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.
November 12, 2011 at 11:55 am
What’s happening is that the Govt realized that too many COEs over the past decade, but only realized that it screwed up 3 or 4 years back and started to tighten the COE numbers.
The problem with COEs is that it takes 10 years to fix a mistake in the supply. Currently, there’s a temporary spike as the COE supply is reduced.
I predict the current situation will remain for another 2 to 3 years before stabilizing at $50-60K eventually in about 5 years. Thereafter, we should see graduate increases in tandem with inflation.
The situation could change if we see a massive recession within the next 2 years, which is not entirely unlikely. Good luck. 🙂
My final advice: try to avoid buying a car lah. Waste money only. 😛
November 12, 2011 at 11:15 am
Agree with your analysis, and that COE prices may moderate or at least plateau in a few years time.
Another key factor for COE prices imo, is the number of deregistrations. The COE quota supply formula is basically a deregistrations + X % growth. The previous relaxation of the COE supply from around 2003-2007 will lead to a larger number of deregistrations, and hence supply of COEs from 2013-2017.