On Nov 11 last year, I wrote in straitstimes.com that it was a good time to go shopping for a car.
Evidently, not many people paid heed to the recommendation, because a week later, certificates of entitlement (COE) for cars tanked.
The premium for models with engines up to 1,600cc crashed to an unprecedented $2.
Today, I would like to repeat the suggestion. But first, allow me to ease into the topic with this preamble.
Despite car sales sinking to a four-year low last year, the year's vehicle population is expected to show one of the strongest rates of growth in recent years. Full-year figures from the Land Transport Authority will be out only in the middle of this month.
The car population is expected to chalk a 7 per cent growth to over 550,000, while the total count of all vehicles is expected to be just under 900,000, or 5 per cent more than 2007's.
The expansion is appreciably more than the 3 per cent cap stipulated in the COE system. The cap was also busted in 2007, 2006 and 2005.
Hence, folks who are expecting this year's COE supply to be crimped won't be wrong. The question is: How big will the cut be?
All signs point to a slash rather than a trim. First of all, a new growth cap - 1.5 per cent - becomes effective this year.
If the final vehicle population tally is 900,000, COEs for allowable growth should work out to be 13,500, compared with last year's 24,887.
Next, the number of vehicles to be scrapped - the biggest determinant of COE supply - is expected to dip this year.
About 85 per cent of Singapore's cars are younger than four years, more car owners are saddled with huge car loans that make it harder for them to switch to a new car without a hefty penalty, and more people are expected to hang on to their current cars in these uncertain times.
Last year, more than 75,000 vehicles were taken off the road. Considering all the factors mentioned, a conservative estimate of this year's figure should be in the region of 55,000.
Finally, an adjustment to last year's oversupply would have to be made. This is expected to be close to the 5,600 cut effected in last year's mid-year adjustment.
Thus, this year's COE supply will probably be 63,000 or so - 40 per cent smaller than last year's quota.
The reduction is likely to be made in two stages: when the new COE quota year starts in April, and when the six-monthly adjustment kicks in in October.
Details of the new supply could be revealed as early as Budget day, Jan 22.
Ordinarily, a sizeable cut in COE supply will send premiums - and consequently car prices - soaring. But these are not ordinary times.
With bonus cuts, wage freezes and job uncertainties looming, buying a new car is unlikely to be a top priority.
COE rates are thus expected to stay weak for several months to come.
Which brings us to the topic at hand: Is it the ideal time to shop for a car?
While conventional wisdom has it that the early bird gets the worm, the contrarian often gets the fattest, juiciest pick.
In the current context, going car-shopping may not seem like the most prudent thing to do given the economic climate. But if you view cars as an expense - which essentially they are - then the prospect of acquiring one with relatively light depreciation can be realised now.
This is simply because prices are unlikely to be much lower than they are now.
The window of opportunity may not stay open for long. As soon as the economy recovers - that will happen just as surely as day follows night - demand for cars will start to pick up speed.
And with the smaller COE supplies going forward, you don't have to be a rocket scientist to know that prices will take off too.
I'd add that my "buy" recommendation applies to those who are buying their first car, those acquiring an additional car and those with cars that are approaching 10 years old which need replacing.
Those with relatively new rides may find the current weak resale market unpalatable. But if they do not have a huge loan, they will find comfort in the lower interest expenses on a newer, cheaper ride.
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