Big car COE premiums hurtle towards S$100,000 in wake of higher luxury car tax

CERTIFICATE of entitlement (COE) premiums rose across the board in the latest bidding exercise on Wednesday (Feb 23), the first after higher new taxes for luxury cars kicked in.

The Category B COE, for cars with more than 1,600 cc or 130 horsepower under the bonnet and the one most relevant to luxury cars, soared to S$93,590 at the close of bidding, an increase of 8.69 per cent from the S$86,102 seen after the last auction two weeks ago.

The price of the Open Category COE, which can be used for all vehicle types except motorcycles but is almost certainly deployed only in the Category B market, jumped in tandem to S$93,102. That 7 per cent leap follows a closing price of S$87,000 a fortnight ago, already the highest seen since early 2013.

The sharp rise in prices run counter to any expectations that last week's Budget 2022 measures to tax wealth by raising the Additional Registration Fees on high end cars would dent demand for Category B certificates.

The ARF is currently tiered at 100 per cent of the OMV for the first S$20,000; 140 per cent of the OMV for the next S$30,000; and 180 per cent of the OMV in excess of S$50,000. Under the new tax rate, the ARF is tiered at 100 per cent of the OMV for the first S$20,000; 140 per cent for the next S$30,000; 180 per cent for the subsequent S$30,000 and 220 per cent for the amount in excess of S$80,000.

The additional ARF is expected to generate an additional S$50 million in revenue annually.

One director for a multi-brand car dealership told The Business Times that because the luxury car tax hike impacts models that retail for S$400,000 with COE and more, the effect on the overall car market would be limited.

He said mainstream premium cars continue to sell well enough to account for this week's higher prices.

Other market watchers singled out "event" cars as a reason for the Category B hike. BMW dealer Performance Motors supplied 160 cars to the Singapore Airshow 2022 last week, for example, and sold them with aggressive discounts. The sale of those cars will have padded BMW's sales this month and added to demand for COEs.

Lexus distributor Borneo Motors is also believed to have been stockpiling Open Category COEs to register an undisclosed number of VIP cars for the upcoming HSBC Women's World Championship 2022, a golf event.

Category A COEs, for cars with less than 1,600cc or 130 horsepower under the bonnet, also rose in price but did so less sharply. The certificate associated with mass-market cars ended the auction at S$63,000, or 3.68 per cent higher than the S$60,761 recorded early this month. The result is a 7-year high.

One senior manager for an authorised distributor that handles only Japanese brands told BT that the car trade suspects the new Honda HR-V of selling well enough to cause the bump in the Category A COE premium. Market rumours say the HR-V (together with the Honda Vezel, the parallel-imported version) accounted for some 180 bids, roughly a third of the 536 certificates available for auction.

The premium for Commercial vehicle COEs also traded sharply upwards, climbing from S$44,001 to $46,501, a 5.68 per cent rise. The price represents a five-year high, but also suggests that demand for goods vehicles and buses has not run rampant. Buyers fought over just 76 Category C COEs this week while in January 2017, the price reached S$47,001 even though 186 certificates were available.

Would-be motorcycle buyers saw no relief from the persistently salty prices that have dogged the Category D certificate. Its premium rose sharply to end at S$10,589 from S$10,010, a 5.78 per cent jump to an all-time high.

One motorcycle importer that BT spoke to said the gradual reduction in the number of bike COEs available for grabs has led to chronically high prices, although this week's jump took him by surprise. "I didn't expect it to go down, but I definitely didn't expect it to shoot up so much," he told BT.

While the COE market will have disappointed buyers who expected prices to fall this week, the higher prices have also defied some expectations by surpassing them.

Read more:

• Budget 2022: Higher ARF may not put the brakes on luxury car sales
• Budget 2022: Luxury cars subject to heavier tax
• Analyse historical COE data with the Business Times interactive tool