Tan Chong Motors car showroom along Dunearn Road. The sharp supply cut sends COE prices soaring. Premiums double in just two months to as high as S$49,000.

LEG 3: 2005 - 2008

Buyers take the lead, from 2005 to 2008.

The scrapping of cars leads to an over supply of COEs.

From 2004, the supply was about 100,000 COEs annually.

This was more than double the average quota in the 1990s.

Even more COEs are released because the Electronic Road Pricing system is introduced in April 1998.

Usage of roads is charged, although ownership of cars is made cheaper.

Enter the $2 COE.

This takes place in November 2008, for Category A COEs (cars 1,600cc and below) and taxis.

Then the Monetary Authority of Singapore deregulates vehicle loans.

These used to be 70 per cent of the purchase price, with repayment periods over a maximum of seven years.

Under the new guidelines from January 2003 onwards, buyers can go for 10-year loans.

This means that loans can be repaid over the car's entire lifespan.

New cars are cheap and the market for second-hand cars slows down.

Second-hand car dealers export cars to places like Libya and New Zealand.

Parallel importers enter the market and competition brings down prices further.

But new car owners are stuck for the full 10 years because of their hefty loan.

Since the breakeven point is now dragged, scrap too early and the amount you fetch might not be enough to redeem the loan.

Fewer cars are scrapped.

LEG 4: 2009 - now

Last year, car buyers hit by the global recession opt for cheaper brands.

The trend of fewer cars being scrapped continues and deregistrations are low.

This month, the Government says it will cut the supply of COEs.

Instead of an annual quota, figures will be revised every six months. COE premiums race up.

Second-hand car dealers and parallel importers raise the prices of their cars in line with these increases.

As buyers are left watching the prices spiral upward, the speculators re-enter the market.

This article was first published in The New Paper.