When COE inflates, your ride deflates?
The rise of prices of the Certificates of Entitlement (COE) defies logic. The results are astonishing, considering that the COE price of a single Category A could have bought you a second car three years ago. But are Singaporeans making blind purchases during these unpredictable times?
I have often encountered people breaking the ice with me with the question: "How's the car market now?" Of course, there are questions to be answered, but the issue is not about when the COE market will dip. It's about what this situation is going to bring us in the next five years.
The manufacturing cost of an average Japanese sedan is an average S$20,000, and the COE that you have just paid for ($72,501 for cars above 1,600cc) is about three bags "fool" of it. It is an enormously inflated figure, which some have justified by saying that hacking away at the Quota allocation tree is fundamental in slowing down the rise in the vehicle population in Singapore. Naturally, not one of us likes this arrangement at all. Or do we?
It seems that, over time, we are getting used to this inflation. We are gradually accepting the practice of paying more for the entitlement to own a car locally, rather than paying for the symbolic value of the car itself. Sales of brand new cars are slackening, while the pre-owned market is booming. Vehicle financing institutions are showing more support than ever in raising their valuation of the market prices of vehicles and granting higher loan facilities to the consumers. How then does this judgment help in administrating a healthy control on the vehicle population in Singapore?
Buy a Japanese hatchback now and finance it on a 10-year loan tenure, and you will possibly find yourself embroiled in a $60,000 debt five years later. The glitch is, would your ride be worth $60,000 on the open market five years down the road?
My answer is likely to be "No", because one of my personal friends bought a five-year-old unit at a reasonable price of $36,000 only recently. So you see, there is little logic to the market right now.
So there it is. This is the kind of price Singaporeans have to pay to buy a car. And no, its not a luxury sedan like BMW, Mercedes, Audi or Jaguar. Its a basic Japanese sedan. Which can cost up to $150,000. Impressive isn't it? Even a shitty Chinese car from the shitty land of China can cost up to $150,000 as well.WTF seriously.
The original article can be found here.
2 comments:
To justify such need to increase the price of COE is that cars are considered demerit goods and the consumption of cars by driving it would impose negative externalities. For example, a congestion would lead to lower productivity in companies like Fedex and construction companies, therefore indirectly and adversely impacting economic growth. Therefore, it is certainly imperative that the Singapore government forces car buyers to take into consideration the above significant negative externalities to maximise total welfare to society. Consumers like you would only consider your net private benefit and cost, and over-consume the car at the private level but not at the socially efficient level. Furthermore, the car market has also have to serve at the allocative efficient output for it to be efficient.
As people's income rises over the years, their demand for cars would eventually increase more than proportionately as income elasticity of demand for cars is relatively high; due to its luxury good status. Hence, there is a continuous need to increase the overall cost of purchasing a car so as to reduce the number of cars on roads and for consumers to internalise the negative externalities of driving a car.
Besides, what's so bad about public transport anyways. haha
Your arguments reek of typical vague statements and assumptions, that are generally erroneous, given in GP essays.
For one, Singaporean's income haven been rising over the years. Our standard of living have, our cost of living have but not our income. A simple search on the internet will reveal evidence detailing that.
Also, I would appreciate more elaboration on your points. For example, what is a socially efficient level? Is it even achievable in the first place? Or is it just a theory that exists only on paper?
All in all, I can safely assumes you are a JC student.
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