Will COE drop in 2023? When is the best time to buy a car?

 Planning to buy a car in 2023?

COE has skyrocketed for cars, with all 3 categories ( Cat A, B and E) at an all-time high for the 1st bid of April. The bad news is that if you want a new car for 2023, COE will most likely remain at these elevated levels.

COE Quota calculation 

From Feb 1, there is a new way to calculate COE.

LTA used the following formula to determine the number of COE in each category

• Provision for annual vehicle growth rate
• With effect from 1 February 2023, the number of COE available for bidding in each quarter will be based on a rolling average of deregistrations over the last 4 quarters.
• There will be adjustments for changes in the taxi populations, replacement of commercial vehicles under eh Early Turnover Scheme and expired COE.

What does it mean to COE in the short run?

Based on how the COE quota is calculated, the bulk of COE supply is from the deregistration of vehicles and the rolling average of deregistrations over the last 4 quarters.

Source: Coe.sgcharts.com

Source: Coe.sgcharts.com

Source: Coe.sgcharts.com

From the past records, COE quota was low from 2011 to 2014.

2013 has the lowest quota average for Cat A and Cat B at around mid-350 each per bidding cycle. COE for Cat E was at 250. While cars will be deregistered earlier, the low supply during this period will indicate the supply. 

Comparatively, COE quota for 2016 averaged 2000 for Cat A, high 1400 for Cat B and mid 400 for Cat E. Regarding absolute numbers, the average quota for 2013 was 900 vs 3800 in Cat E. Unsurprisingly, COE was almost half when you compared 2013 to 2016.

If you are banking on increasing COE quota in the near term, it may not be possible. Given that it is on a 4-quarter moving average, 

What does it mean to COE in the longer run?

Looking at the numbers, COE tends to trend lower from 2014 onwards. With the potential quadrupling of COE deregistering, COE would most likely be much lower from today's level in two to three years time. Unless there is a change in COE policies this would be the trend. 

Is it time to buy a car now?

If you need one, you would have no choice. Judging by past numbers, 2024 to 2026 might be a better time to buy if you can afford to wait. Another interesting to note was that COE was lowest in the past five years during the election year (2020). With the next election expected before Nov 2025, there is a good chance it be lower before that.

Good luck car-huntng!