Off-peak car conversions soar as new sales dip

Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Dec 18, 2010
Off-peak car conversions soar as new sales dip

By Christopher Tan, Senior Correspondent

SALES of off-peak cars (OPC) have slowed to a crawl as high certificate of entitlement (COE) prices have kept budget buyers away from showrooms. But the conversion of normal cars to red plates has soared as a result of bigger incentives put in place early this year.

According to the Land Transport Authority (LTA), 1,876 owners switched their regular cars to the OPC scheme in the first 11 months of the year - nine times the number converted in the same period last year.

The OPC enhancements, which started on Jan 25, allow car owners who convert their normal plates to red plates to receive $1,100 in cash for every six months the car remains an OPC, which can be driven between 7pm and 7am on weekdays.

Under the new scheme, OPC owners also have unrestricted use of their cars on Saturdays and on the eves of New Year's Day, Chinese New Year, Hari Raya Puasa, Deepavali and Christmas Day.

Under the previous scheme, they could be used only from 3pm on Saturdays and the eves of holidays. If owners wish to drive outside these prescribed hours, they had to buy a supplementary licence, which cost $20 a day.

Since November last year, the paper supplementary licence, which resembled a large parking coupon, has been replaced by an electronic one. Drivers can buy these via channels such as the Internet and AXS terminals.

Unlike the days when the paper licence had to be purchased in advance, drivers can now buy an e-licence a day after they have driven their off-peak cars outside of prescribed hours. This gives flexibility to drivers who need to use their cars urgently, but do not have a supplementary licence on hand.

While conversion of normal cars to OPCs has risen, the popularity of new OPCs has waned.

In the first 11 months, only 123 new OPCs were put on the road - down from 463 last year and 798 in 2008.

The drop in new sales was far more drastic than the overall shrinkage of the car market.

Motor traders said spiralling COE premiums have made OPCs less appealing.

Mr Jeffrey Low, spokesman for Hyundai agent Komoco, said this is because the $17,000 tax savings on an OPC have now become a smaller percentage of the total car price.

For instance, a Toyota Vios 1.5 with manual transmission cost $57,000 around this time last year. Today, the same car is $85,500. The OPC discount would have been 30 per cent on the Vios last year, but only 20 per cent today.

Also, the absolute cost of such an OPC after the tax break has gone up from $40,000 to $68,500. This represents a 70 per cent jump, versus a 50 per cent increase on the cost of a regular Vios.

Temasek Polytechnic lecturer Dennis Toh, who specialises in consumer behaviour, said the price gap between a normal car and OPC has to be substantial before buyers are drawn to them.

He added: 'Off-peak car buyers are generally price-sensitive. When prices increase due to higher COEs, they would rather hold on their wallets.'

Motor traders also said those who need a car could always look for a used one within their budget.

As for the surge in number of people converting their normal cars to OPCs, the draw of receiving $1,100 in cash every six months may also be diminishing.

According to LTA data, the bulk of the conversions - 1,365 - were done in the first half of the year, a sign that the trend is already slowing down.

My Value Investing Blog:

Forum Jump:

Users browsing this thread: 1 Guest(s)