Loan restrictions on car loans lifted for 60 days

Written by Cheryl Tay on . Posted in Cheryl Tay News | Latest Industry News No Comments

Loan Restrictions Lifted Temporarily for Purchase of Pre-Existing Stock of Used Cars; Restrictions Extended to Credit Companies Not Regulated by MAS

The Monetary Authority of Singapore (MAS) will lift the current restrictions on car loans for a period of 60 days for the purchase of used cars1 that were part of car dealers’ inventory before the restrictions were introduced on 25 February 20132. As dealers have up to seven days to register used cars under the Land Transport Authority’s Temporary Transfer Scheme (TTS), used cars registered as of 4 March 2013 will be eligible for this concession.

2 MAS had also earlier indicated that the scope of the financing restrictions will be extended to all entities that finance car purchases, including those that are not regulated by MAS. This will now come into effect. The Ministry of Trade and Industry has today issued new regulations pursuant to the Hire Purchase Act to ensure that MAS’ financing restrictions on the purchase of cars apply to these non-MAS regulated entities as well. The Ministry of Law has also today required licensed moneylenders to comply with MAS’ financing restrictions.

3 The lifting of the financing restrictions on purchases of used cars under the TTS as of 4 March 2013 takes into account the distinct conditions in the used car market currently. The inventory of used cars acquired by dealers at relatively high in-built 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.

4 MAS has therefore decided to temporarily lift the financing restrictions for the purchase of the limited pool of used cars registered under the TTS as of 4 March 2013. This pool comprises less than 7000 cars. Based on trends in purchases of used cars since the announcement of the new restrictions, it is expected that much of this inventory can be cleared within a period of two months. This concession takes effect from 6 April 2013 and will be in place for a period of 60 days3, after which, the financing restrictions will apply.

5 MAS has taken into account useful feedback from the Singapore Vehicle Traders Association on the state of the used car industry. While it is not possible to relieve the industry from the impact of the financing restrictions on an ongoing basis, the two-month relaxation of the rules for its pre-existing inventory will help the industry adjust to the new conditions.

6 MAS will continue to monitor developments in the car market and COE premiums, and will recalibrate the financing restrictions for new and used cars when appropriate.

***

1 All references to cars include goods-cum-passenger vehicles.

2 On 25 February 2013, MAS announced restrictions on car loans granted by financial institutions: (i) For a car with open market value (OMV) that does not exceed $20,000, the maximum loan-to-value (LTV) is 60% of the purchase price, including relevant taxes and the price of the Certificate of Entitlement, where applicable; and
(ii) For a car with OMV of more than $20,000, the maximum LTV is 50%.
(iii) The tenure of a car loan will be capped at 5 years.
These restrictions took effect from 26 February 2013.

3 Only loans granted for the purchase of used cars that are registered under the TTS as of 4 March 2013 and where the agreement to purchase such used cars is dated between 6 April 2013 and 4 June 2013 (both dates inclusive) will be exempted from the financing restrictions. For the avoidance of doubt, loans granted for the purchase of (i) used cars which are registered under the TTS as of 4 March 2013, but where the date on which the agreement to purchase such a used car is prior to 6 April 2013 or after 4 June 2013, (ii) all other used cars which are not registered under the TTS as of 4 March 2013, and (iii) all new cars will continue to be subject to the financing restrictions announced on 25 February 2013.

Source: MAS website

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Cheryl Tay

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Singapore’s only female full-time motoring and motorsports photojournalist. Independent automotive consultant and prominent local motorsports personality Cheryl Tay is uniquely passionate about all things cars and motorsports. She also has a strong passion to share her interest and knowledge, hence having a dream to become the ‘Oprah Winfrey of cars and motorsports’ and create a multimedia platform for her sharing. - A female in a male-dominated world, Cheryl Tay is Singapore’s only female full-time motoring journalist and motorsports blogger and she regularly writes for prominent titles in Singapore, Asia and internationally. (See full list of titles that Cheryl Tay writes for here.)

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