TALK TO A DEALER nowadays and you get tales of woe mixed with pretty hefty dramatics about the dismal state of the local car market. But exactly how bad are things anyway? Everyone basically knows that the number of cars that can be sold here is fixed, and there are more people who want cars than there are COEs available. Always.

A host of reasons has been mooted, from boring old model line-ups to negative equity (a situation where you owe more money to the bank than what your present car's actually worth) hobbling existing buyers who might otherwise want to change cars.

But are buyers really that jaded? As mentioned above, this explanation is a bit hard to believe considering that each round of bidding is perpetually oversubscribed.

So how do we account for all the doom and gloom?

The problem, it seems, lies with profit margins. Dealers don't set out to break even, they want to make oodles and oodles of money. Sales volumes are estimated, model allocations are planned, and how much money a dealership might make in a worst case scenario is written in stone. And all at the start of the work year. The rest is pretty much an exercise in collective buyer pulse-taking.

And as much as they're loathe to trim them, dealers do play with their margins. If demand is strong, they can tweak prices upwards, which in turn determines how strongly they can bid for COEs.

It's a balance that's not easy to achieve. Jack prices up too high and you risk scaring away buyers, keep them too low and you won't be able to bid strongly enough to satisfy the demand that low prices typically generate.

Doing all this right requires an accurate sampling of buyer perception, or basically assessing the strength of demand and tailoring pricing schemes to suit, all things being equal. But lately this endeavour has been hobbled by what some dealers seem to think is an increasing number of especially savvy buyers.

Witness the hefty price cuts made in the wake of last round's dive in premiums, cuts that made prices for some models dip by $4,000 and even $6,000. But rather than bringing people into showrooms in droves, like they would normally, the cuts came off more like damp squibs.

Cat A premiums "soared" by $97, about the price of a full tank of premium unleaded in some cars. Cat B did a little better, registering a $282 increase, but again, hardly worth writing home about.

Cat E prices actually dived, by $685. There was some hope that added interest from commercial vehicle buyers might help maintain or even boost Cat E premiums but apparently these more practical-minded buyers are still put off by the relatively small price difference between Cat E and Cat C premiums.

Some dealers attributed the overall lack of interest to a "new equilibrium" in terms of pricing. "COEs at the $10,000, $12,000 level are what customers are generally considering fair now," says one sales manager. So presumably any movement within this range isn't going to drive buyers into a feeding frenzy.

"People who want to buy this year already have gotten their cars," he continues. And with specific regards to Cat B premiums, our manager suggests that any movement "basically depends on how many cars Lexus and Honda have in hand for registration," referring to the healthy order books for the IS 250 and Civic.

If you need more evidence that buyers are getting smarter, the general manager from one large distributor told CarBuyer that his customers "know more than my salesmen, sometimes", when it comes to COEs. "A lot of them keep track of how COEs move, and they can predict quite well how the price will end up."

"Earlier this year when there was a big drop I think people really became aware that rushing in was no good. I have customers with friends who are telling them that they're still waiting for cars," explains the general manager. The implication is that bargain basement prices might reel you in, but this could also mean that you're in for a wait to get your car.

Overall, though, the prospect of more circumspect buyers should be a good thing in the long run. "No one likes big price changes, actually," says the general manager. And with more and more savvy buyers likely to act as a major stabilising force in this regard, big price swings could conceivably become a thing of the past.

Category A May 2nd tender
52-week high: $17,481
52-week low: $8,009
Quota: 2,222
Bids: 2,473

THE HEAVY PRICE cuts dealers instituted following last round's price dip don't seem to have had exactly the desired effect. An insignificant $97 increase was all Cat A could manage, attributed to the fact that there were only 47 more bids this round over last.

CarBuyer predicted that Cat A would recover slightly this round, given more attractive car prices, but the degree of the recovery doesn't seem to bode well for the car market in general. The general consensus is that buyers intending to get cars this year have already done so, and only major dips in premiums that spur significant price cuts will encourage marginal buyers to step forward.

Category B May 2nd tender
52-week high: $16,889
52-week low: $9,001
Quota: 1,091
Bids: 1,337

CAT B PREMIUMS rose slightly to close $282 higher this round, not something to lose sleep over if you had registered a new car with a COE from last round. One manager we spoke to opined that how Cat B moves depends on how large the shipments for the Lexus IS 250 and Honda Civic are at any given time.

This round, the number of bids grew by just 44, against an increase in the number of COEs by two certs. Nothing to shout about, really. Some in the trade also seem to believe that that buyers feel a mid-$10,000 to $12,000 range for COEs is about right for now, and are more circumspect when it comes to reacting to dips or spikes in COE premiums.

Category E May 2nd tender
52-week high: $18,200
52-week low: $9,275
Quota: 1,176
Bids: 1,570

WE DID NOT expect Cat E to dip this round, considering that comparable pricing might sway bus and commercial vehicle operators to use this certificate instead of the usual Cat C one to register their vehicles. The problem appears to be that the relatively small difference between Cat E and Cat C prices are not so small where commercial vehicle owners are concerned.

We might have also overestimated current demand for commercial vehicles, since Cat C took a $1,001 dip this round. The difference between B and C premiums currently stands at $617, up over last round's $301 gap, which makes it less likely to appeal to the more price sensitive commercial vehicle buyers.