Hit by the triple whammy of loan curbs, cheaper new cars and higher interest rates, used-car dealers here — some of whom failed to close a single deal in recent weeks despite holding a fire-sale — made another appeal yesterday to the authorities, just a week after their initial appeal was rejected.
Following a meeting between the Singapore Vehicle Traders Association (SVTA) — which represents more than 400 used-car dealers — and the Monetary Authority of Singapore (MAS), SVTA President Neo Tiam Ting said the association again proposed that the authorities do not impose the financing restrictions on cars that were bought by the dealers before the curbs kicked in on Feb 26.
Mr Neo said: “We are trying to work towards a solution where second-hand car dealers can sell these vehicles under the old rules, that is, bigger loan amounts and longer tenures.”
While the MAS declined to comment on the meeting, Mr Neo said the authorities’ doors were not closed. The MAS was “willing to meet up again”, he added.
Under the loan curbs, the tenures of car loans are capped at five years, with the maximum loan amount pegged to 50 or 60 per cent of the vehicle’s purchase price, depending on the Open Market Value. Previously, there was no cap on the loan, and buyers could take up to 10 years to repay the money.
In response to the SVTA’s original appeal, the MAS had sent a letter to the association last Wed. An MAS spokesman told this newspaper earlier that in its response last week, it “highlighted that the new and used motor vehicle markets are essentially linked”. He added: “If used motor vehicles were exempt from the financing restrictions, the demand for these vehicles would push their prices up and drive demand back to the new motor vehicle market, resulting in higher COE (Certificate of Entitlement) prices and compromising the policy objective.”
The MAS has also made some concessions, such as allowing depreciation to be taken into account when calculating the Open Market Value of a used motor vehicle to determine the loan-to-value ratio for car loans. It has also stressed that the curbs are not intended to be permanent, and will be adjusted as market conditions change.
On Wednesday, in the latest round of COE bidding — the second since the loan curbs were rolled out — the premium for small cars continued to slide to S$64,209 — the lowest in six months. While the COE for bigger cars rebounded to S$73,900, it was still some way below previous levels.
Apart from new cars being cheaper — which brought people back to the car showrooms — the interest rates for loans for used cars have also gone up, used-car dealers said. They were informed by some of the banks of the increase in recent weeks.
Mr Kelvin Tan of Straits Euro Motors said his firm has suffered a loss of about S$50,000 in the past two weeks, as it slashed prices to draw customers.
Mr Alex Wong, a manager at Hua Yang, said the firm would be shutting down two outlets next month. Pointing out how the falling COE prices have resulted in brisk sales for new cars, Mr Wong questioned the MAS policy which has seemingly hurt used-car dealers more. He said the company’s Turf City branch only sold two cars in the past fortnight.
Mr Teh Han Sing, Managing Director of Chin Lian Seng Motor Trading, said the local banks have increased interest rates for used-car loans to 2.88 per cent, up from 2.28 per cent.
Some financing companies such as Hitachi Capital and Century Tokyo Leasing have raised it further to 3.28 per cent, Mr Wong said.
Mr Wong added: “The banks are increasing their interest rates to make up for the shorter loan tenure. But our customers are very unhappy about this. Some of them have low budgets of maybe S$500 a month. But now they have to pay S$100 to S$200 more, which they cannot afford.”
Meanwhile, used-car dealers at Turf City said that their landlord has rejected their request for lower rents because they had just signed three-year tenancy agreements last year. Mr Teh, who said he has lost more than S$100,000 since the loan curbs kicked in, said: “The MAS should have told us much earlier, so that we don’t bring in and keep so much stock. I really don’t know how to continue.”
SOURCE
MAS is doing the right thing by not succumbing to the dealers' request. Imagine the main bulk of the cars brought in by the dealers before the new ruling came about being not applicable to it, it would render the new law completely useless and nothing will change.
It is probably time for the dealers to "pay back" with the good past two years they had when COE was skyrocketing and they adjust their resale prices accordingly even though most of them have low paper value.
Right now, they are bleeding. It will be interesting to see how many will manage to survive by the end of this year.
No comments:
Post a Comment