Measures that brought motorcycle COE prices down will not work in the car market, analysts say

Transport economist Walter Theseira said the new measures worked to discourage speculation because motorcycle dealers tend to hold on to a stock of temporary COEs. They profit when COE premiums rise because they can sell the motorcycle for a higher price even though the certificate was purchased at a cheaper rate.

The dealers will also register vehicles in their business’ name before selling it to consumers as a “new second-hand” product.

This is not a strategy used in the car market because buyers are sensitive to the “transfer count” or the number of previous owners, said Dr Theseira, who is an associate professor at the Singapore University of Social Sciences.

Buyers are unlikely to be willing to pay the same price for a car that has one previous owner, even if it is the dealer’s company.

Additionally, cars depreciate much more than motorcycles.

“It is very risky for car dealers to hold COEs speculatively or to use them to register vehicles in their own name, when very expensive depreciation starts the moment registration is completed,” he said.

GENUINE BUYERS

Motorcycle dealers who have a large stock of COEs have an incentive to try to control the market price. But under the new rules, dealers can no longer hold on to old certificates for three months and benefit from the difference in COE premiums.

If dealers put in bids to push the COE higher, the deposit for each bid is now higher and that amount goes to waste if the COE expires.

For the car market, however, dealers usually put in a bid only when they have confirmed a buyer.

“The dealer only executes the bid when there is a buyer who has already committed to the purchase and has transferred the COE bid deposit, and in many cases, also a deposit for the car itself,” said Assoc Prof Theseira.

He added that the bid is made in the name of the buyer, so dealers will not put in a bid without a deposit and sales contract.

A higher bid deposit for cars would increase the amount of cash needed upfront, he said.

“However, I don’t expect that to have much effect on the market, as if you are ready to pay S$200,000-S$300,000 for a car, is there much difference whether you have to pay, say, S$10,000 upfront as a COE bid deposit, or even S$20,000 or S$30,000?”