May 2016, MAS eases car loan curb. Are gloomy days over for the car industry?

May 2016, MAS eases car loan curb. Are gloomy days over for the car industry?

For the past 3 years since 2013, buyers had been facing difficulties in forking out 40-50% down payment for their beloved rides. Now that MAS had ease the loan curb, are gloomy days for the car industry over?

Vehicles with an open market value (OMV) of $20,000 or less, buyers can borrow up to 70% of the purchase price, up from 60 per cent. Buyers of cars with OMVs of more than $20,000 can now borrow up to 60 per cent of the purchase price, up from 50 per cent.

The loan tenure has also been raised to seven years, from five.

MAS deputy managing director Mr Ong Chong Tee said: “In 2013, when we introduced the measures, our immediate aim was to help restrain escalating COE premiums and consequent inflationary pressures.

“Since then, demand conditions have moderated and it is timely to ease the measures.”

Motor traders said many parties have found ways to circumvent the loan curbs. One common way is to inflate the invoice of the car. Another is to offer leases instead of hire-purchase deals.

Of late, ride-hailing apps like Uber and Grab Cars have also been offering high loans to potential car buyers. They can do so because the cars are registered under a company’s name, as private-hire vehicles, instead of the buyer’s name.

But during 50-60% curb period, the COE price not only did not gradually drop, it went the other way up. It was until the end of 2015 that we slowly see the COE declining from the high $70ks to the $40ks region. Sales of new and used cars started to pick up as it was in the affordable region. With the easing of the new loan curb, COE prices starts to soar again driving new car prices up. Buyers with the lesser down payments flock to the new car showrooms with new hope of getting their new rides again.

“Gloomy days for new cars might come again as COE prices soar but used car’s demands will continue to be strong. Owners of cars reaching the 10 year old mark might not think of renewing the COE anymore as it becomes now feasible over buying another used car. When these 10 years old cars begin to be taken off the road again driving the population of cars down, the Government might increase the COE quotas again to replace these cars. COE prices might start going down again. So, it might take a while again for the market to stabilize,” says a veteran car industry observer.

No Comments

Post A Comment