Buyers 'hold out' for COE price drop

Interest in new cars has been rising steadily in the past month and it is being shown mainly by someone with a small, old car.

Traffic at some showrooms has doubled as owners of ageing vehicles shop around, with the focus mainly on Category A models, the so-called small car category with engines below 1,600cc and 130bhp. But distributors said sales have not increased much as prospective buyers are hoping and waiting for certificate of entitlement (COE) premiums to soften.

"It is not surprising that a lot of the interest is coming from Cat A owners," said a senior executive at a major dealership. "This group is generally more prudent and conservative. After all, if you can afford a Cat B car, you would have replaced it five years ago."

Cat B cars have engines above 1,600cc or 130bhp.

One brand that has seen its showroom traffic spike in recent weeks is Chevrolet, whose launch of the Sonic sedan and Sonic hatch could also have attracted more walk-ins.

"We are seeing an influx of customers," said a sales manager. "Many are window shoppers with cars that still have one to 11/2 years of COE lifespan, so they are coming to review the market first."

As at Aug 31, there were 56,271 cars aged between nine and 10 years, according to the Land Transport Authority. These account for 9.1 per cent of the passenger car population, while the number of cars between eight and nine years old is 109,256 or 17.6 per cent.

Cars which are 10 years old have to be deregistered. If their owners want to keep them on the road, they have to pay the prevailing quota premium to renew their COEs.

The Chevy sales manager added that those who are interested buy only if the price is "very attractive". One reason for the reluctance is the belief that COE premiums will start easing with the next announcement of the COE quota in the middle of this month.

Most expect the November to January quota to be larger than the current August to October quota.

"They believe COE premiums can only go down. So until that happens, they will drive their cars to the very last day," he said.

Over at Mazda, there has also been an increase in browsing, with recent footfall about 25 per cent higher than a month ago.

"Most of them are waiting for COE prices to fall, and most have cars that need to be scrapped soon, some in six months, others a year, maximum," said a senior manager. "But they won't commit until the Government announces next quarter's COE quota."

Not all showrooms have seen traffic go up, however. Popular brands like Volkswagen, Toyota and Honda have experienced the same or lower levels, as compared to the previous month. At Mitsubishi and Kia, showroom traffic has been "erratic".

"Some weeks are high, some are low, but 80 per cent of those who walk in to look have cars that are more than eight years old," said a sales manager. "Some owners even have only three to six months of COE lifespan left, but they are trying to delay their purchase for as long as possible."

These prospective buyers are looking at Cat A models, such as the Kia K3 or the Mitsubishi Lancer and Attrage.

He added: "Those who buy are usually those with cars aged nine years and 11 months. They are holding out to the end. The general market sentiment is to wait until next year unless there is no choice."

This article by The Business Times was published in MyPaper, a free, bilingual newspaper published by Singapore Press Holdings.