How Does The Easing of Car Loan Rules Affect You?
From 27 May 2016, the Monetary Authority of Singapore (MAS) has revised the rules on motor vehicle financing. The maximum loan-to-value (LTV) ratios and loan tenure allowed for motor vehicle loans will be eased, although there will still be restrictions in place for the long term.
Why the Easing of Guidelines?
According to MAS deputy managing director Mr Ong Chong Tee, when the measures were first introduced in 2013, the immediate aim was to help restrain escalating COE premiums and consequent inflationary measures in Singapore. However, these adjustments after just three years follow the sustained moderation in Certificate of Entitlement (COE) premiums, and resulting inflationary pressures over the these few years.
However, the LTV and loan tenure framework will still be in place for the long term, to promote financial prudence and to help support the promotion of Singapore as a car-lite society.
What Exactly Has Changed?
| Open Market Value of motor vehicle | Maximum LTV* | Maximum loan tenure |
|---|---|---|
| Less than or equal to $20,000 | 70% (previously 60%) | 7 years (previously 5 years) |
| More than $20,000 | 60% (previously 50%) |
* LTV is the amount of the loan expressed as a percentage of the purchase price of the motor vehicle. The purchase price includes relevant taxes and price of the COE.
The cap on loans for vehicle purchases has been raised, from 60% to 70% for vehicles with an Open Market Value less than or equal to $20,000. This means that buyers can take loans for 70% of the vehicle’s cost. As for vehicles with a value above $20,000, the cap has been raised from 50% to 60%.
The maximum loan tenure has also been increased from 5 years to 7 years.
What Does This Mean for You?
If you’re looking to buy a new car, the loan tenure stretching up to 7 years instead of 5 you can spread your instalments over a longer period. This might make a new car more affordable for you.
Furthermore, now that a larger loan can be taken, you do not need to pay so much in terms of downpayment.
If you’re in the market for a used car, the increase in loan tenure means you now have more options to consider cars with up to 7 years of COE validity.
However, there is some speculation that COE premiums may go up due to the rising demand. If you’re looking to purchase, we’d advise you not to wait too long!
