Certificate of Entitlement (COE) has more or less doubled since the start of 2021 in January. The new release of COE biddings on 20 July 2022 has showed an all-time high for the open category COE premium at S$114,001, a 3.1% rise from S$110,524 at the previous tender. This new high overtook the previous record set back in December 1994, at S$110,500 which stood for almost 30 years. Despite the record breaking high, COE premiums are still expecting to rise amid projected decrease in supply.
Lesser Deregistered Rars – Lesser COE Released
According to Land Transport Authority (LTA) latest data, 4,131 and 3,501 vehicles were deregistered in April and May respectively, setting the lowest recorded in 2022 so far. As a result, experts from the automobile industry predicted a 15%-20% drop in the COE quota set for August to October 2022 and COE prices to continue rising naturally due to lack of supply.
Increase in Ultra High Net Worth Foreign Talent
You may be wondering why there is a demand for COE, keeping the COE on short supply even after the ridiculous surge in COE premiums. This comes from Singapore’s influx of affluent foreign talent moving to Singapore to escape their country’s Covid-19 lockdowns, looking for houses and a car without batting an eye on COE prices. The Monetary Authority of Singapore had approved 100 applications to set up family offices within the first 4 months of 2022. These family offices are private wealth management advisory firms for ultra-high-net-worth millionaires, which could continue to contribute to the high demand for cars despite its ultra-high prices.
Shift in COE Category for Electric Vehicles
Previously catergorised under Category B, Electric Vehicles (EVs) with power up to 110kW, were eligible for the Catergoy A COE since May 2022. EVs, which were previously considered luxury vehicles, have been shifted to a lower COE category to make EVs more affordable to the general public. Through a broadened user base, Land Transport Authority’s (LTA) aim was to reduce Singapore’s transport emission by extending EVs’ customer base. However, this movement would disrupt the demand supply balance over in the Category A. Environmental-saving enthusiasts would rush in to purchase an EV now that it is significantly cheaper compared to when it was in Category B. With limited supply and overgrowing demand surplus, Category A COE premium would be pushed to further heights. Competition between conventional cars and EV dealerships would spike up the COE premium to secure COEs for their buyers through aggressive bidding.
Market analysts in the automobile field do not see this trend changing until the influx of these individuals settles down. COE premiums are also expected to continue rising with the decreasing supply of COEs, with Open Category predicted to breach the S$120,000 mark.
Will COE premium ever go down?
Experts forecasted premiums to go down to create a new market equilibrium after COE supply has been restored to their optimum quota in coming years. Based on the COE 10-year cycle derived from the COE 10-year lifespan, the COE supply is likely to be restored in 2024 or 2025 when more vehicles deregister as COEs from the 2015 surge expire.
Furthermore, the zero growth rate for car population introduced by LTA back in 2017, which was initially intended to last till 2020, has been extended to 2022 and then further extended till 2025. This prevents the COE quota from satisfying the insatiable demand of Singaporean citizens, corporates, as well as foreign investors/residents.
IMPACT ON CAR RENTALS IN SINGAPORE
In-Flush of Rental Customers
In view of this economic phenomenon, a large percentage of middle class car buyers with the desire to purchase new cars have been sitting on the sidelines waiting for COE premiums to dip down to their acceptable level. Just within the first 3 months of 2022, more than every 5 cars – or 20.9% – registered were for private hire cars, up from 12% during the same period in 2021. This excludes the registered numbers by car rental companies in Singapore. At the same time, those with expired or expiring COE are diving into renting cars to avoid high-rising COE premiums to bide their time while waiting for those insane premiums to dip.
Supply Shortage of Cars Islandwide
With the unprecedented inflow of car rental customers, along with the supply shortage of cars in manufacturing factories, car rental companies in Singapore are facing a massive shortage of cars. Unable to satisfy overwhelming customer enquiries, car rental companies are reluctantly forced to turn down rental requests.
Better to go Long Term
Given the continuous rise of COE premiums, rising inflow of rental customer enquiries, limited supply of cars for rental and market uncertainty, there has been a rising trend of customers seeking long-term car rental lasting 1-2 years. Here at BizLink Rent-a-Car, we too advise our customers to lean towards long-term car rental to secure possession of chosen rental vehicle, as opposed to unpredictable availability status of your rental vehicle. This may hinder customers’ intentions to extend their short-term rental contract due to reservations made by following customers.
Here’s Some Reasons You Should Rent a Car Long Term Amidst Inflated COE Premiums
*the below are based on Bizlink Rent-a-car rates*
Avoid Road tax/Insurance
- Save up to $1,500 – $2,500/year on insurance
- Save $600 – $1,500/year on road tax which varies with the engine capacity and make of your purchased vehicle
Low Upfront Costs
- $300 – $1,500 deposit vs 30% – 40% downpayment depending on the Open Market Value (OMV) if you are purchasing a car
- Assuming you are purchasing a Toyota Corolla Altis with the current market rate of $140,000. A 30% downpayment would require you to pay $42,000 upfront cost
Free Vehicle Servicing and Maintenance by Trusted Workshop
- Save up to $300/year for servicing
- According to standard guidelines, drivers should be sending their vehicle for basic servicing for every 10,000km mileage clocked or every 6 months
- Each servicing session may cost from $80 – $150
- Loyalty perks and additional services
- 24hr towing services
- Guaranteed car replacement in events of breakdowns/accidents
- Convenient delivery/collection to and from your doorstep or place of choice
Be it a long-term car rental or short-term car rental, Bizlink Rent-A-Car is pleased to provide our assistance in helping you find your most suitable rental packages. Please reach out to our friendly sales associates at 6285 6616 to find out more about our exclusive services or to enquire today.