Saturday, July 7, 2007

Low COE = Good Deal ?

My brother-in-law told me that his friend is so lucky to have gotten COE rebate in the latest bidding exercise. Lucky? Good deal? Let’s gone through the numbers before coming to the conclusion.

The quota premium for the Category A COE is S$5,200. This is the lowest premium in over ten years and the annual COE cost of the registered vehicle is only S$520. The owner will only realize the downside when he wishes to sell the vehicle as the COE rebate would be LOW and a corresponding lower resale value is expected.

Most dealers set the COE rebate at S$6,000 and so the actual rebate to a buyer is only S$800. The selling price usually include a minimum of the moving average of the COE quota premium. In this latest exercise, many dealers should have gotten a good windfall. A recent letter to the ST Forum highlighted the issue but how many buyers want to bid for the COE by themselves? Most will not mind paying more for the dealers to bid on their behalves but they may not have anticipated the low COE. If you go around asking for the new car price without COE, it is not going to be the regular selling price minus the current quota premium.

New car dealers have reduced the selling price between $1,500 to $2,500. Thus, this is the best time to buy - low price with an expected rebound in quota premium. Seize the opportunity while it lasts! Some dealers have already increased the price after recording strong bookings.
Now, do you think our friend is lucky?