Bigger car loans, fewer defaulters
Motor loan delinquency rates at 'very healthy levels' despite easing of curbs last year
Since the easing of car loan curbs last May, buyers are taking out bigger loans while the number of defaulters has gone down, a study by the Credit Bureau Singapore (CBS) has found.
In December last year, motorists borrowed an average of $65,868 to finance both new and second-hand car purchases.
This is an increase of 22.5 per cent from last May, when the Monetary Authority of Singapore (MAS) eased the curbs, and a 10.9 per cent increase from December 2015, when the average loan was $59,408.
MAS had announced that for cars with an open market value (OMV) of $20,000 or less, up to 70 per cent of the purchase price can be borrowed, up from 60 per cent.
For cars with OMVs of more than $20,000, up to 60 per cent of the purchase price can be borrowed, up from 50 per cent.
The loan tenure was increased to seven years, from five previously.
The restrictions were put in place in 2013. Previously, buyers were allowed to take a loan for 100 per cent of a car's purchase price, with a tenure of up to 10 years.
The study, based on the 244,488 car loan holders in the CBS database, found that despite the heavier debt commitment, the number of delinquent debtors had dropped.
In December last year, about 1.3 per cent of car loan holders had an instalment that was overdue by more than 30 days, a drop from the delinquency rate in December 2015.
CBS executive director William Lim said: "Motor loan delinquency rates have dropped to very healthy levels.
"The delinquency rate of 1.3 per cent in December last year represents a 66 per cent drop from the high of 3.82 per cent recorded in 2012 prior to the institution of curbs on motor vehicle loans by MAS."
He added that the larger loans and lower delinquency rates were a result of lenders offering responsible loans based on more comprehensive data, and car buyers practising prudence ahead of forecasts of a sluggish economy.