Panel answers readers' burning questions
A panel comprising Straits Times senior transport correspondent Christopher Tan, Motor Traders Association president Cheah Kim Teck and past president of the Society of Financial Service Professionals Leong Sze Hian answered readers' questions during a live blogging session yesterday.
Here are some highlights of the hour-long event.
What is the outlook for certificate of entitlement (COE) premiums in the next six months? Should I buy now or wait?
Mr Cheah: It is too early to judge. There are too many moving parts affecting the value of COE. My gut feel is that this will ease the COE premiums but I don't see them crashing or tumbling down. COE premiums cannot move down rapidly unless the supply increases.
Mr Leong: COE premiums may fall. Fewer people will be able to afford cars, and there will be less demand for COEs. But credit companies may come up with more creative packages. It's hard to say how much COE will go down by.
Mr Tan: There will be 25 per cent of people who will rush in. But most will hold back to monitor how prices move.
The new measures will be a game-changer.
For those who need a car to take their children to school or elderly parents for medical appointments, and do not have the money for the 40 per cent down payment, what can they do to own a car?
Mr Tan: They can consider leasing a car, joining a car-sharing club, car pool or take a taxi. Leasing best replicates the benefits of car ownership although the monthly instalments are higher.
For instance, the lease instalment for a Mazda3 at today's COE prices is $2,000 or so a month, against $1,300 if the car is bought on hire purchase.
Mr Leong: You can buy used cars that have one or two years left. Cash for the down payment should be easier for these cars.
What is the impact of the recent changes on the used car market? Does the new loan-to-value ratio apply to the purchase of used cars?
Mr Cheah: Higher-value used cars are unlikely to drop much, but I don't see it going up. For mass-market cars, there's a lot of uncertainty. In the near term, there may be some depreciation before you see a new normal.
Mr Tan: The value of used cars will definitely go down. Your trade-in value will be depressed because traders will offer an artificially low price because of the uncertainly.
In the light of the newly changed regulations, will there be specific changes to insurance policies in terms of replacement or market value?
Mr Leong: Most motor insurance policies are insuring on market replacement value basis. So you don't have to worry if car prices have gone up in the market. But if car prices go up, then premiums will go up as well.
What is an advisable combined income for a family looking to buy a car? What about a single working adult?
Mr Leong: Because of the down payment changes, you must have at least six months' cash for household requirements in the bank before you can think about buying a car.
After paying for your car and all your needs, are you in the red or black? In many bankrupt cases, people took car loans, and suddenly found they can't pay.
I hope to buy my first car and am looking at a used five- year-old Toyota Altis either as a normal car or a weekend car. With the changes, does it make sense to buy a weekend car?
Mr Cheah: From a financial standpoint, the considerations will be the same. It's whether it meets your needs and objectives.
The changes are neutral to weekend cars.
Mr Leong: If you must have a car, the cheapest option now is the weekend car.
How many car loans can I take? Can I also apply for a bank loan for the cash portion (now 40 to 50 per cent of my purchase)?
Mr Tan: Taking two loans for one car is not prudent. In the light of the current rules, the borrower must sign and declare he has not borrowed from anyone else. Anyway, taking credit lines or borrowing from licensed moneylenders means having to pay high interest rates of at least 12 per cent a year.
Will motorists switch to commercial vehicles instead of private cars, since commercial vehicles enjoy a 30 per cent road tax rebate and cheaper road tax?
Mr Tan: Commercial vehicles have limitations or curbs in terms of comfort, speed and safety. Also, you are not supposed to use them to ferry family members. From a money point of view, buying a commercial vehicle may make sense, with the loan restrictions. But you have to bear in mind LTA (Land Transport Authority) regulations.
In your opinion, what is a reasonable quality of public transport in terms of peak-hour crowdedness and frequency of buses and trains, to coax car users to switch to public transport?
Mr Cheah: It's a fact of life that public transport is congested and there's a lack of privacy. A bigger problem is frequency. And there are some places that are not so accessible by public transport.
Mr Tan: Both men have touched on accessibility, connectivity, predictability and relativity of public transport. Public transport is not going to be as good as private transport. You have to accept that. It is about how big the gap is. I believe, in Singapore, if you own a car, it's first-class travel. But the chasm between private and public transport is big. The relativity has got to be narrowed.
[For the full proceedings from yesterday's forum, go to http://stcarforum.tumblr.com/]
DO THE MATHS
Because of the down payment changes, you must have at least six months' cash for household requirements in the bank before you can think about buying a car... In many bankrupt cases, people took car loans, and suddenly found they can't pay.
- Mr Leong Sze Hian, a former president of the Society of Financial Service Professionals