What’s the rush?

The LTA’s move to push existing cars in Cat A with engines that produce more than 97kW into Cat B should push a fairly large pool of buyers into Cat B. In the short term, prices are sharply up because people who want to buy cars like the BMW 316i or Mercedes CLA 200, which currently qualify for a Cat A COE, have to act now.

Come February, the entry of previously-Cat A models into Cat B is expected to push prices in the latter COE category up, so buyers of larger cars are also buying now to beat the expected price increase in Cat B.

The effects of “crowding” Cat B can, in a sense, already be seen, with Cat A and B COE prices climbing towards the S$100,000 mark. The general expectation is that Cat B will be more expensive than Cat A next year.

Currently there’s an S$8,500 price difference between the two categories. This gap has fluctuated — in 2007 the two were very close, with Cat A even slightly higher than Cat B on occasion. Last year saw price differences of up to S$30,000.

Some industry players expect prices to ease when this temporary frenzy is over, especially in Cat A. After February, the removal of a large group of models from the likes of BMW, Mercedes-Benz and Volkswagen should ease demand for Cat A COEs, leading to lower prices.

There are, of course, a host of unknowns — some luxury manufacturers could, for instance, introduce new models with less powerful engines to help them qualify for Cat A.

This may be tough advice to follow, but the best course of action given what is currently known, could simply be to wait for prices to fall. Derryn Wong