02-03-2013, 10:16 AM
The Straits Times
www.straitstimes.com
Published on Mar 02, 2013
Credit firms push up car loan interest rates
They are not bound by new MAS rules and offer more flexible financing
By Christopher Tan Senior Correspondent
WITH restrictions imposed on the car loan quantum and loan period, at least two credit companies have raised interest rates to ride on the greater demand for more flexible financing.
Credit companies do not come under the purview of the Monetary Authority of Singapore (MAS), which announced on Monday that loans for new and used cars are now restricted to 50 per cent or 60 per cent of purchase price, and must be repaid within five years.
Observers expect that many potential car buyers will not be able to stump up the hefty down payments and that some will seek alternative financing sources like credit companies - despite the higher interest rates.
The Straits Times understands that Century Tokyo Leasing and Hitachi Capital have raised car loan interest rates by about one percentage point each.
Century's rates are now between 2.98 per cent and 3.28 per cent a year while Hitachi's are 3.25 per cent to 3.88 per cent.
Century's previous rate was 2.28 per cent while Hitachi's were 2.28 per cent for used cars and 1.88 per cent for new cars.
Both still offer loan tenures well beyond five years.
Banks and finance companies, which are regulated by MAS, have not revised rates despite speculation that they will do so to make up for a foreseeable plunge in earnings because of the loan restrictions. Their rates for new cars remain at around 1.88 per cent.
The move by the two credit companies did not take many by surprise. Mr Anthony Lim, director of credit company Kenso Leasing, said credit companies have been swamped with car loan applications because of the new rules. "We are also looking at raising our rates," he admitted.
Car manufacturer-owned finance firms also intend to support their customers.
According to Mr Say Kwee Neng, managing director of authorised BMW agent Performance Motors, BMW Financial Services financed up to three in 10 cars it sold before the loan restrictions.
He expects the figure to rise. Car manufacturer-owned financiers are also not legally obliged to comply with the MAS curbs.
A BMW Asia spokesman told The Straits Times: "We will do everything we can to support our customers without contravening the spirit of the law."
When contacted, the MAS said it is aware that "there are entities unregulated by MAS that also finance motor vehicle purchases".
It added, however, that such lenders account for less than 3 per cent of total motor vehicle loans.
An MAS spokesman said the authority will address "the risk of leakage" through financiers it does not govern in two ways.
It has instructed financial institutions that provide funds to credit companies to ensure that they comply with the restrictions.
It is also working with other government agencies "to strengthen the effectiveness of the car financing restrictions".
It would not elaborate on what it meant but observers expect it to ask the Ministry of Trade and Industry to pressure companies which provide car loans to keep within the new curbs.
Meanwhile, industry watchers said new-fangled schemes are likely to proliferate to help buyers overcome the heftier payments. These include balloon or deferred payment schemes, credit card payments, guaranteed buyback plans and overtrade.
The last refers to a practice of paying a higher price for a buyer's trade-in car to help him with the down payment.
christan@sph.com.sg
www.straitstimes.com
Published on Mar 02, 2013
Credit firms push up car loan interest rates
They are not bound by new MAS rules and offer more flexible financing
By Christopher Tan Senior Correspondent
WITH restrictions imposed on the car loan quantum and loan period, at least two credit companies have raised interest rates to ride on the greater demand for more flexible financing.
Credit companies do not come under the purview of the Monetary Authority of Singapore (MAS), which announced on Monday that loans for new and used cars are now restricted to 50 per cent or 60 per cent of purchase price, and must be repaid within five years.
Observers expect that many potential car buyers will not be able to stump up the hefty down payments and that some will seek alternative financing sources like credit companies - despite the higher interest rates.
The Straits Times understands that Century Tokyo Leasing and Hitachi Capital have raised car loan interest rates by about one percentage point each.
Century's rates are now between 2.98 per cent and 3.28 per cent a year while Hitachi's are 3.25 per cent to 3.88 per cent.
Century's previous rate was 2.28 per cent while Hitachi's were 2.28 per cent for used cars and 1.88 per cent for new cars.
Both still offer loan tenures well beyond five years.
Banks and finance companies, which are regulated by MAS, have not revised rates despite speculation that they will do so to make up for a foreseeable plunge in earnings because of the loan restrictions. Their rates for new cars remain at around 1.88 per cent.
The move by the two credit companies did not take many by surprise. Mr Anthony Lim, director of credit company Kenso Leasing, said credit companies have been swamped with car loan applications because of the new rules. "We are also looking at raising our rates," he admitted.
Car manufacturer-owned finance firms also intend to support their customers.
According to Mr Say Kwee Neng, managing director of authorised BMW agent Performance Motors, BMW Financial Services financed up to three in 10 cars it sold before the loan restrictions.
He expects the figure to rise. Car manufacturer-owned financiers are also not legally obliged to comply with the MAS curbs.
A BMW Asia spokesman told The Straits Times: "We will do everything we can to support our customers without contravening the spirit of the law."
When contacted, the MAS said it is aware that "there are entities unregulated by MAS that also finance motor vehicle purchases".
It added, however, that such lenders account for less than 3 per cent of total motor vehicle loans.
An MAS spokesman said the authority will address "the risk of leakage" through financiers it does not govern in two ways.
It has instructed financial institutions that provide funds to credit companies to ensure that they comply with the restrictions.
It is also working with other government agencies "to strengthen the effectiveness of the car financing restrictions".
It would not elaborate on what it meant but observers expect it to ask the Ministry of Trade and Industry to pressure companies which provide car loans to keep within the new curbs.
Meanwhile, industry watchers said new-fangled schemes are likely to proliferate to help buyers overcome the heftier payments. These include balloon or deferred payment schemes, credit card payments, guaranteed buyback plans and overtrade.
The last refers to a practice of paying a higher price for a buyer's trade-in car to help him with the down payment.
christan@sph.com.sg