The price of COE is determined by demand and supply. Even a primary school educated person know this. Price is not only determined by supply, so if supply of COE increase, that does not mean price will go down as demand is high and rising. We all know that supply of COE has increased but we can also expect demand to increase much more than the supply increase.

Here are the factors that cause demand to rise:

1. Replacement demand. What this means is people who scrap their 10 year old cars will go back to the new car market to buy new cars. Most would prefer not to buy a resale car due to the "lemon car" problem. You may get a used car which gives you so much problem and cost not only time but thousands of dollars to repair. Brand new cars are prefered by most drivers. In 2015, there will be 100,000 replacement demand and in 2016, there will be another 100,000 replacement demand.

2. Rising income and wealth of the Singapore population. The family income of a household today is higher than 10 years ago. For instance, the household income 10 years ago could be $60k pa and the family cannot afford a new car but today their income could increase to $120k pa and they can afford a new car. Many families also make a lot of money from flipping their properties and they have cash to buy new cars. For instances, they bought a BTO flat five years ago for $200k and today they can sell their flat for $500k and make $300k profit. They can use $100k to buy a new car paid in cash. They can then use the balance $200k to pay for a new BTO flat costing $200k.

3. Higher population. With more population, the demand for cars will also rise.

4. Low oil prices. With low petrol prices, it may be more economical and beneficial to buy a new car than to take the taxis. Even though petrol prices have gone down, taxi fares have not gone down and may increase in the future. Why should you make taxi uncles rich?

5. Well paid young graduates. Many young graduates are earning more than their parents. They can even earn as much as $150k pa in their 20s.

6. Snob appeal. Shiny, brand new cars are objects of snob appeal. So, many people buy new cars just to show off to show that they are successful and they have made it. There are people who change cars every 2 - 3 years.

7. People working longer. With more people working longer beyond 65 years old, they will need to buy new cars.

8. More families owning more than one car. More and more families are buying their 2nd and 3rd cars. These are for their wife and children. The wife may be working and so need a car of their own. The car for their child is for their 21st birthday.

9. Many more reasons.