2004 another record year for scrapped cars / The Great COE Scam
- Comments: Mellanie Hewlitt
24 Dec 2004
The obsolesces rate of valuable assets in Singapore is extremely high. Whilst
it is conceivable that certain products like computers have short life spans
due to rapid technological progress and changing consumer needs, it is quite
another matter to find this unhealthy trend in "longer term" assets like a
house or cars.
A car that usually would cost only SGD30,000/- with an average life- span of 20-
30 years is only given a shelf life of 10 years on paper (COE). In other
developed countries, it is not unusual to see a 1965 Beetle (or cars older then
15 years of age) rumbling along the roads as these vehicles are still in
perfectly good and road worthy condition and are testimony to the engineering
feats of their makers.
But in Singapore, the COE system effectively encourages owners to discard
perfectly functional cars and replace these with newer models. Of cause the
only beneficiaries are the government (who rake in the proceeds from new COE
bids) and also car dealers.
In reality, one never really owns a car in Singapore. One only acquires the
right to lease the vehicle from the government for 10 years. And the icing on
the cake is that car prices in Singapore are the highest in the world. A
typical 1.6 liter Japanese car can cost SGD85,000/-. No two guesses needed on
where the proceeds go.
The same applies also to 99 year leasehold property and HDB flats. On maturity
of these periods, "owners" have to fork out additional cash upfront to retain
the right to the asset. This inefficient and highly expensive system has
resulted in tremendous wastage and additional costs for the average Singaporean
especially since housing and cars will be the 2 most expensive items for the
High Obsolesces Rates of Valuable Assets Lead To Wastage & High Costs
70 to 80 per cent of the 82,000 care that were deregistered last year are less
than five years old, and more than 90 per cent are less than 10 years old.
A home and a car will top the list of big ticket expenses for most
Singaporeans. And these same items have limited life-spans......
Dec 24, 2004
2004 set to be another record year for scrapped cars
by Christopher Tan
DESPITE measures to discourage the early scrapping of cars, the number of vehicles deregistered will reach a record level again this year.
It is estimated that by year-end, up to 115,000 vehicles will have been taken off the road, up from the 109,710 recorded by the Land Transport Authority last year. The estimate is based on the more than 105,000 vehicles deregistered in the last 11 months, a monthly average of about 9,600.
Cars would make up 74 per cent of them, a tad above last year's 73 per cent.
The sizeable exodus has been a yearly phenomenon since the late 1990s, because of the tax rebates owners get when they send their cars to the scrapyard or for export.
As prices of cars decline with falling taxes and certificate of entitlement (COE) premiums, rebates are often higher than what owners could get on the resale market.
The Government has taken steps to curtail the premature scrapping, as it is a drain on the country's foreign exchange earnings. It changed the rebate formula in early 2002 to make it less generous.
But industry players say the trend will take time to reverse. The president of the Automotive Importers and Exporters Association, Mr Neo Nam Heng, expects the trend to continue for some time, noting that 2002 and 2003 cars are already being scrapped.
'In my yard, there are at least 50 2002 cars, mainly Lexus,' Mr Neo said, adding that the lower COE results released this week will 'accelerate scrapping'.
Four export-processing zones - yards to hold vehicles before they are shipped out - were set up last year. Two more operators were appointed two months ago to handle the growing number of scrapped cars.
But Transport Minister Yeo Cheow Tong expects more people to keep their cars for 10 years, with the new scrap rebate formula. Pegged to the additional registration fee (ARF), the rebate will shrink as the ARF is trimmed.
The Government will be gradually reducing the ARF. Mr Yeo last month said: 'We will continue to review the upfront taxes to make car prices more affordable.'
Date: Tue Jan 13, 2004 12:00 am
Subject: The Great COE Scam
We circulate below letter from Concerned Reader.
From: Concerned Reader
Date: Tue, 13 Jan 2004 12:51:06 +0800
You have the knack for stating the obvious. It is no secret that the official
reason used to impose COEs (i.e. to restrict traffic and control congestion) is
bogus. Any person can come up with 10 different schemes of rationing cars on
roads without imposing sky-high COEs.
Indeed, the entire world is aware that the ONLY reason for existence of the
COEs is to get revenue from car owners.
What is less obvious is the huge amount of money that goes into the government
coffers every year. Taking the below statistics from the Shitty Times as a
rough yardstick, if 82,000 cars per year were prematurely retired, there will
be new replacement COEs of equivalent number.
At an average rate of SGD23,000/- per COE, 82,000 COEs will bring in an
estimated SGD1.886 billion per year. This is in addition to the daily ERP and
road tax rates that the government imposes. Let me put this figure in proper
perspective; SGD1.886 billion is;
1) SGD1,886,000,000; or
2) One Thousand Eight Hundred and Eighty-Six Million Sing Dollars.
And no one has a clue what happens to this humongous sum. Where does it all go?
How is it utilised? Does the LTA spend SGD2 billion a year upgrading roads?
Please do not tell me that the money went into the half-baked half f%$%#@ piece
of contraption that is the NEL. That's another joke of the year.
Its clears as daylight that Singaporeans are taken for a very expensive ride.
And the even more amusing fact is that no one even raises this as an issue to
be addressed. People still flock to buy cars by the hundreds!!! Call it herd
mentality (or monkey see monkey do).
Given that a car tops the list (after a house) as the biggest ticket item on
the average Singaporeans lists of expenses, this also says alot about the
apathy permeating Singapore's less then inquiring populace. But then again,
this is Singapore......
Just my two cents worth.
From a "Concerned Reader"
Below are extracts from "Singapore National Education Part 68" which
illuminates the wonderful Singapore COE system in practise.
"9. That because of a freak $101 COE for the month of July, people are buying
COEs to extend their 7 to 10 year old cars for another 10 years. Based on the
three-month moving average of the COE, a person owning an 10 year old car can
renew his car for about $18,000, instead of the usual $30,000+.
But because of the present low COE prices compared to say, 2 years ago, and
because of the poor market sentiment post-Sept 11, many Mercedes Benzes and
Lexuses (Lexii?) bought with high COEs of the past are now being scrapped. This
is because these big almost-new cars can fetch better values from
deregistration (thus realising the rebates from the unused portions of the
residual taxes) than from a second-hand sale.
From the BT Motoring section:
"According to the Land Transport Authority, 50,392 vehicles were deregistered
in the first eight months of 2001, of which 32,508 were cars. Of these, 11,562
were big cars (above 1,600cc). The figures are already higher than several
previous full-year numbers. And extrapolated over 12 months, scrappage is
likely to hit 75,588 vehicles or 48,762 cars. Of these, 17,343 would be big
So, as a result of our wonderful COE system, ten-years-or-older cars with old
emission engines are being kept on the road, while high-tech two-year-old
luxury cars are being scrapped.
Renew your old car, scrap your new one. Only in Singapore."