Motorists, dealers waiting to see how proposed COE changes will impact car prices

Car dealers and motorists in Singapore are awaiting the outcome of proposed changes to the certificate of entitlement (COE) system, though some are considering purchasing vehicles before potential rebate schemes are discontinued. Gina Koh, a 38-year-old education sector worker, is not in a hurry to buy a new car, as the COE for her Nissan Note expires at the end of 2027. She is unsure whether renewing her COE or purchasing a new vehicle will be more financially advantageous.

Sales manager Ben Tjhin, also in his 30s, expressed that the proposed changes are unlikely to significantly impact him at this stage. The Land Transport Authority (LTA) recently published a consultation paper proposing to merge COE categories A and B into one, with a rebate or surcharge based on the car's value. However, the specifics of determining this value are unclear, leaving car dealers uncertain about how the system will work.

Ron Lim, the sales and marketing head of Tan Chong Motor Sales, stated that merging categories A and B into a single category is simple to comprehend, but the determination of rebates or surcharges based on a car's value remains unclear. LTA suggested two possible banding systems – a three-band or five-band system, with varying rebates or surcharges depending on the band the car falls in.

Currently, a Category A COE costs $130,001, while a Category B COE costs $130,100. LTA proposes that the car's median open market value (OMV) will determine its band. However, the OMV is a fluctuating figure influenced by factors such as foreign currency exchange rates and supply chain changes. The agency plans to use the median OMV of cars registered in the previous year to determine their banding under the proposed system.

Dealers are concerned about how facelifted models will be handled under the proposed system, as changes to a car's features or equipment can alter its OMV, making it difficult to determine its band accurately. Additionally, some motor dealers believe that offering smaller battery capacity models for electric vehicles could lower their OMVs, potentially resulting in a poorer ownership experience due to reduced driving range.

Several motorists expressed concerns that those with deeper pockets could gain an advantage if a single passenger car category is created, as they would likely be able to secure cars at more favorable bands. Car manufacturers have recently started tuning high-end cars to fit into Category A, causing the prices of Category B COEs to converge with those of Category A COEs. This convergence was a key factor in the COE review exercise.