Money Talks: With COE prices at record levels, does buying a car make sense anymore?

SINGAPORE: The Certificate of Entitlement (COE) premiums broke records for a third consecutive tender on Wednesday (Apr 19), with prices for cars in Category A (meant for smaller cars) hitting S$103,721 (US$77,693), up from S$96,501 in the last tender.  

Premiums for larger cars in Category B rose from S$118,501 to S$120,889. 

According to car dealers CNA spoke to, the recent surge in COE premiums is caused by a 10-year low in the supply of COEs, with a further decline in the quota of new cars expected in the next quarter.

Julian Kho, general manager of online car marketplace Sgcarmart, thinks it will probably take dire economic conditions before prices start dropping.

“During the COVID-19 pandemic, COE prices dipped a fair bit because of the lack of demand,” Kho added.   

Rising COE prices are driving some prospective buyers and owners to reconsider having a car, including Kho.

However, Kho admitted that he is currently unable to give up his ride – a Toyota Crown – because he uses it to send his children to school. Although, it is not from a lack of trying.

“During (the COVID-19 pandemic), I would actually take the train instead of driving (the kids) to school … because (I) was working from home. And it felt good,” said Kho to host Andrea Heng, on a recent podcast episode called This or That: Own or lease a car in Singapore.

But when pandemic restrictions were lifted and he had to return to the office, the car became indispensable. “It’s home to school, school to office … It’s a bit tiring,” said Kho.

Aside from convenience and comfort, Kho believes that demand comes from car ownership being viewed as a “status symbol”.

“People buy cars because it’s a desirable thing. If I drive a Mercedes E Class, people will think that I’ve made it in life”, laughed Kho.

WEIGHING THE COSTS

Before buying a car, Kho cautioned that prospective buyers should carefully consider all the costs. 

“You have your depreciation, road tax, insurance, petrol, electronic road pricing (ERP), it’s constant payments. If you put all of that together, we’re talking about a good S$1,000 to S$1,500 every month just to own a car.”

“If you take Grab every day, are you really going to hit S$1,000 to S$1,500 (a month)?”, asked Kho.

But car leasing may be the first step on the ladder towards car ownership. 

“Maybe you want to try car ownership for a while, six months minimum, up to a year. The advantages of going for car leasing is that you don’t have to fork out that one lump sum of down payment. Everything’s covered – road tax, insurance”, said Kho.

However, Kho noted that “you don’t own the car, which means to say you can’t modify the car”.

Nevertheless, given the current inflated prices, Kho said that leasing is a serious option for those who need a set of wheels. 

“Car leasing is a much better option than buying … not because it saves you more in the long run, but it saves you a lot of trouble.”

For more on this conversation, listen to the full episode. New episodes of the Money Talks podcast drops every Tuesday. You can listen on the CNA website or app, MeListen, Google, Spotify or Apple Podcasts.