No extension on lifting of car loan restrictions

SINGAPORE — The lifting of car financing restrictions for used-car buyers for 60 days will not be extended beyond the stated period, said Acting Minister for Culture, Community and Youth Lawrence Wong in Parliament yesterday.

He added that the Monetary Authority of Singapore (MAS) “will not for some time revert to the pre-February situation of having no financing restrictions on car purchases”.

Mr Wong, who is a board member at the MAS, was speaking on behalf of Deputy Prime Minister Tharman Shanmugaratnam, who is the Minister in charge of the MAS, in response to parliamentary questions filed by Members of Parliament (MPs) Lim Biow Chuan (Mountbatten) and Lee Bee Wah (Nee Soon GRC).

Mr Wong said data from the Land Transport Authority (LTA) indicated that of the 11,000 used cars acquired before the introduction of the financing restrictions on Feb 26, 4,000 were sold in the one month since the loan curbs were introduced.

“Based on this trend, and with the temporary lifting of the financial restrictions, dealers should be able to sell most of the remaining 7,000 used cars within the two-month window,” said Mr Wong.

He reiterated that the curbs were introduced for two reasons, to encourage financial prudence among buyers and moderate the demand for cars, which has seen Certificate of Entitlement (COE) premiums and car prices rising sharply over the past year.

Higher COE prices contribute to a higher inflation rate and create negative spillover effects on the broader economy.

Ms Foo Mee Har (West Coast GRC) expressed concerns about buyers who were “less cash rich” taking personal loans from banks or moneylenders, that have interest rates that are six to 12 times that of car loan rates, to tide them over for the purchase of a car.

In response, Mr Wong said that the situation was something that the authorities would have to monitor.

“I don’t think we have seen any signs of loan behaviour being driven to moneylenders, but we will continue to monitor and make sure that doesn’t happen,” he added.

Some MPs, such as Mr Lim and Nominated Member Teo Siong Seng, suggested the MAS allow car buyers to borrow up to 70 per cent of the vehicle purchase price, higher than the current 50 per cent.

In response, Mr Wong said: “We will continue to monitor developments in the COE market and we will recalibrate our financing restrictions for all cars, new and old, in response to market conditions in particular, if there is a sustained moderation in COE prices.”