COE's Hidden Reset: Why Prices Won't Ever Crash

This influx has supercharged demand, particularly in Category A, which is now crowded with a host of new, affordable EV models. Generous government subsidies, including the EV Early Adoption Incentive and Vehicular Emissions Scheme rebates, can reduce the upfront cost by as much as S$40,000, effectively giving dealers a larger budget to bid for COEs. This creates a feedback loop where the savings on the car itself are channeled directly into more aggressive COE bidding, artificially inflating premiums for everyone in the category.

The result is that even as COE quotas expand, the supply is insufficient to satisfy this new wave of demand. The very incentives designed to encourage green vehicle adoption are, paradoxically, contributing to the record-high cost of the right to own any car, fundamentally altering the cost structure of market entry.

This rising affluence means more households are crossing the threshold where they can consider a major purchase like a car, even at today's elevated prices. The sustained demand suggests a psychological shift among buyers; rather than waiting for an anticipated price drop that may never come, more are accepting the six-figure COE as the new baseline for car ownership. This sustained buying pressure provides a strong floor for COE premiums, preventing the significant dips seen in previous cycles.

This trend is further compounded by a large cohort of owners whose cars, registered during the high-supply years of 2017 and 2018, are now approaching their 10-year mark. This creates a steady stream of replacement demand from owners who are accustomed to car ownership and are more likely to pay the prevailing rates to maintain their mobility, adding yet another layer of persistent demand to the market.

Unlike a family that might postpone a car purchase for a year hoping for better prices, these corporations operate on strict fleet renewal schedules and business growth targets. This insulates a significant portion of COE demand from fluctuations in consumer sentiment or household economic anxieties. This strong institutional presence acts as a powerful stabilizing force at an elevated price point, further eroding the deep, cyclical troughs that private car buyers have historically relied upon for more affordable entry into the market.

Analysts argue that these interventions are designed to prevent uncontrolled price variations rather than to force premiums down to levels seen in previous cycles. The gradual injection of additional COEs, while helpful, represents only a small fraction of the total vehicle population and is easily absorbed by the strong underlying demand. The consensus among many dealers is that in the long run, even with the cut-and-fill approach, COE prices are not expected to decrease substantially.

This suggests that while government measures can temper the worst of the volatility, they are not a silver bullet against the powerful market forces of EV disruption and rising national income. The fundamental imbalance remains: demand, supercharged by new technology and economic health, continues to outpace a deliberately constrained supply.

A more pragmatic approach involves a fundamental reassessment of the total cost of mobility. Potential buyers must now weigh the permanently higher cost of private car ownership against the improving efficiency and cost-effectiveness of Singapore's public transport network and the growing car-sharing ecosystem. The financial decision is no longer simply about "when" to buy, but "if" buying remains a sensible financial choice at all.

Future developments, such as the full implementation of distance-based charging under ERP 2.0, could further reshape the landscape by shifting costs from ownership to usage. However, until such systemic changes occur, Singaporeans must navigate a market where the rules have changed. The confluence of technological disruption and sustained economic strength has created a new, elevated plateau for COE prices, demanding a more critical and disciplined approach to one of life's most significant financial decisions.