(Photo Credit: Straits Times)
COE premiums may be on the rise, but that doesn’t necessarily mean in the big scheme of things that it’s a bad time to buy a new car.
Looking at the past few COE results, it is quite obvious that premiums are on an upward trend, with all three car categories (Cat A, B and E) on a steady rise since February. On the surface, it may seem that now is a terrible time to buy a new car. Or, is it?
Here are four good reasons why this is the best time to get a new car.
1) COE Prices Are Still Reasonable
(Photo Credit: Straits Times)
Yes, while COE prices have been rising since the year started, the current premiums are still low compared to a few years ago. Looking at Cat A as an example, the current premium stands at S$33,199. Four years ago, during the second bid of April 2015, it was S$67,601, more than double the price of what it is today.
Back then, it was almost impossible to get a new car for under S$100,000. Now, you can get decent cars, like the Suzuki Swift, a sensibly-priced Japanese car for just under S$80,000. For those in the market with an even tighter budget, the Mitsubishi Attrage can be yours for just S$65,000. That’s an entire car (including COE) for the price of a Cat A COE just four years ago.
Although, the whole point of this article is about good timing, which brings us nicely to our next point…
2) Rising COE Prices
While it remains to be seen whether COE premiums will return to the sub-S$70,000 prices we saw a few years ago, one thing’s for sure, it’s going to rise further. For the second quarter in a row, COE quotas are decreasing due to the low amounts of deregistrations and high amounts of COE renewals.
In January to March this year, the amount of Cat B cars deregistered was at 7,585, which was 940 less as compared to January to March 2018, in which 8,525 Cat B cars was deregistered. That was a 11% drop year-on-year, and with this trend brings an increasing number of renewed COEs.
While we did say in our first point that in the big-picture view of things COE prices are still quite low, it probably won’t stay that way for long. With supply dropping and demand remaining the same, or even increasing, COE premiums are likely to continue climbing higher.
3) Easement of Car Loans
In 2016, the Monetary Authority of Singapore finally eased their restrictions on car loans. Previously, you could only loan up to 60% of the purchase price if your car's Open Market Value was $20,000 or less. Now, you can get up to a 70% loan of the purchase price under the same circumstances.
With the easing of the loan to help take some of the pressure off the car buyer’s upfront payment, COE premiums rose quite a bit in 2016. But right now, with COE prices still relatively low, upfront costs are still manageable for the everyday car buyer.
Click here for a more detailed analysis on the easing of the car loans.
4) High COE on Used Cars
As we mentioned earlier, in the past few years, COE prices have been quite high, almost double what it is today. That means a big portion of the used cars on the market today that are around four to five years old have high COEs.
Even though used cars are cheaper, the high COEs usually mean a high depreciation cost, sometimes exceeding those of a new car. While that could be written off and covered by the COE rebate, that only applies if you keep the car until the end of its 10-year lifespan and deregister it yourself.
By then, anything could have happened to the COE premiums, and are you willing to take that chance?
Can you think of any other reason of why now is the best time to get a new car? Are you planning on buying a new car soon? Let us know in the comments below!
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