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Car buyers hold back despite relaxed financing rules

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A customer getting advice from car dealer Aisyah Amirah (in red attire) at the showroom of Doktor Kereta in Woodlands. (Yahoo photo: Safhras Khan)

Singaporean motorists are not rushing to car showrooms to sign on the dotted line despite the easing of vehicle financing rules last month.

Some current car owners are adopting a wait-and-see attitude and considering extending the shelf life of their cars by renewing their Certificates of Entitlement (COEs) instead.

The Monetary Authority of Singapore (MAS) relaxed the rules for the maximum loan-to-value (LTV) ratios and tenure for motor vehicle loans, which took effect on 26 May.

With the changes, buyers can borrow up to 70 per cent of the purchase price for cars with an open market value (OMV) of $20,000 or less, up from 60 per cent previously.

For cars with an OMV of more than S$20,000, buyers can borrow up to 60 per cent of the purchase price, up from 50 per cent previously.

The maximum tenure for all car loans had been raised from five to seven years.

To buy a new car or renew COE?

Despite the rule change, car owners that Yahoo Singapore spoke to prefer to hold back and do their sums first.

Civil servant Mohd Abdillah, who drives a five-year-old Sports Utility Vehicle (SUV), said that he doesn’t plan buy a new car soon. “I still need to make a high downpayment for the car and I think it is a bit taxing on me,” said Abdillah.

Robert Lee, a 40-year-old engineer, is also not in a hurry to replace his nine-year-old Mitsubishi Lancer. He is looking to extend the car’s COE for another five years after it expires next year.

“It is expensive still (even after the rule change). It is cheaper if I were to extend the COE of my car. I have been looking after my car well and invested a lot of money into the car,” said Lee, who services his car regularly.

Other car owners said that although COEs prices are expected to rise, they prefer to buy a new car.

Angeline Tan, a 38-year-old assistant manager, and her husband had been looking to replace their Volvo S60 and made a booking for a new Subaru Forester on 28 May, two days after MAS announced the changes.

“I think the MAS ruling could affect car prices. It could lead to more people buying cars, which in turn could increase the price of COEs,” Tan said.

COE prices rose across the categories on 8 June, the first outcome of bidding after the amended rules took effect. The COE price for Category A went up by 14.4 per cent to $53,694; Category B rose by 14.1 per cent to $56,000; while that for the Open Category increased by 10.9 per cent to $55,100.

Woon Ming, a stem cell broker, also bought a new car and said that his decision was not based on the MAS ruling. The 38-year-old has made payment for a new Mercedes C Class Coupe and is expected to take delivery of the car later this year.

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Stemcell broker, Woon Ming, has purchased a Mercedes C Class Coupe, which will be delivered to him later this year. (Photo courtesy of Woon Ming)

Woon was not worried about higher COE prices, saying that it made more sense for him not to renew the COE of his Mazda MX5.

“I bought the (Mercedes) car now because if I want to renew the COE, I need to pay about $50,000 and forfeit a further $17,000 (in preferential additional registration fee) just to keep the car for another 10 years.

“It is not worth it as I also will have to fork out more for road tax and send the car for repairs,” he said.

Drop in visitors at car showrooms

Car dealers in Singapore told Yahoo Singapore that they are seeing a drop in customer traffic at their showrooms despite the easing of rules.

Shaikh Abdul Aleem Mohamed Taifoor, General Manager of Mohamed Taifoor Motoring, said that while there has been an increase in customer inquiries, it has not translated into more sales.

Aisyah Amirah Abdul Rahman, Assistant Director of Doktor Kereta, pointed out that June is traditionally a slow month for sales because of the school holidays.

“We do see about a 20 to 30 per cent increase in inquiries since the (MAS) announcement was made but most of them were asking about the new ruling,” said 34-year-old Aisyah.

The full impact of the MAS ruling will be felt a few months later, Abdul Aleem said. It is relatively more expensive for car buyers as they have to pay more interest for new loans due to the longer tenure, the 29-year-old dealer added.

“My advice to buyers is to do their calculations carefully and only buy if they are able to commit themselves,” said Abdul Aleem.