Last time round, we ended our COE analysis with the following words: start shopping now, and be ready to pounce. We made that recommendation on the expectation that COEs were ripe for a fall, but little did we know just how right we would turn out to be.

COEs saw heavy falls across the board on the back of slow car sales, with the Category A certificate (for taxis and cars 1.6-litres and below) down $1,619 to end bidding at $12,081, and Category B (for cars above 1.6-litres) COEs collapsing $4,300 to just $9,001, touching a new low in the process.

Open Category (or Cat E) COEs, which can be used to register any kind of vehicle but are only used for cars, showed some strength but still shed $898 to close at $13,302.

Buyers of large cars will have had reason to cheer, then. Those who took the plunge last round will most likely have scored a COE, and assuming they were careful to buy a car with a high COE rebate, they are probably looking at nice refunds from dealers.

The mood amongst car dealers, however, was gloomy. The low COEs, they say, reflect just how thin showroom traffic has become. "It's horrible," laments one marketing manager we spoke to. "Everyone's disappeared." She blames the December holidays for the mass desertion of car buyers. "There's no support, there's nobody around to buy," she says.

Other motor trade sources we spoke to pointed the blame at the holidays, but one managing director we spoke to offered a further explanation. "There's this stupid rumour going around that ARF is going to be cut," he fumes. ARF, or Additional Registration Fees, refers to a part of the upfront taxes payable for new cars. If buyers think a reduction in ARF from the current 110 percent is around the corner, they are most likely to wait for it to happen, and pay less for their cars as a result.

Whether that is about to happen is anyone's guess, but the MD makes a fair point when he says that, historically, an ARF cut has usually resulted in a big buying rush that pushed COEs up, partly negating the effects of the tax cut to begin with.

Rumours of a tax cut and holidaying buyers might indeed be the factors behind this round's crash, but the car industry might take it as a sign that they are beginning to face an ugly truth: the Singapore car market is getting saturated. As of the end of 2004, 57.2 percent of cars in Singapore were three years old or newer. If anything, that proportion is likely to be higher for 2005, a record year for new car sales.

There are signs that saturation has set in. "In the past we had a rush for Christmas and Lunar New Year. I suspect that that's gone for most dealers," says the MD we spoke to.

So who, then, is left to buy a car, and what does the answer mean for next round's COE bidding? Most traders expect Category A to continue its downward slide. One source in particular believes that Nissan Sunnys have been propping up the market so far. When the COE quota was increased in October, it resulted in a steep drop in prices, and Tan Chong apparently picked up huge orders for the Sunny. If these orders were fulfilled from then to now, that will remove a lot of support for next round's COE tender exercise.

No one believes Cat B will stay below the $10,000 level, though. Not when dealers have slashed prices on their large cars by as much as $4,000, at least. And yet, there's the feeling out there that the market is so weak that even dramatic price cuts like that won't result in a flood of buyers, so the rebound won't be large. "The last time it crashed to $11,000 it bounced back up above 14 grand. "From $9,000 I think it'll recover to a high 11 (thousand) or low 12 (thousand) level," says one source we spoke to.

Others, perhaps more pessimistically, see the COE closing below $11,000 in early Jan. That might seem quite a bit higher than this round's eye-popping low, but any large car buyer should still be reasonably happy. Just a month ago, a Cat B COE cost $14,897.

Category A Dec 2nd tender
52-week high: $20,654
52-week low: $11,991
Quota: 2,858
Bids: 3,309

Cat A Premiums slipped by a hefty $1,619 this round. Last issue CarBuyer predicted that prices would continue to dip but the size of the fall does point to some serious market lethargy. The Cat A quota for this round went up by 66 pieces but the number of bids fell by a whopping 862. We did also mention last issue that this time of year buyers do tend to get asked to push their registration dates back till January to get 2006 sales off to a healthy start.

With the order backlog from October's buying frenzy more or less cleared and the general holiday mood precluding car buying sentiments, it's no wonder that this Cat slumped. Dealers are hopeful, however, that the low prices will encourage buyer activity and drive up premiums for January's first round of bidding.

Category B Dec 2nd tender
52-week high: $21,710
52-week low: $9,001
Quota: 1,271
Bids: 1,386

Cat B premiums crashed by over $4,000 to close at all-time low, barring the aberrant $50 COE in 1998. The bid ratio (the number of bids divided by the number of COEs available) declined significantly from 1.18 last round to 1.09 but the size of the dip in premiums indicates that not only were there fewer bidders for a larger quota of COEs, but that the bids being put in were very weak as well.

Expect these super low prices to encourage buying activity and drive premiums up next round. However, widespread instances of negative equity, where owners face the situation of having to pay back to banks more than what their cars are worth, and the stabilising of the initial rush for new Cat B models like the Honda Civic should see prices gaining only slightly.

Category E Dec 2nd tender
52-week high: $21,999
52-week low: $12,000
Quota: 1,414
Bids: 2,112

Cat E suffered the smallest drop, just under $900, but considering that Cat A and B premiums are currently so low, we wonder what dealers intend to do with them. According to one sales manager that we spoke to, dealers are still using Cat E COEs in significant numbers to register Cat A cars under immediate registration schemes.

While these are pricier overall than the low-bid-and-hope-for-the-best type, in any event buyers in this case are already prepared to fork out extra for the privilege of getting their cars quickly, and since they assume the risk of Cat A prices dipping, there's no skin off dealers' noses.