27-02-2013, 07:22 AM
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
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