It's easy to look at the recent downtrend in COE prices and come to the conclusion that each new bidding cycle increasingly favours the small car buyer. While these buyers do exist in more than sufficient numbers, the problem is that they're either unwilling or unable to pay what dealers are used to being able to charge.

Therefore, you find many industry players lamenting the fact that while prices of late haven't been more attractive, they're that way only because of lacklustre buyer interest. Cash rebates, COE rebates and plenty of free gifts up to and including the shirts off sales executives' backs are now increasingly becoming the norm in order to secure that elusive order.

It's a downward spiral that has got some of the industry players CarBuyer polled wishing for more monetary incentives, like further reductions in the existing import tax structure, to stimulate demand, and to take the pressure off their margins.

With the replacement car market or Cat B segment pretty much stagnant, the emphasis has been on the small or first time car buyer, the Cat A buyers.

According to the product manager of a major Japanese distributorship, this has seen Off-Peak Car (OPC) ownership, (a scheme that involves a $17,000 rebate on a car's list price, with the trade-off being significant usage restrictions) increase significantly, much to the benefit of Korean marques like Hyundai and Kia.

With a large proporation of new buyers of very different demographic entering the market, the pressure has been on prices to drop. This trend can be seen in the last few bidding cycles. Traditionally, the bulk of new car purchases comes from the Cat A segment, and this COE took a big dive this round, dropping over $1,000 to close at $16,112. Not only is this a 52-week low, it's the lowest Cat A has been since the $101 premium in June 2001.

So the problem, according to industry sources, is essentially two-fold. For one thing, as in CarBuyer's survey of dealer sentiment last issue, there are no new significant volume models to really pique buyer interest and get demand going.

From one point of view, this would seem to factor more into a second-car buyer's considerations, based on simple purchasing ability, than that of a first time buyer's. While this is not to suggest that there are limits as to how 'downmarket' a second-car buyer will go, established purchasing ability means more emphasis can be placed on the latest and the most stylish as opposed to the best bargains.

For these buyers, the fact that there's nothing new on the market could easily put them into a sit and wait posture.

The other significant factor touched on earlier is that cheaper prices have really opened up the market to a new breed of first-time buyer, who would never have considered car ownership because of the high costs.

Take the Kia Picanto for example, a car that lists at just over $40,000 with COE. Knock $17,000 off that figure if you opt for the OPC scheme and you're looking at paying only $23,000 for a brand new car. It's no wonder then that some industry insiders consider 2005 as belonging to the Koreans.

In the Cat B segment, COEs rebounded slightly to close at $15,501, a $500 increase over last round's premium. For the traditional Cat B car customer, however, a $500 difference likely means relatively little so this increase can't really be attributed to a significant surge in demand. The fact that there are no enticing new models does the replacement segment no good either. Honda has recently started taking orders for the 2.0-litre version of its Accord sedan but as deliveries won't start until September, we won't see the impact until then.

However, BMW recently announced that it's been receiving more and more stocks of new models like the 3 Series. If the company's been actively bidding for COEs, this could have had some impact on Cat B premiums.

For now the outlook for the foreseeable future, at least until something scorching hot appears on the horizon, is that cheap looks likely to remain king.

July, 1st tender
52-week high: $27,769
52-week low: $16,112
Quota: 2,220
Bids: 2,445

Cat A premiums slumped heavily this round to close at $16,112, the lowest it's been since 2001. The drop of $1,177 mirrored the dip in the bid ratio, which fell to 1.10 from 1.20 previously. Last issue, industry players polled by CarBuyer said that they expected premiums for this Cat to drop.

This means good news for first time car buyers however. As prices hit new lows, more and more people who never would've considered car ownership previously have started heading down to the showrooms.

July, 1st tender
52-week high: $28,990
52-week low: $14,002
Quota: 1,114
Bids: 1,374

Cat B COEs rallied a little bit to close $500 up from last round's bidding. The bid ratio also increased to 1.23 from 1.17 which indicates more interest. The industry doesn't seem to be that shaken up as unlike for Cat A cars, at this level of the market and for your typical Lexus, BMW or Mercedes owner, a $500 difference doesn't exactly count for very much.

One item of interest is the buzz that BMW has finally started to register more and more of its new 7 and 3 Series models, both Cat B stalwarts, and this could have had some effect on the small increase in Cat B premiums.

July, 1st tender
52-week high: $28,499
52-week low: $17,199
Quota: 1,155
Bids: 1,534

Cat E COE premiums tend to more or less keep in step with those of Cat A, and like Cat A's performance this bidding round, Cat E premiums also hit a 52-week low. The bid ratio dipped marginally to 1.33 from 1.34, which does appear to point to a modicum of weakened buyer interest.

Cat E COEs are traditionally used for Cat B segment purchases as buyers in this class tend not to want to wait to get their COEs. However, with the low Cat B premiums it could be that more of the usual Cat E buyers are opting for Cat B COEs instead.