Latest luxury car tax could spur rush to dealers with transferable COEs
Speculators with the right COE could profit big by selling to luxury buyers, but the window of opportunity is closing fast
THE race is on to get ahead of the new luxury car taxes that Finance Minister Lawrence Wong announced in his Budget speech on Tuesday (Feb 14). All buyers have to do is get their hands on a suitable Certificate Of Entitlement (COE) – or find a car dealer with one.
Doing so could save hundreds of thousands. For example, buyers can still reap as much as S$300,000 of tax savings on a new Aston Martin or Bentley, according to authorised dealer Wearnes Automotive.
The new tax schedule raises the Additional Registration Fee (ARF) payable on cars with an Open Market Value (OMV) of more than S$40,000, but the adjustment becomes steeper as prices get higher. For the OMV portion above S$80,000, the ARF tops out at 320 per cent, up from 220 per cent.
The revised taxes came with a new cap of S$60,000 for Preferential Additional Registration Fee (PARF) rebates – the tax refund car owners get from deregistering a car. Previously, taking a car off the road for good before it reaches the 10-year mark entitled its owner to a rebate of anything from 50 to 75 per cent of the ARF.
Combined, both measures raise the cost of owning a Mercedes-Benz S 450L for 10 years by around S$80,000. For a pricier car such as a Rolls-Royce Phantom, the difference is a whopping S$875,000 (from S$420,000 in higher ARF and a S$475,000 cut to the PARF rebate).
But there is hope for buyers who act fast and choose the right car. The new rules only affect cars registered with a certificate from February’s second COE auction on onwards, so with an older COE, the higher ARF does not apply.
Some car dealers are in the happy position of holding Open Category COEs from earlier in the year. Since these are transferable (unlike other COEs for cars), dealerships often stockpile them and use them to register vehicles immediately for customers who don’t want to wait for COE bidding.
“We have some (Open Category COEs),” Victor Kwan, the managing director of Wearnes Automotive’s prestige division, told The Business Times. “Not a lot, but some.”
Kwan said that Wearnes is pooling these COEs among its various brands, and can deploy them for luxury models from the likes of Aston Martin, Bentley and Range Rover.
Kwan spoke to BT on Wednesday (Feb 15) at a showcase for the Aston Martin Valhalla, a petrol-electric hybrid supercar that could be the poster child for how hard the new taxes can bite. Wearnes had to raise the price for the 350 km/h, 1,012-horsepower rocket from S$3.8 million to S$4.8 million overnight.
The Valhalla also exemplifies how there is a firm deadline to beat the new taxes. It only arrives at the end of 2024, far too late to take advantage of existing Open Category COEs, which have a three-month validity. “You must have stock to deliver by May, because the latest expiry for this sort of COE is May,” Kwan noted.
Not every luxury car dealership is in a position to help customers in this way. Ferrari and Maserati importer Komoco Holdings declined to comment, but a source said the group does not have any Open Category COEs in hand.
Charmain Kwee, executive director for Eurokars Group, said that the company would look at the stock of COEs it has among the eight brands that it handles in Singapore, among them luxury nameplates such as McLaren and Rolls-Royce. “That is the benefit of our having many brands,” she told BT. “For those who’ve ordered a car with us, we will do our best to ensure that they do get allocated the COE to register the car.
Yet, the sudden usefulness of Open Category COEs is giving speculators a chance to turn a quick profit on them. One senior manager for a multi-brand franchise told BT that he has seen asking prices for them vary wildly, from S$30,000 above the price of the COE itself, to a juicy S$100,000 premium.
“The offers out there have been crazy. It’s all speculative,” the marketing director for one multi-brand group told BT. She said that the company would not buy from speculators directly, but might refer an interested customer to them so they could deal directly.
Eurokars’ Kwee said that she probably would not obtain COEs from a speculator. “It’s a bit like ticket scalping,” she noted.
“For now things are still a bit messy,” Wearnes’ Kwan added. “Our first step is to use whatever limited number we have internally, and then later yes, if we see the demand really go beyond that, we may go out and buy. Obviously we’re aware you need to pay a significant premium.”
He added that Wearnes expects its stock of tax-busting COEs to last no more than a week.
“In general, it’s first come, first served. The first customers who commit, we will allocate to them,” he said, adding that the dealership’s sales team rang prospective customers on the night of Budget Day to nudge them into action. “You have to move very fast.”
