How does the supply for COE affects you?
With increased vehicle deregistrations (aka scrapped/exported) in July 2020 along with the prorated return of quota from the suspended COE bidding during circuit breaker, COE supplies are set for an increase.
In the most recent 19th August COE bidding exercise, the COE Premiums have seen an increase across the board. This is the second consecutive bidding exercise to see COE Premiums increase across all categories.
Category A COE Premiums are currently standing at a 12-month high of $35,710.00. This is an increase of $2,701 (8.2%) from the previous bidding exercise.
Category B COE Premiums see a smaller increase of $1,700.00 (4.6%) to $38,802.00.
The current 12-month high Category A COE premiums are largely caused by the backlog of new car registrations when COE bidding exercises were suspended during the circuit breaker.
Most new car dealers that we speak to, do not expect COE Premiums to increase or decrease significantly due to weak economic conditions while many car dealers are still struggling to clear their backlogs of new car registrations.
LTA data indicates that COE supplies are projected to increase for the November 2020 to January 2021 window.
Assuming car de-registration numbers for August 2020 and September 2020 follows July’s numbers, the market can expect a 5% to 10% increase in COE supplies. Category B COE quotas are expected to see a relatively large increase (14% to 18%) while Category A COE quotas are expected to see a slim decrease.
A big increase of Category B de-registrations are also indicative that used car dealerships are expecting consumers to swing towards more frugal options during this uncertain economic conditions.
Should the projected expansion in Category B happen, we can expect COE Premiums for larger cars to taper downwards towards the end of the year while Category A COE Premiums remain stable.
What does this mean to you as a car buyer?
New car prices are expected to remain steady and stable in the short term. While COE Premiums might have increased across the board, it is still relatively affordable compared to the highs of 2013 where Category A Premiums shot up to $92,100.00 or the more recent 2017 high of $52,000 for Category A Premiums.
A walk down the authorized dealerships will show you that demand is still relatively healthy as showrooms are still packed over the weekends. Currently, there is still an estimated backlog of 1000 new car registrations for both COE Categories. It would be difficult to expect COE Premiums to correct downwards any time soon.
As for the used car market, there are mixed views from different dealers as well as car marts in Singapore that we spoke to. While June and July have shown a huge increase in used car sales, August has proven challenging for many used car dealerships as transaction numbers correct downwards; we have attributed the increase in demand in June and July to higher car deregistrations and revenge-shopping due to circuit breaker.
While a higher COE Premium tends to be better for the used car trade, the current COE Premiums have not deterred Singaporeans from visiting the new car showrooms. Thus, we do not expect used car prices to see a major spike in prices. We do however, expect demand for used cars to grow stronger as long as COE Premiums continue their upward trend for the next 3 to 6 months.
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