Could COE prices jump this week?

SINGAPORE - April’s first auction for Certificates Of Entitlement (or COEs) kicks off today and will end on Wednesday, and if history repeats itself you can expect prices to rise.

For that you can thank a quirk in the COE bidding process that usually leads to a slight jump in demand.

Car dealers usually have two weeks to collect orders from buyers, and after doing so they usually bid for COEs as soon as they can. But COE auctions take place on the first and third Mondays of every month because some months (like March) have five Mondays in them, so dealers sometimes have a whole extra week to sell cars before bidding for COEs.

These extra orders usually bump up demand enough to create a small ‘three-week bounce’ in COE prices. Even if car sales haven't been particularly robust, this extra week effectively gives dealers 50 percent more time to get them buyers buyin'.

Ironically, one of the things to do if you anticipate a jump in COE prices is to go ahead and book a car (assuming you were thinking about it anyway).

This is because car dealers price their goods to a large extent in response to old COE results.

If COE prices had gone down in March, car dealers would have lowered their prices—even though buying a car today means they have to deliver it with a COE from April or later that is potentially more expensive.

The three-week bounce happens four times a year, with the next one set to occur during the first COE auction of July.

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