Puzzled? You’re not the only one. Non-driving Singaporeans are equally bewildered as to why luxury cars in perfect running order – some only two years old – are being disposed of to make way for new ones.

It’s hard to fathom why, in a still-troubled economy, the city would want to deregister a record number of cars (2003: 82,126). Some 80% of them are less than five years old, and most in pristine condition.

However, they were not sold into the second-hand market. They were exported or scrapped to allow the owners to get cash rebates to buy new cars.

If they were for the second-hand market here, they would have retained their registration numbers.

The whole exercise has become a great national waste of financial resources. Even without this, the price of a car in land-squeezed Singapore is already the highest in the world.

The story supports the new conventional wisdom that inflation in today’s modern cities is not only about supply and demand – but about lifestyle choices and government policies, too.

Last year, 110,000 vehicles (including 82,126 cars) were deregistered. In 2002, it was 66,997 cars. These are big numbers.

Cars that are less than five years old are exported to countries like New Zealand, Cyprus and Thailand. The rest are turned into scrap metal.

“These cars are getting newer and newer. It’s scary,” a handler told a reporter. Among the 1000 cars in his yard were some 2002 models.

The cause of all this is partly the Singaporean love affair with the car and partly government policy aimed at capping the car population.

The real culprit lies in something called the Certificate of Entitlement (COE) that a Singaporean must have before he can buy a car.

Twice a week, the government offers a fixed number of them for public tender. The price varies according to engine capacity and market demand but is currently at about S$30,000 (what millions of Asians pay for a house) – up from S$23,000 to S$25,000 last year.

At the peak some five years ago, it was S$60,000.

The COE lasts 10 years after which a new one is needed. An owner who scraps his car after five years, for example, will get a rebate of about half of what he paid. So if he had paid high, his rebate will be high; if he had got it cheap, it will be low.

Another factor is the PARF (Preferential Additional Registration Fee) rebate that also works on a declining scale over 10 years.

The current lower COE prices and higher rebates have become a powerful combination to push people to scrap their cars long before the 10 years are up.

Cars have become a lot cheaper. For example, a 1600cc automatic Toyota Corolla now sells for about S$74,000 compared to S$127,000 in 1995.

At the same time, the owner gets a new COE that lasts 10 years and saves on depreciation.

One professional, for example, scrapped his 2.0-litre Opel Omega, which had cost him S$137,000 in 1999. With a rebate of about S$65,000, he bought a 1.8-litre Japanese car for S$83,000.

With a top-up of S$18,000 he gets a new car, an extended 10-year COE and a much lower depreciation.

After deducting rebates on the 10th year, his car’s annual depreciation is currently S$6,500, compared to some S$10,000 a year for his old car – a substantial saving.

The high punishing costs are aimed at keeping the car population under control. The number of COEs will increase by 3% a year at most.

The government wants to avoid the sort of traffic gridlock many advanced cities face. With the help of a smooth train-and-bus public transport system, it has worked.

But the costs to the public are high. Despite the falling prices, young Singaporeans still complain of not being able to own a car. Expensive houses and cars are often cited as reasons for more professionals migrating to Australia or New Zealand.

Critics say it has nothing to do with road congestion, but raising government revenue. Of the car industry’s estimated S$7bil annual turnover, they say two-thirds are going to the Treasury – but these figures are not confirmed.

One online critic charged: “The COE system is promoting waste by encouraging owners to discard perfectly functional cars and replacing them with new models.

“In other developed countries, it is not unusual to see a 1965 Beetle (or cars older then 15 years) still in good and roadworthy condition.”

It has also thrown the second-hand car market into a state of some disarray. A buyer looking for a used car can likely find only one that is less than three years old or over 10 years old. Everything else has either gone to the scrap heap or exported.

Some three-quarters of cars advertised in the newspaper classifieds are for vehicles registered between 2000 and 2003. At the other end are those older than 10 years.

The trend has left an impact on the city. It is obvious to the casual eye that Singapore’s cars are relatively very new. As of 2003 year-end, 46% of the 404,274 cars were less than three years old.

Apart from cars, Singapore’s buy-don’t-repair culture among the broad middle-class is also contributing to high living costs.

When their television, washing machine or air-conditioner breaks down, the owner is generally advised to buy a new one rather than repair it.

“How long have you been using it?” he is asked.

“Four years, time to change (although the general life span may be seven years),” he is told. “It will cost you more to repair and replace the parts, anyway.”

It stems from the Golden Era when the city was short of technicians. At the time, it had plenty of salesmen who earned more money. This trait is hard to change.

The big corporations know the Singaporean psyche, a powerful innate urge to possess new, expensive things. Old is bad – like cars!

o Seah Chiang Nee is a veteran journalist and editor of the information website littlespeck.com (e-mail: cnseah2000@ littlespeck.com )

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