Selling and buying in the same market, and why the COE level matters less than it seems
When COE is high, the car you sell and the car you buy are priced in the same conditions. Done together, much of the effect cancels. What decides the deal is the gap between the two cars, and how much of your trade-in's value moves with the market.
With premiums above $130,000, the question we hear most from people replacing a car is about timing. Should they sell now while values are high? Should they wait to buy until premiums fall?
Both questions treat selling and buying as separate decisions. If you are doing both, they are one decision, and looking at it that way changes the answer.
How a used car's value is made up
A used car's price has two parts.
The first is its paper value: the PARF rebate plus the COE rebate you would receive by deregistering it today. Both are fixed by what was paid when the car was first registered. They do not change with this month's bidding.
The second is everything above paper value. That part is set by the market, and it rises and falls with demand for cars. When COE premiums climb, new cars become more expensive, more buyers move into the used market, and this part of every used car's price goes up.
When you sell and buy together
Suppose your trade-in is worth $60,000 and the car you want is $110,000. You are paying a difference of $50,000.
Now suppose the market moves by 3% before you act.
The car you want rises by $3,300. That is the number that tends to worry people. But your trade-in rises too, by $1,800. The difference you pay goes from $50,000 to $51,500.
So the change that actually reaches you is $1,500, not $3,300. The market move is real, but the car you are selling absorbs part of it.
The same works in reverse. If premiums fall, the car you want becomes cheaper, and so does the one you are selling.
Where the balance tips
The offset is strongest when your trade-in is younger and closer in value to the car you are buying. It becomes weaker in three situations.
When your car is near the end of its COE. Most of its value is paper value, which does not move with the market. You receive little of the lift when selling, and pay all of it when buying. For a car in its last year or two, a high market is a less favourable time to switch, and deregistering may compare well against a trade-in offer. The comparison is in What happens at the ten year mark, renew, scrap or sell.
When you are stepping up a long way. If the new car costs three or four times your trade-in, the offset is small in proportion, and the headline level of COE matters more.
When you sell and buy at different times. Selling now and buying later, hoping for a dip, leaves you exposed to the market in between, in either direction, and usually without a car. The offset only works if both happen in the same window.
How to approach it
- Get the trade-in offer and the price of the next car at the same time, and compare the net figure you would pay.
- Keep the sale and the purchase within the same week or two.
- If your car has less than two years of COE left, compare the trade-in offer against its deregistration value before accepting.
- Avoid timing one side of the transaction on a forecast. Neither side can be predicted, and trying to time one while committing to the other adds risk rather than removing it.
The level of COE is the headline. For someone replacing a car, the gap between the two cars is the number that decides what you pay.
For the latest bidding results and what they suggest, see COE dips from its record.
The 3% figure is illustrative, used to show how a market move affects both sides of a transaction. Actual changes in used car values vary by model, age and demand.
Looking at something specific?
Send me the car and I will run these numbers on it before you commit to anything.