better financial prudence.

This would also mean that the monthly installments would stay roughly the same (financing cut by half, but maximum loan tenure also cut by half), with the effect that you will be cash-poorer.