Reprieve applies to cars in stock before Feb 25; MAS also plugs loan loophole
By Christopher Tan, The Straits Times, 6 Apr 2013
By Christopher Tan, The Straits Times, 6 Apr 2013
LOAN restrictions on some used cars have been suspended for 60 days from today.
The Monetary Authority of Singapore (MAS) eased its curbs on vehicles that were in stock or acquired before Feb 25, when the restrictions were announced, after repeated appeals by hard-pressed traders.
It has also acted to plug a loophole by altering regulations to cover lenders not previously governed by them.
In a statement yesterday, the MAS said: "The inventory of used cars acquired by dealers at relatively high certificate of entitlement (COE) values before the introduction of the financing restrictions has made it particularly challenging for them to adjust to the new market conditions.
"Demand has also fallen more sharply in the used-car market compared to that for new cars."
The curbs limit car loans to no more than 60 per cent of the purchase price and a tenure of not more than five years.
The Singapore Vehicle Traders Association (SVTA) had made several appeals to the Government, including one to Prime Minister Lee Hsien Loong.
The MAS convened an urgent meeting with the SVTA yesterday to announce the 60-day reprieve.
But SVTA secretary Raymond Tang said: "Sixty days not enough. If they want to give, they might as well give a longer period. Consumers also can't adjust in time now." Cosmo Automobiles' managing director Eugene Chng said: "Whether 60 days is long enough to clear our stock, we really don't know. But any sort of help is good for now. The past month has been hell. This will give us some breathing space."
He said he sold 25 cars last month, but at a loss of about $300,000. The loan curbs had forced him to cut prices for each car by an average of 20 per cent.
But SVTA secretary Raymond Tang said: "Sixty days not enough. If they want to give, they might as well give a longer period. Consumers also can't adjust in time now." Cosmo Automobiles' managing director Eugene Chng said: "Whether 60 days is long enough to clear our stock, we really don't know. But any sort of help is good for now. The past month has been hell. This will give us some breathing space."
He said he sold 25 cars last month, but at a loss of about $300,000. The loan curbs had forced him to cut prices for each car by an average of 20 per cent.
The MAS estimates that traders have fewer than 7,000 used cars which were in stock before the curbs kicked in.
"Based on trends in purchases of used cars... it is expected that much of this inventory can be cleared within a period of two months," the central bank said.
The Ministry of Trade and Industry has amended the Hire Purchase Act so that lenders such as credit firms and financiers owned by carmakers face the same curbs slapped on banks and finance houses in February.
The Ministry of Law has likewise made revisions to ensure moneylenders follow the curbs for both car and housing loans.
Mr Gerry de Silva, spokesman for leading car-loan provider Hong Leong Finance, called the move to plug the loopholes "superb". He said: "We welcome this fair action by the Government."
But Moneylenders' Association of Singapore president David Poh said customers can still take out personal loans which are not restricted. Interest rates for these, however, start from 20 per cent per annum, versus 1.88 per cent for car loans from banks.
Car trader and credit broker Anthony Lim said car-loan interest rates will continue to be soft because "everybody is on a level playing field now".
He said used-car prices should also continue to slide because dealers have to clear several thousand cars within 60 days. In turn, this will depress trade-in prices, new car prices and COE premiums.
Used car showrooms see visitor surge
By Leong Wai Kit, Channel NewsAsia, 6 Apr 2013
Used car dealers saw a surge in visitor numbers to their showrooms, after the MAS announced on Friday that loan restrictions on some used cars would be suspended for 60 days from April 6.
By Leong Wai Kit, Channel NewsAsia, 6 Apr 2013
Used car dealers saw a surge in visitor numbers to their showrooms, after the MAS announced on Friday that loan restrictions on some used cars would be suspended for 60 days from April 6.
Following feedback from the Singapore Vehicle Traders Association, the Monetary Authority of Singapore (MAS) lifted temporarily its curbs on vehicles that were in stock or acquired before February 25, when the restrictions were announced.
The MAS curbs limit car loans to no more than 60 per cent of the purchase price and a tenure of not more than five years for vehicles with an open market value (OMV) of S$20,000 or less. When the OMV is more than S$20,000, a tighter limit of 50 per cent will be imposed.
To buy, or not to buy.
That was the question on the minds of those who went shopping for a second-hand car at showrooms in Ubi on Saturday.
But they have only up till 4 June to make up their minds.
A man at a showroom said the 60-day reprieve is a good time "to look around" while another potential buyer said "there is a window for us to do it, so we better do it as fast, as soon as possible".
The temporary lifting of restrictions is good news for second-hand car dealers who saw a drop in demand for their vehicles since the curbs were rolled out.
Eric Liew, general manager of Fugen Automobile, said: "I believe that in this short term, the measure will really help our business. I think more people are already coming in, looking at the cars right now."
But car dealers predict sales would not pick up until the third week, as consumers wait out for discounts.
Some dealers are considering offering discounts of up to 5 per cent for small cars and up to 10 per cent for big cars during the 60-day window.
They believe small second-hand cars will be popular among buyers.
Once the 60-day period is up, some dealers say they will scale down their business.
Fugen Automobile's Eric Liew said: "Looking forward, I would say that it's really very uncertain. Because after these 60 days, it will be back to the restrictions, and then we can foresee that most probably it'll become a very big slowdown."
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