Restrictions on used-car loans lifted for 60 days from 6 Apr 2013 to 4 Jun 2013

Reprieve applies to cars in stock before Feb 25; MAS also plugs loan loophole
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.

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.

New rules governing car-loan providers not under the scope of the MAS also kick in today (6 April 2013).

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.

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."

Temporary lifting of car loan restrictions will not be extended
By Hetty Musfirah Abdul Khamid, Channel NewsAsia, 8 Apr 2013

The Monetary Authority of Singapore (MAS) will not be extending the temporary lifting of car loan restrictions for used cars beyond the two-month period.

Speaking in Parliament on Monday, Acting Minister Lawrence Wong, who is on the MAS' board of directors, said the time period is already "very reasonable."

He pointed to figures from the Land Transport Authority (LTA), which showed that of the 11,000 used cars acquired before the loan restrictions in February, 4,000 were sold in the following month.

Based on this trend, Mr Wong said dealers should be able to sell most of the remaining 7,000 used cars within the two-month period.

He assured that MAS has taken in the feedback, studied the issues very carefully and worked out what would be a reasonable period to help the used car dealers clear their inventory.

MAS had earlier restricted buyers of both new and used cars, to loan up to 60 per cent only.

They also have to service the loans over a shorter period of five years.

Mr Wong explained that in granting the temporary concession, MAS had considered the fact that demand had fallen more significantly for used cars.

The used car industry had found it challenging to dispose of the inventory that was acquired with higher COE values before the introduction of the restrictions in February.

He said it is not possible to relieve the industry on a continual basis without undermining the policy objectives.

The objectives are to encourage financial prudence, moderate the demand for cars and cool the prices of COEs.

He said the industry should adjust to the new reality in the car market.

Mr Wong said: “MAS will continue to monitor the developments in the COE market and will re-calibrate the financing restrictions for all cars - new and old in response to market conditions, in particular a sustained moderation in COE prices, but we will not in some time revert to the pre-February situation of having no financing restrictions for car purchases.”

* Used car dealers sell most of stock as curbs kick in

But they now face supply slump as owners hold on to cars for longer

By Jermyn Chow, The Straits Times, 5 Jun 2013

NEARLY three-quarters of the used cars that could be sold with full loans had been snapped up by the end of the Government's 60-day loan reprieve yesterday.

While most traders were relieved to have sold their remaining stock, they were also bracing themselves for a slump as they are struggling to buy used vehicles.

Many drivers are refusing to let go of their wheels after the drastic car loan curbs were imposed in February.

Buyers are holding off their purchases as they wait to see how the market fares.

A Land Transport Authority spokesman said about 5,200 of the 7,000 used cars that dealers had acquired before the loan restrictions kicked in had been sold as of yesterday.

This tally may go up as it takes a few days to finalise sales documents.

Dealers managed to move their stocks after the Monetary Authority of Singapore lifted loan curbs on these vehicles for 60 days in April after responding to repeated appeals from used-car dealers.

This reprieve ended yesterday. From now on, anyone buying a used car will not be able to take a loan of more than 60 per cent of its purchase price.

The tenure must also be no more than five years.

These rules - for both new and used cars - took effect on Feb 26.

Previously, buyers could borrow up to 100 per cent of the purchase price and repay the loan over 10 years.

Apex Trading managing director Thomas Lim said that while he is happy to have sold the 20 cars in his fleet in the last two months, he is projecting business to slow or plunge.

His business has already fallen by 40 per cent in the last month because he does not have enough cars to sell.

"No one is interested in selling their old cars as they can't afford to replace them," he said.

As he rides out the downturn, he is looking to cut the monthly $60,000 overheads cost for rental, utilities and salaries at his Turf City dealership.

Bigger dealerships, however, are hunkering down and looking to restructure their business.

Mr Eddie Loo, managing director of CarTimes, is leasing out his fleet and also focusing on parallel imports in the coming months.

"We have to double our efforts and sell as many cars as possible... If the smaller dealerships close down, we may even be able to maintain or even increase our market share," he said.

The Singapore Vehicle Traders Association said it is still in talks with authorities about easing loan restrictions for used cars.

Mr Raymond Tang, its secretary, said it is also looking beyond Singapore, in places such as Thailand or Japan, to source for more used cars. The association wants authorities to waive the $10,000 surcharge to import used cars.

He said: "It may still be too early to gauge what happens, but we expect the ride will be quite bumpy."

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