MAS imposes restrictions on private car loans

The Monetary Authority of Singapore is imposing restrictions on loans for private cars to safeguard against borrowers defaulting on their repayments.

Beginning on February 26, the central bank said consumers will be limited to borrowing 60 per cent of the purchase price of a motor vehicle when the open market value (OMV) is S$20,000 or less.

A tighter limit of 50 per cent will be imposed when the OMV is more than S$20,000.

The MAS is also capping the tenure of a motor vehicle loan at five years.

"The financing restrictions are necessary to encourage financial prudence among buyers," the MAS said in a statement.

"In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves," it said.

The new restrictions do not apply to loans for either commercial vehicles or for motorcycles.

For re-financing facilities, only the cap on loan tenure applies.

The MAS previously had in place financing restrictions on car loans from February 1995 to January 2003.

SOURCE

What a surprising move by MAS!! Well it seems that this isn't the first time they've done this according to the report above. I can safely say it will be very hard to hit $100k COE now. Next week will be the first round bidding for March, it will be very interesting to see how the prices go,

Limiting buyers to only 60% loan will take a huge hit on premium car dealers, namely the BMWs, Merc etc etc. A $180k Merc C180K will now require buyers to pay a downpayment of $90k in cold hard cash, with the balance being repaid within 5years.

This will weed out buyers who leverage too much on bank loans. To those who are cash rich, it is time to pounce!!