Demand for used cars set to rise after changes to COE

The demand for used cars is expected to go up following changes to the Certificate of Entitlement (COE) announced on Monday.

The Singapore Vehicle Traders Association believes car buyers will consider buying used cars until the market stabilises.

Car dealers expect premiums in Category A and B to remain high -- at least until the changes in Category A kick-in in February next year.

Cars belonging to Category A must not have more than 130bhp of engine power. This is on top of the existing one that caps engine capacity at 1,600cc.

Dealers expect to see good demand for newer used-cars because these will still be more affordable than brand new ones. Used-cars that have a few more years left in their COE could also be popular.

Raymond Tang, honorary secretary of the Singapore Vehicle Traders Association, said: "Because of the changes, most consumers will be unsure what to do, what should they buy.

"I think the best way is to go in and buy a more stable car, aged, left with two years, three years, or four years and see what will be the situation in the market. And these range of cars they are very near to the paper value, and I think there is no risk for the consumer."

Before the changes take effect, industry players expect car agents to quickly clear some of their high powered-cars that are currently in Cat A. At the same time, consumers may also rush to buy a luxury Cat A car.

The used-car market took a hit in 2013 when the Monetary Authority of Singapore imposed loan curbs.

Under current rules that took effect in late February, used-car buyers can borrow only up to 60 per cent of the car's purchase price. The maximum period of the loan is also capped at five years.

Industry players said the re-categorisation of COE may prompt the entry of different car models to suit the new requirements. However, they doubt if more premium brand diesel models that typically have lower horsepower, may be introduced.

Mike Wee, owner of Mayfair Motoring, said: "Diesel cars at this moment is not that popular, because (in the past), you have to pay a road tax (which is several times higher).

"People are concerned next time if (the government) were to remove this benefit and the road tax may become five to six times higher. So, I think it's difficult for them to sell their cars."

An estimated 332 diesel cars were registered in Singapore last year. This is a relatively small percentage when compared with total new car registrations of nearly 28,000 in 2012.

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Highly doubt diesel powered cars will pick up in Singapore, but for bystanders waiting to get a car, I guess mostly will wait till Feb'14 to make their decisions. As for second hand cars getting more attention, most likely it is only the older ones which will be snapped up as they're relatively much cheaper.

Come Feb'14, the best selling Cat A car will probably be VW Jetta 1.4 TSI. With its 1.4L engine, it's able to produce 122BHP of power and an impressive 200Nm of torque. Higher OMV and having a better premium feel, it's a winner.