The theory behind the COE is that, instead of raising taxes to discourage vehicle buyers, the Government sets a quota on the number of vehicles that can be put on the road at any time, and leaves it to market forces to price the COE via a fortnightly auction.
Bidding for a COE can be effected by motor dealers, or individual car buyers at an ATM, as long as you have $10,000 in your bank balance. 9 out of 10 buyers let the motor dealers bid for their COE because dealers set different prices for cars sold to buyers who supply their own COE and those who take up one of their packaged deals. The difference is not a simple arithmetic of deducting the COE price from the package deal price. Let the greedy dealer explain that.
After all bids are received, the lowest successful bid submitted in a tender is the price everyone in the same category pays. For instance if there are 100 COEs available in a category, and bidders make bids from anything between $1 and $100,000, the 100th successful bid from the top becomes the COE price.
Naturally the dealer with a quota of cars to unload will bid as high as he can, since the customer has left him the task of securing the COE. Ditto the sports car fanatic with money to burn - what's a $150,000 COE bid compared to the price tag on his exotic marque? It is not difficult to imagine these characters with deep pockets are yanking the COE higher and higher.
The original reasoning for opposing a "pay-as-you-bid" tender system was that bidders are likely to over-estimate the value of the COE, and thus end up over-paying. Similar logic like senior citizens are likely to blow their life savings on a spending spree, to justify the Minimum Sum and all sorts of excuses to avoid the CPF payouts. Well, the rationale originally cited for the introduction for the COE was supposedly to avoid raising taxes to discourage vehicle buyers. Guess what, taxes have been raised. Maybe it's about time we make the buggers with the fat wallets pay at their submitted price level, instead of the lowest successful bid. Drastic times require drastic measures.