COE prices skyrocket

COE prices skyrocket

Last week, I posted a short article Time to Buy a Car? on COE prices increasing because of the government's move to restrict the supply of COE.

On 24th Mar 2010, the news reported that COE prices have skyrocketed to $28,389 for cars of up to 1,600cc and $36,089 for cars above 1,600cc.

It will definitely not be surprising if the prices continue to climb higher as that is what the authorities hope to achieve. With a limited supply of COE and a high demand for cars, bidders will have no choice but to push the prices higher.

I remember the days when COE prices were going for less than $1,000. The COE for my car was around $14K which is pretty cheap compared to today's prices.

How the ordinary Singaporean is going to afford a car is now a big question mark. With prices so high, I think most people are better off taking public transport. Couple it with the ever increasing HDB prices, the cost of living in Singapore is definitely going up.

Why People Buy Cars

I guess the better way to deal with the problem is to look at the reasons why people drive:

1. Convenience (Public transport is inconvenient)

2. Comfort (Public transport is not comfortable)

3. Status (Singaporeans value status and one is deemed to have made it if they drive a car)

Let me expound on the points further...

For convenience- Family with kids, pregnant women, old folks, rushing for time. All these play a part in people's decision to buy a car. If public transportation is not convenient enough for me, I will opt for the car.

For comfort - Buses can be old, dirty and smelly. Good thing they have removed the noisy TVMobile. During peak hours, when one is weary from work, "fighting" with the crowds just to get on and off the bus or train is a headache. The Singapore weather is also a killer. Hot and humid weather means you get sweaty just by waiting at the bus stop. When it is cool, it usually means that it is raining and one can prepare to get their feet soaked wet.

For status - In Singapore, the car is associated with STATUS. Isn't that what all the Channel 5 and Channel 8 shows have inculcated in us since we were young. The TV ads for cars are also too alluring and thus people are wired from young to desire for the biggest and nicest car.

A Better Way to Deal With Traffic Jams?

But is there a better way to deal with traffic jams and the clogging up of roads? So far, the government has implemented a slew of measures to prevent the overcrowding that is taking place on roads.

We have the COE and ERP that have been put in place to curb the amount of congestion of roads. But have these policies worked?

This is clearly a case where the government has decided that the only way to control the problem is to let the highest bidder pay for the right to use a car. After all, the reasons why people chose to drive a car cannot be easily answered even with the best public transportation system in place.

How High COE Prices Will Affect One's Personal Finance

For many potential first time car owners, they will probably have to put off the decision of buying a car. With COE prices at nearly half a year's wages for the average Singaporean, is it worthwhile to use up 0.5 years of wages to obtain the COE for a car that you can only drive for 10 years? That is a question lots of young adults will have to answer for themselves. Or perhaps they should put off the decision of buying a car only when they have started a family.

For those who cannot live without a car, be prepared to pay higher prices for the years to come. You might want to cut down on other expenses (e.g. holidays, luxury goods) and start saving up the money for the next car that you want to purchase.