COE PREMIUMS for cars dived on Wednesday, as buying faltered amid a flurry of downbeat forecasts and warnings of a global economic slowdown, and also expectations of a tax cut in car registration.

Motor traders said the stockmarket turmoil in the past week has dampened buying sentiment.

At the same time, other buyers were holding back in anticipation of a cut in car registration tax - an expectation arising from Prime Minister Lee Hsien Loong's New Year message.

The PM had said then: 'We need to enhance the ERP and extend its coverage so that driving costs significantly more, but we will balance that with lower vehicle ownership taxes.'

The motor industry is rife with talk of a 10 to 20 point cut in the ARF or additional registration fee, a major vehicle tax which currently stands at 110 per cent of a car's approximate import price.

A 20-point cut translates to savings of about $3,300 for a Toyota Corolla and $10,000 for a Mercedes-Benz E-class.

Even if COE prices rise - and they are likely to on the back of an expected smaller supply of certificates this year - buyers reckon they will still be ahead if ARF is cut.

Toyota agent Borneo Motor's managing director Mark Choong said 'this has caused used car dealers to give ridiculous trade-in prices', thus discouraging car owners to switch to a new car.

COE for cars up to 1,600cc fell 14.6 per cent to $12,001 on Wednesday, while that for cars above 1,600cc closed 16.9 per cent lower at $13,289. Open COE, used mainly for cars, fell 11.5 per cent to close at a 10-month low of $13,801.

COE for commercial vehicles was 3.8 per cent lower at $12,501, while motorbike COE was 8.1 per cent down to $1,012.