By Sing Geok Shan, Channel NewsAsia, 25 Feb 2013
The Monetary Authority of Singapore is imposing restrictions on loans for private cars to safeguard against borrowers defaulting on their repayments.
Beginning on February 26, the central bank said consumers will be limited to borrowing 60 per cent of the purchase price of a motor vehicle when the open market value (OMV) is S$20,000 or less.
A tighter limit of 50 per cent will be imposed when the OMV is more than S$20,000.
The MAS is also capping the tenure of a motor vehicle loan at five years.
"The financing restrictions are necessary to encourage financial prudence among buyers," the MAS said in a statement.
"In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves," it said.
The new restrictions do not apply to loans for either commercial vehicles or for motorcycles.
For re-financing facilities, only the cap on loan tenure applies.
The MAS previously had in place financing restrictions on car loans from February 1995 to January 2003.
Carway Enterprise, which helps buyers borrow to buy cars, said loan applications dropped by 30 to 40 per cent a day after the measures were unveiled.
Middle & lower-income groups may be priced out of car market: dealers
By Dylan Loh, Channel NewsAsia, 26 Feb 2013
Car dealers on Tuesday said middle and lower-income groups may find it difficult to own a vehicle with the new rules in place.
The government on Monday announced a slew of measures, tightening the noose on car loans and registration fees.
This has prompted strong reactions from the industry and prospective buyers.
Under the Monetary Authority of Singapore (MAS) car loan curbs, buyers have a maximum of five years to service their car loans.
They also have to foot a downpayment of 40 per cent or more for a new vehicle.
This has sent buyers and the market reeling.
Carway Enterprise, which helps buyers borrow to buy cars, said loan applications dropped by 30 to 40 per cent a day after the measures were unveiled.
Other car dealers said more time is needed to see what the real effects are.
Eddie Loo, managing director of CarTimes Automobile, said: "We have a mixture of customers -- those who come and buy (with) cash, but there are definitely people who want a hundred percent loan.
"So it's almost like 50-50 kind of market that people come into. So to penalise those who need a car and have to fork out 50 per cent of the loan amount, I think, the timing is not very correct."
Prospective car buyers are also feeling the pinch.
John Molina, a prospective car buyer, said: "I want to buy a car, but because of this, I mean it's impossible for me, or it's almost near-impossible."
Another prospective car buyer, Mark Lim, said: "For those people who are really very rich, to them there's no effect -- today I want to buy a Ferrari, for example, I don't even care about how much is the downpayment."
Still, others have suggestions on how to ease the pinch.
Singapore Vehicle Traders Association's honorary secretary Raymond Tang said: "The government should consider looking into the aspect of weighing these loan curbs -- should not be bringing it into the used car market."
He said the used car market is for people whose "budget is very constrained".
Questions which prospective buyers will be asking in the months ahead are: "To buy or not to buy, and which model? Can I even afford a car?"
Eyes will also be keenly watching how the Budget measures will affect the prices of Certificates of Entitlement (COEs) for cars. This will in turn determine just how expensive owning a set of wheels in Singapore will be.