Impact of Local Regulations on Used Car Pricing and Marketing

Local regulations significantly influence the pricing and marketing of used cars, primarily through mechanisms like the Certificate of Entitlement (COE) system, Additional Registration Fee (ARF), and loan restrictions.

Impact on Pricing:

• The COE system limits the number of vehicles on the road by requiring buyers to obtain a COE through auctions, which can add tens of thousands of dollars to the cost of both new and used cars. The COE price fluctuates based on market demand and remaining COE validity, making used cars with a longer remaining COE period more expensive.

• The Additional Registration Fee (ARF) and Preferential ARF (PARF) rebate also affect used car prices. Newer used cars tend to be pricier because they offer higher PARF rebates upon deregistration, effectively acting as a partial tax refund to the owner. However, if the COE has been renewed, the PARF rebate is not applicable, which can lower the resale value.

• Loan regulations restrict financing to a maximum of 60-70% of the used car’s market price depending on the price bracket, influencing affordability and demand.

Impact on Marketing:

• Sellers often highlight the remaining COE years and PARF rebate eligibility as key selling points since these factors directly affect the total cost of ownership and resale value.

• Transparency guidelines require suppliers to provide clear pricing information to consumers, ensuring fair marketing practices and preventing unfair pricing claims.

• Due to the high cost of new cars driven by these regulations, marketing for used cars often emphasises cost savings, lower upfront payments, and the ability to bypass some new car taxes and fees by purchasing a vehicle partway through its COE period.

In summary, local regulations create a complex pricing structure for used cars that incorporates government-imposed fees and taxes, which sellers must transparently communicate. These factors shape both the market price and marketing strategies, focusing on COE validity, tax rebates, and financing terms to appeal to buyers.