Escalating COE prices causes changes in consumers’ preferences in the local car retail industry.
Contributed By Ricky Chee
“I would rather take the bus than purchase a new car,” says Lim Siang Hock, 52, an IT consultant. “I have already sold my car as my children have grown up and public transport is really convenient nowadays.”
Lim is not alone in his views. With the rise in the cost of the certificate of entitlement for a car owner in Singapore, the real price of owning a car has skyrocketed. Lim and many others concur that given the effective public transport system in Singapore, owning a personal vehicle is more of a luxury than a necessity.
Two years ago, the annual quota of COEs from May 2009 to April 2010 was reduced from 110,354 to 83,879, a year-on-year drop of 24 percent. At that time, the quota of COEs for Category B (cars with 1,601cc engines and above) vehicles fell the most, dropping by 31 percent.
Correspondingly, COE prices have been on an upward climb. The Land Transport Authority received 3,149 bids at the end of January for the first open bidding exercise. Of these, 1,923 were successful. And as more cars populate Singapore roads, the number of COEs up for bidding will decline. According to LTA’s vehicle quota system, the COE quota for February to July 2011 is 22,368, with a monthly quota of 3,728—this is a three percent drop in the overall current six-month quota.
Andy Koh, 46, a used car salesman from Car World, feels that due to high COE prices, the market has seen a rapid increase of consumers looking to buy used cars instead of brand new cars. “The market for used cars now is healthy, because buyers have a cheaper alternative,” said Koh.
He says that previously, owners looking to upgrade their vehicles would sell their cars to used car dealers for export. But these days, used car dealers can purchase and sell these used cars locally and still make a healthy profit. He adds that there are still a lot of people looking to buy cars—whether new or secondhand—because they feel that the public transport during peak hours does not effectively meet demand.
The reduction in COEs drove prices from S$26,389 for category B vehicles in March 2010 to S$45,501 the following month. In May 2011, the price climbed to a high of S$63,000. The prices of COE for category A (under 1,600cc) vehicles rose similarly from S$20,802 to S$34,001. Today, the price for the same category stands at S$53,390.
So, a Category A Toyota Corolla costing S$73,988 back in March 2010 would have jumped to S$90,988 in April 2010, and will have probably leaped past S$100,000 by the time you read this.
If all this sounds ridiculous, the fact remains that the record high for the COE of a category B vehicle is S$110,500 (in 1994), and for category A, S$62,208 (in 1997). So it looks like the sky’s the limit.
“COE prices have been high for some time now, and what we observe is that people are slowly coming to terms with it and getting more accustomed to rates in the range of S$50,000 to S$60,000. We foresee that this is likely to remain for another few years at least, barring policy changes,” says Gerald Wu, managing director of First Automobile.
Due to the increase of COE prices for brand new cars, some owners who have purchased their cars at a lower price due to low COE prices previously are now able to sell their cars at the same price they originally paid.
Tony Xu, 27, a customer service officer, says, “I have no qualms about selling my car at the price which it was purchased at three years ago. I have made full use out of it for the past three years, and if the price is right I will sell it and upgrade to a better car, or at least an equivalent if I can afford it.”
In the current market, as absurd as this may sound, a used car buyer can look to make a profit from the car he bought as the prices have increased once again. To deal with the increasing COE costs which decrease the affordability of new cars, car dealers hold promotions in a bid to make new cars more attractive to buyers, giving out freebies such as free body kits and free servicing for a year or two.
But there are those who seem to be slowly weaning themselves off the mercy of escalating car ownership prices, such as Jean-Jacques Lavigne, 42, an executive director who has been alternating transport modes for 20 years. He currently cycles from his home in Pasir Ris to his office in Sentosa twice a week, and attests that the time taken to cycle to work is only one hour as compared to public transport, which will in fact, take longer—90 minutes.
How Drivers Can Save Money
1) When driving, the most efficient speed for best fuel economy ranges from 80 to 100km/h.
2) Check your car’s tire pressure every month. Under-inflated tires reduce fuel efficiency by two percent for every pound they are under-inflated. Under-inflation also causes premature tire-wear, giving your tires a shorter use life.
3) Always look for cheaper parking lots. Online resources such as www.sgcarmart.com compile the latest parking rates around Singapore for the convenience of car owners.
4) Leave home earlier and reach your destination before 7:30 a.m. to avoid ERP charges.
5) Park outside the CBD and take a train into town to work.
6) Always source for the cheapest car insurance.
7) Don’t open windows when traveling at high speeds. Opening windows on the highway can reduce fuel efficiency by 10 percent due to the extra drag.
8) Drive an off-peak car. If you reach work before 7 a.m. and leave work after 7 p.m., it is more viable to drive an OPC instead, especially one with an extended license to be used on Saturdays.