COE premiums remained essentially unchanged for the first bidding exercise in February, but what does it mean for car buyers?

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SINGAPORE

The first Certificate of Entitlement (COE) bidding exercise for February 2023 saw little changes in the premiums from the previous exercise, with only Cat E registering a slightly noticeable dip.

In Cat A, which is reserved for cars with internal combustion engine (ICE) that are less than 1.6-litres in capacity and output of less than 130hp, and electric cars with an output of less than 147hp, premiums ended at S$86,000, which is the same price as the previous exercise.

Category B, which is for ICE cars with engines that make more than 130hp, or are above 1.6-litres in capacity, and electric cars with outputs of more than 147hp, saw a very small rise of S$65, to end at S$105,524.

Category E meanwhile, which is open to all vehicles except motorcycles, but usually ends up being used for big cars, saw a drop of nearly 2 grand, ending the exercise at S$105,002.

It’s not very often that we see COE premiums remain unchanged from one exercise to another, and it doesn’t really reveal much about the situation on the ground. At best we can presume that premiums are starting to hit a plateau, before slowly making a decline as we see the quota gradually increase, but given how volatile the COE system is, that’s not something we can safely say for sure is happening.

However, one only needs to take a walk down Leng Kee Road to observe what’s been really happening. Showrooms have remained mostly empty for the past several months, and pretty much all observers say that premiums have been mostly propped up by fleet operators who have been snapping up new cars at a much faster rate than your regular walk-in buyer.

It’s hard to say when the music will stop for these operators, but it’s really just a matter of time, even if it might not be soon. In any case, we are already starting to see a growth in the allowable quota, with the current period seeing a 3.4 percent increase as compared to the preceding three months. That should at least help alleviate the high premiums somewhat, even if the effects may not be too significant or immediate.

Down the line, the combination of continually weak demand, in the wake of high inflation and economic uncertainty, and a potentially larger quota should help put downward pressure on premiums. But the forecast, based on available figures on predicted deregistrations, indicate that we probably won’t see any huge fluctuations at least until towards the end of the year.

Until then, we should reasonably expect COE prices to hover around current levels, with small rises and dips along the way. There’s no real advice here, other than if you can afford to wait, then it would probably be wise to do so. Otherwise, in the near term, the prices we see today are likely to be similar to what we will see in the next couple of months as well.

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