THE first nine months of 2007 were characterised by a remarkable reduction in the number of deregistrations, and this could point to a slowdown in new car sales for the near future.

This drop in cars being scrapped means that in the short term, there will be fewer buyers of new cars because fewer owners are replacing their vehicle for a new one, say some motor distributors.

'The drop in Category A deregistrations is even more pronounced, and since this is the bread and butter category which accounts for volume sales, it could hit us badly,' says the senior executive of a popular Japanese dealership.

Cat A certificates of entitlement are used to registers cars below 1,600 cc. Since the beginning of the year, there has been a 31 per cent plunge in the number of deregistrations. In January 2007, 4,425 cars were taken off the road. In August, the number was just 3,058.

For Cat B - cars above 1,600 cc - it was 2,532 cars scrapped in January and 1,809 in August.

Fewer cars are being deregistered these days after the Preferential Additional Registration Fee (Parf) benefits - or scrap rebate - were lowered for cars registered after May 2002. Then in 2003, the government eased restrictions on car financing and the liberalisation led to the industry offering 100 per cent loans and 10-year repayment periods.

Car owners who took auto financing with such conditions later found it difficult to settle their outstanding loans if they wanted to trade in their cars for a new one. 'There are no new hot, mass-market models to get people excited. There has to be a real incentive to draw them into the showroom,' says one sales manager.

He adds that one such incentive could be if the COE premium suddenly dives, like it did for Cat A in the second half of August.

'But when that happens, people rush in to buy and push the premium up again. Then everyone holds back because the COE premium is now so high. So car bookings cool down and market becomes lacklustre again,' he says.