Authorities plugging car loan loopholes

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http://www.todayonline.com/singapore/authorities-looking-close-loopholes-mas-restrictions

Two days after the Monetary Authority of Singapore (MAS) imposed drastic financing restrictions on car loans, some finance companies which are not regulated by the MAS are still offering up to a full loan for prospective buyers — taking advantage of loopholes that the authorities are moving to address.

Meanwhile yesterday, the Singapore Vehicle Traders Association (SVTA) held an emergency meeting with its members. After the meeting, the association sent in an appeal to the MAS and the Ministry of Trade and Industry (MTI), asking the authorities not to apply the new measures “so strictly” to loans for buying used cars.

SVTA President Neo Tiam Ting said: “Used cars are already in the system, there is no need to tighten their supply if one of the reasons for this move is to curb the high COE (Certificate of Entitlement) premiums.”

On Monday, the MAS announced that tenures of loans for motor vehicles — except motorcycles and commercial vehicles — will be capped at five years, with the maximum loan amount pegged to 50 or 60 per cent of the vehicle’s price, depending on the Open Market Value.

The MAS measures — which took effect on Tuesday — have not stopped some car dealers from trying to skirt the restrictions.

When contacted by TODAY, the car dealer said the full loans would be offered as “personal loans” from a credit company. Declining to reveal the name of the credit company, he added: “(The company) told me that they consulted the MAS and that they’re not under the new restrictions.”

The MAS had explained that the restrictions were “necessary”.

These restrictions, however, do not apply to finance companies or credit houses that are not regulated by the MAS but may still finance motor vehicle purchases. These entities will only be subject to the measures if they obtain credit facilities from regulated financial institutions such as banks.

These entities typically offer loans out of their coffers and charge interest rates between 0.5 per cent and 1 per cent higher than banks. Bank interest rates for car loans are around 1.88 per cent for new cars and 2.28 per cent for used cars.

TODAY understands that the MAS is aware of the loophole and is working with relevant agencies to ensure that regulations are effective in light of the changes.

Mr David Poh, President of the Moneylender’s Association of Singapore, felt that the industry could possibly get some business from prospective car buyers looking for extra cash to foot downpayments, for instance.

He said: “We might expect some increase (in business) ... we believe that if a person really needs money, they will find a source for it.”

Mountbatten Member of Parliament Lim Biow Chuan, who is also President of the Consumers Association of Singapore, said he could understand why potential car buyers were “looking for alternatives as the cut by MAS is a bit drastic”.