Friday, 22 September 2023

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Temporarily lift on car loans restriction for second hand cars

By Terry Xu

Monetary Authority of Singapore (MAS) has announced that the car loan restriction will be lifted for purchase of second hand vehicles from today, 6th April till 4th June, 60 days from now. This means that interested car buyers of the second hand vehicles can purchase the vehicles with the previous loan arrangement prior to the implement of the loan restriction during this period of time.

The restriction on car loan was introduced in Feb 2013 to push down the growing COE prices back a few months ago, new car buyers from then onwards would have to finance the loan within a span of 5 years and come up with a downpayment of 40-50% for the vehicle (This excludes commerical vehicles).

This lift on the restriction is set to relieve the struggling pains by second hand dealers on the stock of cars piled in their shops with no buyers in sight, detered by the recent curbs in car loans introduced during the budget 2013.

Many second car dealers have voiced their predicament with the government and have had their stories covered extensively by local news agencies. MPs such as  Dr Lee Bee Wah had also conveyed this issue on behalf of the dealers in the parliament (source)

What the government is trying to achieve here is to basically give the second hand car dealers some breathing gap so as to get the existing cars off their hand while in the meantime,  give them time to think on whether or not they should pack up and close shop as the second hand dealers will eventually face the same situation 60 days later.

That saying, even though a 60 days allowance is now handed out for consumers to buy second hand vehicles without the loan restriction  , but there should be no mad rush to buy a second hand car unless there is a real need for transportation. Just like how you don’t need to buy two pots just because the price for two is 10% cheaper than buying two alone. Consumers should always buy what they need and not what seems to be a “bargain buy”.

And besides this lift of restriction applies only to the 7,000 over used vehicles registered under the Land Transport Authority’s Temporary Transfer Scheme (TTS) as of 4 March 2013.

Apart from the 60 days grace period given by the government, an adjustment has been made to the existing regulation on car loans to be extended to cover licensed moneylenders such as credit companies and other loan facilities.

Just over a month ago, while some were stumbled by the new measures right after it was introduced,  some glee in delight as private credit companies and in house credit loan were not subjected to the 40-50% down payment requirement. This would mean clients would have glady opt for a car loan from these loan facilities even though it had a higher interest rate than what the banks would offer so as to skip the downpayment portion of the car purchase. A loophole that was present at the time with the implemention of the loan restriction on merely bank loans.

While the new measure does effectively cover this aspect of the initial car loan curbing measures. But this poses a question to some members of the public. Did the government think through their policies in great depth before their introduction and implementation or is it a game of trial and error at the expenses of stake holders?

Earlier last month, in response to the complain that those who are disabled as well as their care givers and car dealers are severly affected by the new measures, the government had expressed that the new curbs on motor vehicle loans will not apply to those who are physically disabled as well as their caregivers for one car (link). Apart from that, car dealers were given an extension for owning used cars from nine months to a year. (link)

Even though Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam had reiterated that the restriction on loans were temporary, the government could have considered sitting down to speak with all stake holders first before implementing policies that would affect them to avoid ad-hoc amendments to policies passed in parliament and also reduce the disturbance in the “peaceful” life of normal citizens.

Perhaps in view of the out of control COE price, it might seem that desperate situation calls for desperate measures. But how good would a “temporary” measure be?


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