Car loan curbs to benefit most: Finance Minister

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http://www.todayonline.com/singapore/car-loan-curbs-aimed-tackling-high-coe-prices

The new car loan restrictions were introduced with an eye on bringing down the sky-high Certificate of Entitlement (COE) premiums and to help alleviate overall inflationary pressures in the economy, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.

“This is to the benefit of most Singaporeans,” he said, reiterating that the measures were “not permanent”.

He also announced that the physically disabled or their caregivers will be exempted from the new restrictions to buy one car. The exemption will take reference from criteria in existing assistance schemes for the physically disabled. The Monetary Authority of Singapore (MAS) will provide details soon, he said.

The new restrictions announced last Monday by the MAS were not part of the Budget measures. Nevertheless, during the three-day Budget debate, several Members of Parliament (MPs) expressed concerns about the impact of the “drastic” and “sudden” measures on families and used car dealers.

The MAS had cited the need to “encourage financial prudence among buyers … in this prolonged environment of very low interest rates” when it announced the restrictions.

Mr Tharman said yesterday the other important reason was to cool demand for COE — confirming observations of car dealers and commentators who felt this could be a factor. And it is because of this that more groups cannot be exempted from the new restrictions, despite calls from MPs.

Last year, COE premiums increased by between 30 and 60 per cent. During the same period, car prices contributed one full percentage point of CPI inflation, Mr Tharman noted.

Observers and car dealers TODAY spoke to were divided on the effect of the new financing restrictions on COE premiums.

Singapore Vehicle Traders Association Honorary Secretary Raymond Tang was not convinced. “I do not think it will lower COEs as those who are well-to-do will still be able to afford them. You have to cure the sickness and not just treat the symptoms,” he said.

Motor Traders Association President Cheah Kim Teck likened the Government’s move to “using an elephant to kill a mosquito”. “The jury is still out in my opinion; I do not see how the curbs will definitely bring COE prices down,” said Mr Cheah.

To ease the impact on used car dealers, Mr Tharman said the Land Transport Authority will be extending the temporary transfer scheme for used car dealers from the current nine months to a year. This will give dealers more time to find buyers for their cars.

The MAS is also studying how the depreciation in value of a used car can be taken used to determine the Open Market Value for the purpose of applying the appropriate tier for the new loan rules.