By Lorna Tan

Drawn by lower car prices and certificate of entitlement (COE) rates at record-low levels, potential buyers have been flooding showrooms to check out their dream set of wheels.
The buying frenzy was ignited on Nov 19, when the COE premium for cars with engine size up to 1,600cc crashed to $2, a level never seen before.

Said Ms Helen Neo, head of consumer banking at Maybank Singapore: 'With the Category A (below 1,600cc) COE at a record low of $2, new cars are currently priced at attractive levels.

'Furthermore, with the sharp plunge in petrol prices to a 20-month low, it is definitively a good time to consider buying a car.'

How does a lower COE contribute to savings for the buyer?

The fall in COE to $2 from $10,455 early this month has led many car dealers to cut car prices by between $3,000 and $6,000 for the smaller-car segment.

For instance, car dealer Borneo Motors has cut prices by up to $6,000, bringing its cheapest model, the Toyota Vios, to below $44,000.

Honda agent Kah Motor has cut the Civic's price by $2,700 to $72,500.

Motor Traders Association (MTA) president Tan Kheng Hwee said that car prices are lower today than at any other time in the last 10 years.

This can translate to lower monthly instalments too.

Ms Neo said that lower car prices mean that any loan taken is likely to be smaller too. Hence, the cost of financing would be correspondingly lower.

She gave this example: Let us say the car price was lowered by $5,000.

Assuming a corresponding reduction in loan amount by $5,000, this would translate into monthly savings of about $70 for a seven-year loan.

Besides the lower cost of financing, Ms Tan said that another reason to own a new car is that today's cars have improved features.

'Dollar for dollar, buyers today are also getting a superior product in terms of features and quality.'

For example, a new Honda Civic offers more space, better performance and higher horsepower, plus improved fuel economy compared to the last-generation Civic model, she added.

'And it costs less to buy today. It's a good deal.'

Still, you cannot ignore how the world is facing a prolonged financial downturn and the looming threat of more job cuts.

To add to the gloomy outlook, anecdotal evidence points to an emerging trend of bankruptcy arising from defaulting on car loans. Recent statistics also suggest a rising trend of cars being repossessed here because of loan defaults.