CERTIFICATE of entitlement (COE) for cars up to 1,600cc plunged by more than $4,500 to close at an eight-month low of $12,401 on Wednesday.

The unexpected result puts the mainstay car COE premium far below that for commercial vehicle COE, which climbed $1,900 to finish at a year-high of $15,889.

It is believed to be the first time a commercial vehicle COE has ended higher than a car COE.

Motor traders point to a weakened demand for cars - especially replacement demand - for the car premium drop.

"Buyers probably felt the (previous) $17,000 level was too high, and were waiting for rates to come down,'' said Mr Mark Choong, managing director of Toyota distributor Borneo Motors. "The PSLE exam period two weeks ago might also have kept many parents away from showrooms.''

Other motor traders said the slowdown in number of cars scrapped this year had also affected demand.

'Replacement demand is really, really down,'' said Mr A C Neo, marketing director of Nissan distributor Tan Chong.

He added that many car owners today have 'over-commtted' on the car loans, which means they cannot sell their cars without having to fork out a large sum to pay the bank.

'This over-commitment is really bad for the trade,'' Mr Neo noted.

The crunch came when Borneo Motors reduced prices of its bestselling Altis cars over the weekend by $2,500. Even then, there were not many takers.

The market weakness does not apply to bigger and more expensive cars, though. COE for cars above 1,600cc rose by nearly $500 to close at $17,589. Open COE, used mainly for bigger cars, ended unchanged at $18,000.

'This segment is less price-sensitive,'' Mr Choong said.

Motor traders attribute the surge in commercial vehicle COE to speculators, who are securing these transferable COEs in hope of making a fast buck reselling them.

The supply of commercial vehicle COE between now and March has been reduced substantially to reflect a big drop in the number of such vehicles taken off the road in the past six months.

Motorcycle COE ended $51 lower at $1,050.

Car dealers have cut prices of smaller cars. For instance, the Toyota Vios now starts from $53,488, $2,500 less than previously.

Traders expect premiums to rebound in the next round three weeks from now.