PQP Direction for February 2018

How’s the start to your new year in 2018? Hope all is well with you!

We previously predicted a rise in the PQP for the month of January 2018 compared with December of 2017. Well, sometimes it is unexpected, even by us who look at these numbers on a regular basis. Did we get it wrong? No, we were right, both Cat A and Cat B rose, but the magnitude of the rise was unexpectedly small. Cat C did fall by an amount of $464 while our eyes were on the car category.

For several reasons, we had expected the bidding in Cat A & B to heat up in December as the year of 2017 ended.

Primarily, the introduction of VES or the new emissions standard which would mean many of the models on sale would have to pay extra for exceeding the gas emissions standards set by LTA. This new regulation would be in effect from the 1st of January and so we expected many dealers to be in a hurry to register their available cars before the additional payment for these VES taxes (or surcharge). Some models will see an increase by as much as $20,000 extra.

This coupled with the LTA’s announcement and press release about the impending shrinkage of COE quota for Cats A, B and Open (see note 6 in the announcement) to neutral compared to the policy of slow growth before. This was also widely and enthusiastically reported in the news, both on mainstream media and online portals.

Another expected factor was the usual Chinese New Year buzz, where many Chinese families choose to pick a new car and have it in time for the Lunar New Year. Their orders would be with dealers by the end of the year as most dealers offered 6 bids before delivery and with the impeding VES, they may have chosen to bid higher and secure the COE in December for earlier delivery rather than risk paying VES surcharges.

And so with the confluence of above factors, we had expected the COE bidding to face more upward pressure than usual.

Despite all these factors, the rise was muted, and unexpectedly small, thanks to a weak final COE bidding for the last bid of December 2017 where both Cat A and B dropped by significantly by more than $4000 and $6000 respectively. But in spite of this weakness, the PQP went upwards as the bids in September (that are eliminated from the calculation for January 2018 PQP) were even lower than the bids in December.

So if you have a car due for renewal in the following three months February to April of 2018, what should you expect to see? The below are our projections, with one caveat – The Singapore Motor Show 2018 has just ended and if they were successful in securing orders, the coming bids could show more upward movement. This may be accentuated by the coming Lunar New Year and how many guaranteed 1-2 bid car COE orders they received.

For the month of February 2018 PQP –

February Cat A PQP should remain more or less steady and similar level to January, if the second bid of January remains at its current level of around $41k.

February Cat B PQP would likely be lower in compared to January 2018, if the second COE bid of January remains at current levels of around $45k. Even if the Cat B COE bid goes to $49k in the second bid of January, the February Cat B PQP should still be slightly lower.

Based on the above assumptions, our advice for both Cat A and B owners looking to renew, wait for February to come around, do not renew early. For Cat A owners, that means extending the use of your old COE by one more month, because early renewal means the old COE ends and the new one starts from the first of the month following renewal payment.

However, this does not mean that you should not apply for your loan in advance if your COE ends in February – it is always better to be ahead of the queue if your car expires in February, especially if it is early February as there is often a longer queue for approvals at the end of the month should the following month’s PQP be higher.

For the month of March 2018 PQP –

March Cat A PQP should be lower compared to February, if the bidding in February remains at the level of January 2018’s first bid of about $41k

March Cat B PQP should be lower compared to February 2018, if the bidding in February remains at the level of January 2018’s first bid of about $45k.

Note that the further away the bids are from the current month the less we are less able to foresee the bidding levels will be at. So we are able to see the February PQP levels better than March PQP levels at this point in time in mid January.

However, based on what we do know now, for both Cat A and B owners looking to renew and who have their COEs expiring in March 2018, there is more than a fair chance that it would be wiser to wait for February bids to complete (so that March PQP can be accurately known) before making a decision.

I hope the above information is helpful for those who are have COE that are expiring in these time period and are considering when to do so.

Have a good time thinking about this puzzle and hope you figure out when it is best to renew!

For further help and discussion on COE PQP or car financing, do feel free to call us at 92782880.