COE prices soar after Govt relaxes vehicle financing restrictions

SINGAPORE — On the heels of relaxed vehicle financing curbs, Certificate of Entitlement (COE) premiums for cars swung upwards, particularly for small ones. 

In the first bidding exercise since the loan curbs were eased on May 28, Category A premiums (for cars up to 1,600cc and 97kW) rose by 14.1 per cent to SS$53,694, from S$47,020 in the previous exercise. 

Category B (cars above 1,600cc or 97kW) premiums rose by 13.9 per cent to S$56,000, from S$49,156. Premiums for Open category COEs, which can be used for any vehicle type but are mainly used for big cars, went up by 10 per cent to S$55,100, from S$49,700 previously. 

Until Wednesday (June 8), COE premiums had been stable, amid a record number of COEs available for bidding every three months. 

Since last April, premiums had been decreasing steadily, with premiums for small cars falling below S$50,000 in January this year, the first time in four years.

Last month, three years after it imposed loan limits on motor vehicle financing, the Monetary Authority of Singapore announced it would relax the restrictions, citing the sustained moderation in COE prices that has eased inflationary pressures.

Buyers can now borrow up to 70 per cent of a vehicle’s purchase price, up from the current 60 per cent, for vehicles with an open market value (OMV) of less than or equal to S$20,000. 

The limit will be raised to 60 per cent, up from 50 per cent, for vehicles with an OMV higher than S$20,000. 

The restrictions, which sparked an outcry when announced, were imposed as part of efforts to moderate inflation, which was then in part driven by private road transport costs. 

The easing of the rules prompted some car dealers and analysts to say that more buyers would be drawn into the market, driving up COE prices. 

In recent months, there have also been concerns that demand for rental cars to fuel private-hire services like Grab and Uber would drive up bidding and lead to higher premiums. 

Mr Raymond Tang of Yong Lee Seng Motor, who is also 1st vice-president of the Singapore Vehicle Traders Association, said that with many car buyers waiting on the sidelines, the easing of the loan curbs saw many rush forward quickly to place bids. This is because with expectations that demand would increase as a result, some feared missing out, or ending up paying more if premiums continue to spike beyond this exercise, he said.

The surge in car premiums would likely continue, he added, pointing to the large volume of bids received. “The backlog of orders is a genuine backlog, and many people may come in if they think premiums will be even higher in future,” he said.

Meanwhile, premiums for goods vehicles and buses also went up by about 8 per cent to close at S$46,434, up from S$43,002. Motorcycle premiums saw little change, inching down $1 to close at S$6,302. A total of 9,717 bids were placed in the latest exercise. Of these, 4,823 were successful. 

Here are the numbers at a glance:

Cat A (Cars up to 1600CC & 97KW): S$53,694 (up from S$47,020)

Cat B (Cars above 1600CC OR 97KW): S$56,000 (up from S$49,156)

Cat C (Goods vehicles and buses): S$46,434 (up from S$43,002)

Cat D (Motorcycles): S$6,302  (from $6,303)

Cat E (Open category): S$55,100 (from S$49,700)

Correction:

We originally wrote that the premium for Category C was S$46,343. This is incorrect. The premium for this category is S$46,434. We are sorry for the error.