Since the fourth quarter of last year, interest rates across the board for car loans were cut to as low as 1.88 per cent -- a significant dip compared to the corresponding period in 2009 -- when interest rates ranged between 2.22 per cent and 2.50 per cent.
To be announced this month, new COE quotas for the February to July period are expected to sink even lower.
This is expected to result in higher COE prices.
But it's the fewer COEs available, rather than higher prices, that have brought about lowered interest rates on car loans, said Tan Chong Motors general manager Ron Lim.
However, he feels a further cut of interest rates from the current 1.88 per cent is unlikely.
This is because the first company to lower interest rates cannot hold on to its gain of market share for long, as the other companies will follow suit to remain competitive.
Despite the attractive car loans, car owners are not rushing to replace their current vehicles. Instead, they are now more disciplined with their loan repayments.
The number of car owners who have defaulted on their car loans -- which could have been acquired to finance the entire cost of a car -- has dropped.
According to the Credit Bureau Singapore, 3,038 consumers defaulted on car loans from Jan to Nov 2010, down by 6.58 per cent during the same period in 2009.
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