CAR buyers can expect higher certificate of entitlement (COE) premiums ahead, as far fewer cars are being scrapped this year.

This is likely to mean fewer COEs in the highly anticipated October 2007-March 2008 mid-quota year review - and higher premiums.

Prospective buyers will know the answer this month when the review is released.

In fact, the market expects an across-the-board cut in COE numbers - the first time since mid-quota year reviews were introduced in 2001.

COE supply hinges largely on a replacement principle.

Land Transport Authority (LTA) figures show that the number of all vehicles taken off the road in the first seven months fell by 20 per cent to 52,195, compared to the same period last year.

Since 2001, the LTA has in place a system to tweak COE supply in the middle of a quota year, to better match replacement demand.

As it turned out, it has always released more COEs in the middle of each quota year, since actual scrappage has always far exceeded its estimates at the start of each quota year in April.

For the past six years, the release of make-up COEs for October-March has led to a drop in premiums in the six-month period.

But not this time. The number of cars scrapped in the first seven months just about matches what the LTA had forecast.

The chief executive of multi-brand agent Jardine Cycle & Carriage's motor operations, Mr Cheah Kim Teck, said: "Definitely, there will be no extras this time."

Going forward, he said COE supply in the next financial year starting April 2008 could fall by '15-16 per cent'. But he does not expect any drastic cut.

The managing director of Toyota distributor Borneo Motors, Mr Mark Choong, agreed.

"I don't think there will be extra COEs coming onstream but I don't expect any significant reduction," he said.

Mr Choong said there might not even be much of a cut in the commercial vehicles quota, despite a sharp drop in the number of vans, trucks and buses taken off the road in the first seven months.

"Commercial vehicles are an economic necessity," Mr Choong said, adding that higher concrete prices and higher cost of 'clean-diesel' commercial vehicles - mandatory from October 2006 - had already raised overall business cost.

Mr Choong expects COE prices to climb from the current $16,000-$18,000 levels - "but not just yet to $30,000-$40,000".

Motor traders expect the expanded presence of parallel importers and the arrival of used cars from abroad, following a relaxation of rules, to keep up bids for COEs.

So, higher car prices seem almost certain. But even if premiums rise by $10,000, a Japanese sedan could still be had for below $70,000, compared to the more than $100,000 mid-1990s days.

For sellers, the foreseeable drop in volume in the coming years could result in lower profits and downsizing.

"This is a feast-or-famine business," said Cycle & Carriage's Mr Cheah.