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THE new Certificate of Entitlement (COE) quota from May to July 2014 will be about a third larger than the current one, with a 41 per cent increase in COEs for small cars and a 38 per cent hike in big car COEs.
But most dealers don't expect COE premiums to fall significantly just yet.
Thanks to higher vehicle deregistrations in the first three months of this year, the upcoming quota will have 12,060 COEs, or 32.1 per cent more than the February to April 2014 quota.
In particular, Category A - for cars under 1,600 cc or 130 hp - will see a 41 per cent jump in COE numbers to 1,011 each month. Cat B - for cars above 1,600 cc and 130 hp - will rise 37.8 per cent to 966 monthly.
Cat E - the open category whose premium tracks that of Cat B - gets a 53.4 per cent boost to 586 COEs monthly.
Meanwhile, the number of Cat C COEs - for commercial vehicles - will climb 46.9 per cent to 770 monthly. Only Cat D - for motorcycles - will see a 4.6 per cent reduction to 686 COEs monthly.
The next quota is the second three-monthly quota after the Land Transport Authority (LTA) shortened the cycle from half-yearly to quarterly from February 2014.
The LTA said that a shorter recycling period makes the COE system more responsive to deregistrations.
Other than the replacement of deregistered vehicles, the COE quota is also determined by the provision for a 0.5 per cent per annum vehicle growth based on the vehicle population as at Dec 31, 2013; and adjustments for changes in the taxi population, expired COEs and over-projection of vehicle deregistrations in 2008/2009.
Even with the increase in passenger car COEs, most distributors do not expect premiums to fall much because of pent-up demand.
"Prospective buyers who have been holding off their purchases will now rush in," said the sales manager of a mass market dealership. He said that for premiums to soften, the market needs to first stabilise, which may take "at least two to three more quotas".
For now, the announcement will lead to more people entering the market and propping up the existing premiums.
"I expect prices to stay around this level, plus or minus a few thousand dollars," the sales manager added.
Currently, the Cat A COE premium is $77,400, while Cat B is $84,504 and Cat E, $84,100.
"Also, don't forget that even though the number of COEs has gone up, essentially, the overall quota is still pretty small," he said.