Is it the right time to buy cars?

Is it the right time to buy cars?

The increase in COE supply in the period of May to July was expected to drive premiums southward.

But throw in private-hire companies like Uber and Grab, which are snapping up COEs aggressively to build up their fleets, and the game changes.

That is why all prospective car buyers can talk about now is whether they should wait for COE prices to soften because of the larger COE supply, or buy their cars now before premiums go up due to higher demand from private-hire companies.

UniSIM's Adjunct Associate Professor Park Byung Joon told The New Paper that there is no good or bad time to buy a car because it is hard to predict which way COE prices will go.

"Everyone predicted that the COE premiums will gradually decline because of the number of COEs.

"But these private-hire companies are kind of unexpected," said Prof Park, the former head of UniSIM's urban transport management programme.

The Land Transport Authority announced last week that car COEs would increase by 14 per cent to 8,384 a month during the May to July period.

Whether the premiums go up or down will depend on how aggressively private-hire companies bid for the COEs, said UniSIM's senior lecturer Dr Walter Theseira.

In the most recent bidding exercise, Uber reportedly secured 14 per cent of the total COE bids across the three categories, which helped drive COE prices up by up to 5.5 per cent.

In the previous bidding cycle, Uber-owned Lion City Rental submitted more than 800 bids, which accounted for 11 per cent of the total bids made for car COEs.

That is why Singapore Vehicle Traders Association's first vice-president Raymond Tang believes COE prices will remain firm or go up.

The economy could also drive more people to work as an Uber or a Grab driver, which will in turn contribute to the rising demand from private-hire companies, Mr Tang said.

And it is not just the private-hire companies.

In the past few years, car rental and leasing companies have been doing quite well.

"When they have customers wanting to lease or rent new cars from them, they also join in the bidding," Mr Tang said.

DON'T WAIT

"If you need a car and your financial status allows it, you should not wait. You won't be able to predict what is going up or coming down when it comes to COEs."

Still, there are other factors that may exert downward pressure on COE prices.

While Dr Theseira said that COE demand could increase, the economics lecturer suspects that aggregate demand for cars could eventually fall.

"Demand could fall because some consumers who might normally buy a car could find that all their private transport needs are met by Uber or Grab and taxis," he said.

"Overall, I suspect that aggregate demand for cars will eventually fall because of the ease of taking private transport.

"Why buy the car when you can effectively rent the service only when you need it?"

Even if the premiums do drop, Prof Park said it will be unrealistic to expect a substantial drop.

"My advice: Don't panic buy, but don't panic delay," he said.

"If you plan to buy a car, just go ahead and don't delay your purchase, hoping that something will happen to the COEs."

Dr Theseira said: "Timing a car purchase is just like timing the stock market. It is hard to do and generally doesn't work."

He suggested buying a used car rather than a new one, because a substantial part of the cost is the depreciation that is incurred from buying a new ride.

fjieying@sph.com.sg


This article was first published on April 23, 2016.
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