Category A COE at $2 (All time low) - To Buy Or Not To Buy

The 2nd Certification of Entitlement (COE) bidding for November 2008 had fallen to historic low of S$2 per cert.

With the current financial crisis, banks have tighten lending rate thus many potential car buyers were denied loans. The sudden shortfall of loan approval means these potential buyers are unable to buy their choice car, leading to the massive drop of COE price.

With COE at S$2, it lead to a 10 fold increase in potential car buyers flooding the car showroom, with the intention to change their older car to new car, or to buy a new car. As per last COE bidding, some of these potential buyers will not qualify for loans, thus even if they make attempt to purchase a car, they are unable to do so due to loan rejection.

Car is a liability and a good handful of people doesn't understand the true cost of car ownership. Those who has never own a car before perceive that a car is affordable to them, just by taking loan and a little other ownership cost into mind.

Car loan defaulters have increased tremendiously in recent months. These defaulters are usually those who can barely afford a car many years ago. The plunging COE from an average of $30,000 years ago, to about $10,000-$15,000 in recent years helped these car owners afford a car. They may be earning no more than $2,500 a month, which means their take home pay is no more than $2,000. True car ownership cost is anything ranging from $800-$1,400 a month.

Those on 100% loan over a 10 years loan tenure are most likely the ones who will fall victim to the current recession. Watch out, a lot more loan defaults will surface in the coming months.

Conclusion, it is unwise to buy a liability unless one could truly afford it.