COE Renewal Price | PQP Prediction for April 2021
Is it time to cheer? The COE has finally turned a corner, and we see three out of the four categories we look at go green.
Prices are down for Cat B, C and E (Open Cat). But Cat A is up, though by less than $1k.
Yes, last month all the Categories of COE were down, but that was expected, due to the end of the Chinese New Year new car deliveries. But from this second COE bid after the CNY season, we are taking a read of how the new normal COE situation could be.
Its been a dramatic few months of eventful COE bidding. Nothing is quite normal for the past almost one year.
Covid and the extraordinary 3-month pause in COE bidding it caused, plus the changes in COE quota release from unused quota that followed resumption of bidding. Followed by Phase 3 and a return to slightly better times, and stability returning for many workers, but not being able to travel in the 2020 year end holidays. Which meant some had more disposable income to spend on a car purchase. The past almost 10 months have been quite eventful.
Let’s look at how the latest COE bid closed for early March 2021.
COE Bidding Result 1st Bid March 2021
Cat A $41,996
The COE for Cat A has moved up, a little unexpectedly, by $995 or +2.43%. We had expected a softer Cat A with the end of the CNY, but it has instead firmed up, albeit not in a big way. Why did Cat A price firm up instead of soften?
Cat B $45,001
Cat B is down by $1001 from its previous price or -2.22%. We had expected that Cat B would probably be supported at around the same price level, and this bid is down but not by too much. However, for those who are looking to buy a Cat B this could be good news.
Cat C $37,513
Cat C is where the action has been the last few bids. In this bid, Cat C is significantly down by $3,377, and percent wise (+8.26%). This is the second significant sequential drop in a row. The last COE price of end February, had also dropped $4,111. The sharp rise in Cat C of close to $10k in just two bids, is now followed by two significant reductions in Cat C pricing, though still not back to the $35,900 price of the first bid of January 2021. Was its rise too fast too soon and this fall only to be expected?
COE bidding To Go Back To More Predictable Normal Without Large Price Swings?
Maybe, or maybe not. The recent bidding in Cat C has certainly seen large fluctuations in pricing.
As we have seen from the past almost a year now, many events and situation changing announcements by LTA have resulted in pent up demand, uncertainty and prices rising quickly for Cat A and Cat B.
Cat C action is a result of a sharp COE quota reduction (reported earlier) for the February to April 2021 quarter. But what we failed to mention in earlier reporting was the reduction in prices for the latest two bids. Why did the prices also come down sharply in latest two bids (end February and early March 2021 bids)?
One, is the likelyhood of commercial vehicle (Cat C) buyers being price deterred by the high COE and postponing purchases or choosing to renew COE. (If you followed our earlier report, you would know what we mean by price deterred).
Two, is the possibility for buyers to obtain a new Cat C vehicle via ETS, where the owner of an on the road but usually old commercial vehicle surrenders it and pays only the PQP price or less, instead of COE, for the new one to be registered. Roughly speaking, buyers, or dealers, with suitable old vehicles will choose this when COE bids are costlier than PQP. However, when PQP rises and COE falls, then ETS looks less attractive.
When buyers choose ETS, they will not bid for COE and COE bid price will then have less support. This below shows some info on eligibility for vehicles that can get ETS:
However, registering a large bunch of Cat C using ETS has the same effect as a lot of COE renewals – this results in less available COE for the next quota quarter as the quota that might have been made available by old vehicles being scrapped are partially used up by ETS registrations.
This may be the reason for the fluctuations in the recent two months or four bids. The sharp increase in the first two bids resulted in many ETS in the subsequent two bids (ETS became cheaper than COE bidding), causing less participation in bidding for COE and subsequent COE price reduction.
Cat A sees a slight rise in first bid of March 2021 was also a little unexpected, with post Chinese New Year usually being a soft period.
The order books for Cat A cars have more buyers’ names than Cat B, and the latest bid there are 288 unsuccessful bidders compared to 195 over in Cat B.
Cat A is also seeing more buying as there is a steady demand from the “discard old Grab car to move to new” rule. This is a requirement from Grab placed on drivers who wish to continue making a living from private hire vehicle (PHV) driving.
Many of these car orders are the budget cars up to $110k price range in Cat A, and the momentum in this is supported by car sale companies willing to offer leasing schemes for those PHV drivers that cannot afford a large cash down payment upfront for a purchase in their own name.
These companies also offer attractive schemes, sometimes with up to 10 year repayment, in order to make the monthly lower than what a 7 year loan can provide. This 7 year loan tenure limit is the current maximum allowed by MAS for a hire purchase car loan.
However, such schemes, while lower, usually means a person who signs on for it is not the owner of the vehicle (rental scheme) and stuck in a situation of holding a negative asset – should he wish to give up the vehicle, he can only exit by paying additional money.
Cat B is the one category reacting as most people expected. It has taken a dip immediately after the New Year season to $46,790 and has settled to a more steady price nearby.
COE Renewal Prices – What Does This Mean For Those With Renewals Coming?
As you have seen above in the Cat C current situation, PQP does not follow COE bidding results immediately, causing the swing towards using ETS.
It takes some time for COE renewal prices to adjust when the COE bid makes sudden moves. So while Cat C may have gone down twice in pricing, the next months COE renewal price for Cat C looks to still be increasing.
This below is our prediction for COE renewal prices for the month of April 2021
April 2021 COE Renewal Prices | Cat A to Cat C
Cat A $41,835
The COE renewal price for Cat A looks set to continue its upward rise, predicted to be going up by $438 this coming month of April 2021. The consolation is that this rise should be smaller than last month’s increase of $1,554.
Cat B $46,866
Finally, as Cat B is predicted to reduce by $835 from its previous price, maybe the Cat B car owners can heave a sigh of relief?
Those with cars in the category coming up for renewal in April may have been wiser to renew much earlier, sometime in August last year would have been good. But if there is still more time to go, you might have a chance that overall you did the right thing not renewing too early if you take into account the additional time you got on your current COE.
Cat C $39,884
Up by a whopping $4009, and percent wise (+3.65%). This, after last months increase of $1,672. At this price, we would recommend those considering renewal to go for a 5 year renewal, as commercial vehicles can be renewed again after a 5 year renewal
So as PQP / COE renewal price for Cat C increases, the benefit from ETS will reduce and possibly moving ahead, less vehicles will be registered on ETS and buyers go back to COE bidding.
COE Renewal With A Difference
If you are looking at COE renewal coming up, you will be glad to know we have helped hundreds and we will also help you also to secure an advantageous loan with the best terms and conditions avoiding the common pitfalls, and also to know when to renew if you register early with us for PQP monitoring as our customer.
That’s not all we help with – you also get to choose from all available banks and finance houses for your COE renewal loan, and we explain the benefits of each one to you if you’d like to know, before you pick the one that is most helpful in your situation.
Did you know? Sometimes a lower interest rate loan can cost more than a loan with slightly higher interest! But we will be here to assist, so don’t worry!
We sincerely hope that you pay a lower COE renewal price and get a loan with good terms and conditions, and to that, all our past customers can attest!
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