COE Prediction - Sep 1st Bidding

Category A Quota Premium fell to $8,118 (50% drop) which was a second plunge this year while Category B Quota Premium declined about 15%. The drop were attributed to the Hungry Ghost month and also a suspected problem with the online bidding system. If there is indeed a problem with the system, do you think LTA should invalidate the bidding exercise and push the allocated quota to the next one? Why should those who put in their bids earlier get to enjoy this concession? I believe that most dealers will enter their bids earlier to avoid being caught again in case the problem is not resolved by LTA.

Dealers across the board have lowered the selling prices, mostly by about $2,000. One will wish that the selling price will come down by $8,000 but that is wishful thinking. The outcome is likely prove that the Hungry Ghosts do not stop people from spending their money buying big ticket items as the showrooms are thronged with crowds on knowing the opportunity to buy at a "cheaper" price.

Is it a good time to buy? If you have the intention to buy, this is one good opportunity. I am sure that Category A Quota Premium will rebounce to above $10,000 while there may a little weakness in the demand for Category B COEs with the current volatile stock market.

Prediction on August 28:
Category A: $14,000-15,000
Category B: $15,000-16,000

Verdict on September 5:
Category A: $17,999
Category B: $18,200

When is the Best Time to Buy a Car?

This interesting question was posted in the Carma Forum - "Is now a good time to buy car?" http://forum.carma.com.sg/showthread.php?t=1232696 which trigger a couple of different thoughts in my mind. Alan's comment is good - buy when you can afford to do so but what about choosing the timing?

I can remember the mixed feelings of motorists who bought their cars when the COE quota premium crashed to $50. While they have gotten some rebate from the purchase agreement, the dealers are the ones that are laughing their way to the bank since they have made a lot more from the lower cost of those transactions with COE rebate usually set at very low levels.

So unlike stocks, COE cannot be traded so easily and thus, it is extremely hard to time your purchase for a bottom. However, if you know that the COE quota premium is being pushed up in the recent bidding exercise, you should wait out two weeks and sign on the sales agreement when the dealers lowered their prices after a drop in the COE quota premium.

COE Prediction - Aug 2nd Bidding Exercise

The August 1st Bidding Exercise had both Category A and Category B COE Quota Premium heading north. The effect of the stock market drop didn't hit earlier and the three weeks order cycle had bring in highest sales numbers. Here is my prediction for the August 2nd Bidding Exercise:

Let's look at the time-series plots below, you can see that the balance (ie. unsuccessful bidders) for the past four bidding exercises have stayed quite constant between 300 to 500 for the category A and between 200 to 350 for the category B. This is an indication that the demand has only exceeded the supply by between 20% to 30% and thus, most of the distributors would still be able to fulfill their orders as most have the sales agreement with three to four bids.



You can see that there is always an increase in bids in the exercise following a plunge in the quota premium since most distributors had dropped their selling price. However, the down side is that the distributors may not be successfully to secure the COE if the upswing in the next few bidding exercises is too steep.


I predict that the COE Quota Premium will fall marginally in the August 2nd bidding exercises for these reasons:
1. Some distributors have already revised the car price up by $1,000
2. Closing date on August 22 offers only a two-week cycle
3. Uncertainty of the stock market over the effect of the US sub-prime concern

Prediction on August 12:
Category A: $16,000-17,000
Category B: $16,000-17,000

Verdict on August 22:
Category A: $ 8,118
Category B: $16,010

Remarks (Aug 22): One more factor to be considered is that it is the Hungry Ghost month.

Costly Frequent Car Refresh?

There was a report "Eight out of 10 cars here less than 4 years old" in the Strait Times today. You can see the age distribution of the vehicle population on OneMotoring website http://www.lta.gov.sg/corp_info/doc/MVP01-3%20(MVP%20by%20age).pdf.

The article stated that many motorists are changing their rides every two to three years with the decreasing car price over the past few years. I agree with the reporter Christopher Tan that car price has bottomed out and seems to be on the up trend. Thus, it may not be possible for motorists to trade in for a new car and to continue with instalment payments of the same amount.

Although it is nice to be driving a new car every two years, it is an expensive habit for these reasons:
1. The depreciation rate is highest in its initial three years.
2. The Rule of 78 interest rebate gives your banker the edge on the loan prepayment.
3. The UV film, sports rims, low-profile tyres and other accessories have a much longer useful life than 2 years.
4. While one may argue that a new car will not be prone to breakdown, you are likely to send it back to the authorized service agent and thus, pay a premium for the regular servicing.

In my case, I live near my office and also travel overseas every other month. Thus, I have only chalked up much mileage when I drive up Malaysia for my holidays. My reliable MPV is now FIVE years old and the odometer only reads 94,xxx kilometres. If your mileage is low, it makes sense to stay with your ride since it is able to endure more wear and tear. The export buyers are happy to take Singapore deregistered cars as most of them are in great condition.

You can get a better understanding of the depreciation and finance cost using the Cost of Ownership tool. You should always analyze the financial commitment of upgrading to a new ride. The illustration from the dealer is always showing the average cost over ten years but the cost of ownership is not uniformly distributed. You can get an estimate of the cost of ownership based on which you are intend to sell your new ride.