The Monetary Authority of Singapore (MAS) recently announced the easing of their car loan restrictions. It took effect on the 27th of May 2016. Under these new guidelines, car buyers can now benefit from easier car loans. Buyers of used cars with open market value (OMV*) of SGD 20,000 or less can now borrow up to 70% of the purchase price. This is a significant increase from the previous 60%. Whereas buyers of vehicles with an OMV over SGD 20,000 can currently borrow up to 60% of the purchase price, compared to the previous 50%. The maximum loan tenure was also raised from five years to seven years.
The MAS implemented stricter guidelines in 2013 to help curb skyrocketing Certificate of Entitlement (COE) premiums and alleviate inflationary implications. It also served a long term purpose to encourage financial prudence and support efforts for a car-lite society. Since the implementation of these guidelines in 2013, there has been a moderation in demand for car loans in the country.
How will you benefit from this?
Current car buyers can benefit from more affordable car loans. Instead of having your loan divided up into five years you can now have it spread out in seven years. This means a significant reduction on your monthly repayments. This can be really beneficial for customers who might be put off by high monthly repayments.
Apart from this, car buyers can loan a bigger amount. For example, car buyers planning on purchasing cars with an OMV of SGD 20,000 can loan as much as SGD 14,000. The same goes for those who plan to purchase a vehicle with an OMV over SGD 20,000. Another example of this is with an OMV of SGD 30,000, car buyers can loan up to SGD 15,000. This is a significant increase can enable buyers that have low front money to purchase a car much faster. Plus, you can also afford to go for a better car insurance cover.
What’s the catch?
There is always a catch when it comes to car loans. Car buyers can expect even higher interest rates with extended loan tenure. Is owning a car much sooner worth the extra dollars? It really depends on your personal needs and how much interest you are willing to spend.
Should you purchase one now?
If you were already saving up for a new car under the old restrictions, then now would be the perfect time to buy one. COE and car prices in Singapore are dropping. With the new guidelines, there will be a significant demand for vehicles. Thus higher COE prices have been foreseen. Plus, we have been seeing much more affordable petrol prices making it much more affordable to maintain a car in Singapore. These new guidelines make for an ideal environment to own a car.
If you haven’t saved much front money, then do consider saving up a little longer. With a higher down payment, interest rates would be more manageable in the long run.
It is no surprise that these new car loan guidelines will benefit Singaporeans looking to purchase a new vehicle. What are your thoughts about the new guidelines? Please share your thoughts with us in the comments section below.
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