Car buyers who do not have cash up front and who rely on bank loans to finance their purchase will now find it harder to own their vehicle of choice.
The Monetary Authority of Singapore said yesterday it will re-introduce restrictions on motor vehicle loans granted by banks and financial institutions.
The changes come into effect Tuesday, 26 February 2013.
The maximum loan amount a buyer can get will depend on the open market value (OMV) of the vehicle bought.
This value is assessed by the Singapore Customs, based on the price paid or payable when the vehicle is sold for export. This price includes purchase price, freight, insurance and all other charges related to the sale and delivery of the car to Singapore.
For a vehicle with an open market value that does not exceed S$20,000, the maximum loan granted is 60 per cent of the price, including relevant taxes and the price of the Certificate of Entitlement.
For a vehicle with an open market value of more than S$20,000, the maximum loan granted is 50 per cent of the price.
SHORTER LOAN REPAYMENT PERIOD
On top of that, the repayment period for the loan will be shortened to a maximum of five years.
A check on the One Motoring website by the Land Transport Authority shows that vehicles with OMV of less than S$20,000 in 2012 include the Toyota Corolla Altis (1,600cc), Toyota Vios (1,500cc), Honda Jazz (1,300cc) and Nissan Sylphy (1,500cc), which are the models commonly sought after by the average Singapore car buyer.
The authority said in its statement that the financing restrictions are ?necessary to encourage financial prudence among buyers of motor vehicles?.
?In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves on motor vehicles,? the authority added.
These new limits will not apply to loans taken by buyers of commercial vehicles or those buying motorcycles.
The last time the central bank put financing restrictions on motor vehicle loans was from February 1995 to January 2003, when it capped the loan at 70 per cent of a vehicle buying price and the maximum loan repayment period was seven years.
Source: http://news.insing.com/tabloid/central-bank-clamps-car-loan/id-f16d3f00
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