Opinion

Will the Proposed COE Changes Help?

Ryan Ong 0 Comments

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We’ve been hearing a lot of proposed COE changes. Well good, it’s about time. This is like a two second break in a five year long migraine. The COE system’s getting dated, and we probably should have retired it. Like, around the time nature gave up on the dinosaurs. But let’s see what new tweaks will be effective:

 

Why We’re Surprised by COE Numbers

We’re surprised that COE prices (for category A and B) aren’t falling below the $60,000 mark. In fact, the results from the most recent bidding exercise in May saw jumps in category A, B and the Open category.

New loan restrictions have reduced financing for cars to 60%, which should have dissuaded more buyers. In addition, car loan interest rates have risen, just as we predicted. As of March, rate have been around 2.68% per annum. Previously, rates were around 2%.

Now, we are seeing a general decline in COE prices. There’s a reduction of around $6,000 for category A COEs, and $9,000 for category B. We’re just saying the movements are less drastic than we expected.

Two proposals seem aimed at correcting them further; here’s our opinion on them:

 

1. Surcharge for Every Subsequent Car Purchased

 

opening car door in showroom
“If my other vehicle’s a Cherry QQ, this counts as my first car right?”

 

Proposal:

The idea’s straightforward: For every subsequent car you buy, you get fined pay a surcharge. Proposed amounts vary. Some people feel the surcharge should grow with each subsequent purchase; others feel it should be a flat sum.

But the overall idea’s the same. Buy more than one car, and face a financial kick in the nuts.

How it Would Work:

Dissuades people from buying multiple cars, thus freeing up more COEs. Prevents poor people from lynching the next loser who shows off his five sports cars.

Our Assessment:

There are some potential exploits here (e.g. getting dad to sign up as the owner). But while it might be easy to dodge the surcharge for the first car, the third or fourth might be harder. The real question is, does it impact the COE in a significant way?

We’d need to see some statistics, on how many serial car buyers we actually have. If it’s a tiny minority, this measure won’t impact COE prices by much. Also, it doesn’t help with the real issue: Trying to get more cars off the road.

Think about it. Even if I have five or six cars, I can only drive one at a time. However, if there are multiple drivers in a family, then there could be more cars on the road at a point in time. What would probably make more sense would be to have a family-based quota. Tracking the nuclear family should not be an issue, with everything under the sun including my pet dog being registered in Singapore.

 

2. Better Separation of Category A and B

 

Golfing cart in car park
Honestly, I don’t see why this COE thing is such a big deal.

 

Category A is for vehicles 1600 cc and below, while category B is for vehicles above 1600cc. The assumption is that category B cars will be bigger, and thus their COE should be higher.

On the other hand, Category A is “mass market”. It’s for those of who need a car, but can barely afford one.

Proposal:

Redefine the parameters of Category A and B. Rather than just measure engine capacity, the categories should take into consideration engine power as well. It’s possible, for example, for a fast two-seater coupe to be in category A. And that’s definitely not a family man’s car.

How it Would Work:

There’s more fairness in COE pricing. Someone buying a rocket-on-wheels shouldn’t take a COE away from, say, a working man trying to buy a family car. This proposal doesn’t do much to lower the number of cars on the road. What it does do is make cars affordable, for the “average” Singaporean.

Our Assessment

This is a good idea, but doesn’t go as far as it should. Engine power and engine capacity partly determine if a car’s a luxury. But car models should be assessed individually, based on other parameters like open market value, cubic capacity, and branding.

In the same way the MDA (Media Development Authority) can rate movies individually, the LTA (Land Transport Authority) needs a committee to rate car models individually.

Also, charging more for bigger cars doesn’t really free up more road space. Even if a Category A car is, say, 12 inches longer than Category B car, those 12 inches don’t make much practical difference. If the main emphasis is road space, the focus should be on taking cars off the road altogether, not on encouraging slightly smaller cars. Of course in this case, there is the issue of accessibility and affordability of cars in categories that are supposed to cater to the “mass market”.

 

So What Should We Do?

 

F1 renault team speaking
“And I just imagine having to pay COE on the car if I lose, which is pretty much how I take pole position.”

 

We’ve discussed this in another article. But our overriding belief is this:

Vary the COE based on the buyer’s circumstances. We need to focus more on that, and less on the car model. Now, we’re not saying someone needy should be allowed to buy a BMW at a lower COE (as if they could afford it anyway). But we do think issues like medical necessity, children, and career matter more than the make of a car.

If the government’s serious about pushing a family-friendly agenda, they should probably start working on this around, oh… yesterday.

In the meantime, if you need a car urgently, shop around for the lowest interest loan (there may be a bank with a better deal). If you need an additional personal loan, get the cheapest one from sites like SmartLoans.sg using the new Personal Loans Wizard.

 

Image Credits:
linademartinez, blue_quartz, Jack at Wikipedia, blueskyman123

How do you propose we lower the COE? Or is it cheap enough as is? Comment and let us know!

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.

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