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The Straits Times
www.straitstimes.com
Published on Feb 27, 2013
Car dealers face bleak outlook as customers cancel orders


By Christopher Tan And Jermyn Chow

CAR dealers woke up yesterday to the bleakest outlook in years for the motor industry.

Some customers cancelled their orders on worries they would not be able to meet sharply higher down payments for their new vehicles.

Others were unwilling to fork out a hefty increase in taxes for luxury cars.

The drastic pullback in demand led to industry veterans predicting a more than 50 per cent drop in certificate of entitlement (COE) prices within the next two tenders.

COEs are needed to buy new cars. Premiums are now hovering at near-record levels of $78,000 for cars up to 1,600cc and $93,000 for cars above 1,600cc.

Mr Karsono Kwee, executive chairman of multi-brand Eurokars Group, said: "In my 28 years in the trade, this is the most serious development I've seen."

The motor industry was hit by a double whammy on Monday.

The Monetary Authority of Singapore said that from yesterday, car buyers must place down payments of at least 40 per cent of the purchase price and also settle car loans within five years. Before this, the market was unregulated for a decade.

Meanwhile, the Government also announced a tiered Additional Registration Fee (ARF) which can add $100,000 or more to the sticker price of a top-end car.

In the tiered scheme, a car with an open market value (OMV or approximate cost price) of up to $20,000 will be taxed at the current rate of 100 per cent. The next $30,000 will be taxed at 140 per cent, and any OMV above $50,000 at 180 per cent.

The moves led to buyers rushing on Monday night to beat the deadline before the new loan rules came into effect. Yesterday, it was a rush of a different sort.

Asked if there had been order cancellations, a spokesman for the Komoco group - which sells Hyundais, Chryslers and Ferraris - said: "I'm afraid there have been some." One millionaire car enthusiast said he cancelled the purchase of the new $1.16 million (without COE) Ferrari F12, which will cost $300,000 more under the new rules.

The new ARF scheme will be applied on cars registered with COEs obtained starting next month. This has led to hot demand for a small pool of existing Open Category COEs which dealers hold in reserve.

These COEs, which are transferable, are now trading at premiums of up to $20,000 - still only a fraction of the additional ARF payable on many luxury cars.

Industry players expect COE prices to tumble within the next two tenders. Mr Anthony Lim, director of parallel importer Kenso Leasing, expects them to "plunge by more than half".

Financial institutions are also bracing themselves for a drop in business. Ms Phang Lah Hwa, OCBC Bank's head of consumer secured lending, said the loan curbs "will certainly impact our car loans business".

christan@sph.com.sg

jermync@sph.com.sg
Listen to the people with vested interests making comments on the new car loan financing rules. Interesting.

http://www.todayonline.com/singapore/new...ilies-most
(27-02-2013, 09:14 AM)Musicwhiz Wrote: [ -> ]Listen to the people with vested interests making comments on the new car loan financing rules. Interesting.

http://www.todayonline.com/singapore/new...ilies-most
Not surprising at all. Who would shoot down their own business?

Next thing they will trot out would be how many people who will become unemployed if their business is affected by this measure.
(27-02-2013, 09:14 AM)Musicwhiz Wrote: [ -> ]Listen to the people with vested interests making comments on the new car loan financing rules. Interesting.

http://www.todayonline.com/singapore/new...ilies-most

Based on these responses, I think the new rule is effective. I think many people mix up between needs and wants.
(27-02-2013, 09:14 AM)Musicwhiz Wrote: [ -> ]Listen to the people with vested interests making comments on the new car loan financing rules. Interesting.

http://www.todayonline.com/singapore/new...ilies-most

Policy making is liked that. No matter how you formulate, some will be unhappy.
Anyway, if they are short on cash but still want/need a car, the resale market has lots of cars with 2-3 years of COE left.

Buying a new car is a thrill but the thrill will die now faster than you think...
The policy intent is to drive prudence in spending. But again our central bank made some politically costly mistakes:

1. Earlier they relaxed the car loan from 8 to 10 years. This should never been done, as whether bankers or property developers, the sellers have ways to come up with ways to entice the buyers.

2. This move is too sudden, no warning at all. Cut loan tenure to 5 years, cash upfront 40 to 50%. It is worse than property measures.

3. from this move, I am not sure if they collect data and monitor the lending behaviour closely each month.

While this is a policy I say good, they made the car owners upset, the new car sales pp angry and the bank loans all upset. Lose lose lose for them in all counts.



> Policy making is liked that. No matter how you formulate, some will be unhappy.
> Anyway, if they are short on cash but still want/need a car, the resale market has lots of cars with
> 2-3 years of COE left.
(27-02-2013, 10:39 AM)Contrarian Wrote: [ -> ]The policy intent is to drive prudence in spending. But again our central bank made some politically costly mistakes:

1. Earlier they relaxed the car loan from 8 to 10 years. This should never been done, as whether bankers or property developers, the sellers have ways to come up with ways to entice the buyers.

2. This move is too sudden, no warning at all. Cut loan tenure to 5 years, cash upfront 40 to 50%. It is worse than property measures.

3. from this move, I am not sure if they collect data and monitor the lending behaviour closely each month.

While this is a policy I say good, they made the car owners upset, the new car sales pp angry and the bank loans all upset. Lose lose lose for them in all counts.

Just to comment on your points:-

1) The change was from 7 years max to 10 years max, not 8 years.

2) There was ample warning given in the newspapers, with rumours of the Govt reviewing financing conditions for car loans.

3) It was reported that the average car loan was $88,000 for 2012, up from $82,000 in 2011. This is quite a significant sum of money and would indicate many people are stretching it. 8 out of 10 car buyers also take out a 90% to 100% loan and stretch it over the maximum 10 years. I guess the Govt obviously will have such statistics to back up the measures.

I am supportive of the measures as this means people will be more financially prudent when it comes to purchasing a depreciating asset.
(27-02-2013, 10:39 AM)Contrarian Wrote: [ -> ]The policy intent is to drive prudence in spending. But again our central bank made some politically costly mistakes:

Good governance and good politics sometimes do not come together. This is the hallmark of earlier PAP governments, making good policies and eventually letting those policies make good politics out of it. I wish for a return for courageous decision making, rather than taking easy way out or sleeping on the job.
(27-02-2013, 10:54 AM)thefarside Wrote: [ -> ]
(27-02-2013, 10:39 AM)Contrarian Wrote: [ -> ]The policy intent is to drive prudence in spending. But again our central bank made some politically costly mistakes:

Good governance and good politics sometimes do not come together. This is the hallmark of earlier PAP governments, making good policies and eventually letting those policies make good politics out of it. I wish for a return for courageous decision making, rather than taking easy way out or sleeping on the job.

Well said man...
(27-02-2013, 11:52 AM)Contrarian Wrote: [ -> ]
(27-02-2013, 10:54 AM)thefarside Wrote: [ -> ]
(27-02-2013, 10:39 AM)Contrarian Wrote: [ -> ]The policy intent is to drive prudence in spending. But again our central bank made some politically costly mistakes:

Good governance and good politics sometimes do not come together. This is the hallmark of earlier PAP governments, making good policies and eventually letting those policies make good politics out of it. I wish for a return for courageous decision making, rather than taking easy way out or sleeping on the job.

Well said man...

I fully agree with this statement too.

In my personal opionion to read between the lines of the recent measures, couple of things might be able to infer from the government stance.

1. To pacify the middle and lower income group that the government is able to look after their welfare by doing a "Robin Hood" tax measures.

2. The statistics gathered is showing a credit bubble in the wrong social class, ie. the middle and lower income group is having a higher proportional of debt as compared from the upper income class.
The statistics we can gather from MAS on bank debts loans are an average figure, lumping all income groups together. It doesn't show segregated categories (eg. top 20%, bottom 20%) with their corresponding debt level. It would be good if someone could prove me wrong on this though.

3. The government is expecting interest rate rise and is worried about the impact of it onto those income groups that could not afford yet are accumulating.
Contrary to what property agents and people with vested interests are saying, interest rate may be going up sooner than later.
Check out the FDs interest rate at various banks or for those serviced with RMs, check out the interest rate on liquid accounts. It seems to be inching upwards.
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