Should you buy a new Car with COE at $25,000?
Category A COE for vehicle below 1,600cc and 130 horsepower closed at $25,000 in the 1st bidding of July 2018, that is $67,100 lesser to pay for Category A COE when you compare to Category A COE prices in the 1st bidding in Jan 2013 quota premium at $92,100. That is just less than 6 years ago!
What my Family and Friends has been asking
For the past two weeks or so, friends and family members has been asking me if this is the correct time to buy a car, a quick answer to their question would be: Yes! Because at least present buyers did not have to pay $92,100 for a 10 years COE.
Let’s compare a Mazda 3 brought in Jan 2013 and a Mazda 3 brought in July 2018
Let’s take a closer look at the below example, comparing a Mazda 3 purchased in Jan 2013 with a COE of $91,000 and a Mazda 3 in purchased in July 2018.
Price List from Mazda Singapore Valid from 10 Jan 2013 to 23 Jan 2013
Model: Mazda 3 – 1.6L Sedan 4AT Price $150,988
PARF rebate amount at end of 10 years $7,935
Depreciation or minimum cost of ownership per year $14,305
Price List from Mazda Singapore Valid from 16 July 2018 to 18 July 2018
Model: Mazda 3 – 1.5L Sedan 6AT Standard $87,300
Less PARF rebate amount at end of 10 years $7,149
Depreciation or minimum cost of ownership per year $8,015
How much extra are you paying
You will be paying an additional depreciation of $62,900 if you brought a Mazda 3 in Jan 2013 as compared to buying a Mazda 3 in July 2018 with COE of $25,000 (Deprecation difference $14,305 – $8,015= $6,290 per year X 10 years ownership = $62,900)
$62,900 works out close to the COE difference of $67,100 between Jan 2013 and July 2018
How much is $62,900?
In my daily work, I deploy capital for returns greater the weight average cost of capital. So I cannot help but ask myself how much will $62,900 with a return of 5% per year compounded over 10 years become. The future value is a staggering $102,470! That could very much pay for an Insead MBA or around the world trip!
You are lucky if you are buying your First car
So, if you are buying your first car or adding a second car to your family needs, the present COE prices is definitely at your advantage, with a much lower capital layout.
Well, there will be a group of buyers looking to upgrade, trade in, or sell their car which was brought between 2012, 2013, 2014, 2015 where the COE is at the $90,000 to the $70,000 price range, they might face some challenges in getting a decent price for the sale of their car, naturally because the demand for used car has shifted to new car purchase as most buyer would also want to buy a new car with lower COE premium.
It might be a better option for those affected buyers with existing cars to sell or secure a buyer for their used car first, before shopping for a new car.
Yes, with the COE supply increasing from 8,202 a month currently to 9,225 a month for the August to October 2018 period, COE price might go down further from $25,000. However, if you are not speculating COE for a living, we think it is a good time to buy a car!
Mazda 3, prices source:
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