Motor traders fear plugging of loopholes in car loan curbs – 06Mar2013

SINGAPORE : Some motor traders hope the government will not further regulate the car loan industry, after it introduced new curbs last week.

They said such a move will price out more individuals from buying a car.

Car buyers now have to fork out a minimum cash downpayment of 40 per cent.

This comes after the Monetary Authority of Singapore (MAS) imposed a car loan restriction of up to 60 per cent.

Loans will also have to be serviced over a shorter period of five years.

The move aims to encourage financial prudence.

But buyers are still able to get a higher quantum over a longer period, from financing companies who do not fall under MAS’ regulations.

One credit company which offers a quantum of up to 80 per cent, for example, has seen more interest from buyers.

Jesse Tan, managing director of Speed Credit, said: “Obviously because of the curbs, there are more enquiries, but the approval rate really depends on the customer, they still need to come with the downpayment, it is no longer just 100 per cent.

“We are more selective now, we also have to check with the customer whether they can finance the loan.”

MAS has said that it is looking to plug the loophole.

But some said the industry needs some “breathing space” before more regulations are imposed.

Such a move will also restrict options for individuals or businesses who really need private transport.

Mohamed Taifoor, owner of Mohamed Taifoor Motoring, said: “I think they should be soft on it, and not regulate 100 per cent. They should be soft on this as it is an alternative because the needs of people (with) private transport (are) different. (Some may need it) for leisure, (others need it) just to go to office. But these are people who need it to make money out of it, to get income out of it.”

Some used car dealers said business has already gone down by 50 per cent.

The Singapore Vehicle Traders Association – which has described the curbs as “drastic” – met MAS on Tuesday to register its concerns and is hoping for a more gradual curb.

It is waiting for a response by this Friday.

Raymond Tang, honorary secretary of the Singapore Vehicle Traders Association, said: “The rich can still afford to buy in paying 40 per cent or 50 per cent downpayment, so to them it is not an issue at all. But to the middle- and low-income people, it is really a big effect.”

Despite a slowing market, dealers do not expect premiums for Certificates of Entitlement (COEs) to go down tremendously as the quota supply remains low.

Some dealers MediaCorp spoke with said they will have to adopt a wait-and-see approach before they can fully understand the impact on the market. They expect COE prices to more or less stabilise only after four rounds of bidding.