The first round of November 2011 COE hit a 17-year high of $78,001. Believe me – what goes up, must come down.
My analogy is that COE prices will continue to rise to such a level that many people will stop buying new cars. At this point the 2nd hand market would have also been flooded with those trading-in/making a quick buck selling their cars.
People looking for a bread and butter car will be buying used cars but there will be a point when the market gets flooded with overinflated used cars because the used cars dealers will continue to raise their prices in tandem with the rising COE prices. Used cars will become illogical to purchase at those prices given the amount of risk(s) involved, such as accidents and mechanical issues.
Used car dealers will eventually be stuck with excess stock and there will be price war. A few used car dealers may even wind down due to inability to pay the financing for the cars in their showroom (they are usually on loan). Some people who lost money in the recent downward spiral of the stock market would also be forced to sell or auction their cars for cheap.
When all these happens the prices of used cars will start to come down. People will then again flock to the used cars. But there isn’t enough new car buyers to trade in their old cars. New car dealers will be in trouble when this happens and down comes the price of COE.
Don’t buy a car now if you can wait another year… trust me.