Singapore

Car showrooms see rise in traffic after new loan measures

Car showrooms see rise in inquiries after news of new loan measures

For three years, Mr Koh Swee Liong has been waiting for certificate of entitlement (COE) prices to fall.

With his COE expiring in January next year, the 50-year-old family man's sense of urgency is rising as the clock runs down.

Mr Koh, who works in operations at Changi Airport, was one of the visitors who was checking out cars at the Toyota showroom in Leng Kee Road. The New Paper visited seven showrooms yesterday afternoon.

This follows Thursday's announcement from the Monetary Authority of Singapore (MAS) that it is revising car loans effective yesterday.

MAS' revised guidelines - with a higher loan amount and a longer loan tenure - mean that monthly instalments will be more affordable although buyers will be paying more interest in the long run. (See table above.)

Mr Koh, a father of three, sees the car as a necessity as his 85-year-old mother lives with the family, and they go out on weekends.

"You know when old people go out, they cannot walk long distances. You have to take them to the doorstep," said Mr Koh, who was looking at a Toyota Wish.

Mr Koh, who has not made up his mind on buying, said: "The new rule will make it easier as it will lighten the down payment. (The rule change) will also mean that repayment of the loan will be less 'xiong' (tough in Hokkien)."

The effects of the changes in loan policy are complex - car buyers fear that COE prices and interest rates might rise.

Mr Koh is going to wait a little longer and see if it is worthwhile to buy a new car, depending on COE prices.

If not, he may just extend his COE to save money.

An increase in interest rates could also negate the effect of the changes.

Said Mr Anthony Ong, 42, who owns a four-year-old car: "It still depends on COE prices and loan interest rates. The interest rate can kill us."

Mr Ong was waiting for his car to be serviced at the Honda showroom in Alexandra Road.

Businesses that TNP spoke to, however, are convinced that sales of cars will rise in the coming months.

Said Mr Alvyn Ang, director of operations for Mitsubishi, Kia and Citroen marques: "The news broke less than 24 hours ago and the crowd is already there... There have been many more inquiries today.

"For most people, the main problem is the down payment. A longer tenure will help make the car more affordable for people because they pay less per month."

Mr John Ling, 53, founder of SJ Motor Enterprise, agreed. He said: "I am confident that more people will come forward and buy. The new ruling is a helpline for younger families and those with a lower income as they can pay less every month."

Mr Koh said that if he does buy a new car, he appreciates the change in the down payment amount the most.

"(The rule change) will help more people... more average people can afford a car now. I have a family and I struggled when prices were high because I needed the car," he said.

He said he has been dealing with anxiety in the past three years over the decision of when to buy a car.

At a glance

Car dealer John Ling, founder of SJ Motor Enterprise, demonstrates the difference between the old and new car loans using a Honda Vezel, which has an open market value (OMV) of $20,000:

5-YEAR LOAN (OLD)

Price tag of car: $100,000

Down payment: $40,000

Loan: $60,000

Current interest rate: 2.78%*

Total interest over loan period: $8,340

Monthly instalment: $1,139

Total cost of car: $108,340

7-YEAR LOAN(NEW)

Price tag of car: $100,000

Down payment: $30,000

Loan: $70,000

Current interest rate: 2.78%*

Total interest over loan period:$13,622

Monthly instalment: $995.50

Total cost of car: $113,622

*Dealers expect interest rates to increase.

CarsCOESingaporeCarsalesmarketMonetary Authority of Singapore