Easing of car loan curbs sends mixed signals

People who buy cars on larger loans and longer tenures are normally those who are marginally able to buy a new car in the short term ("Bigger car loans over longer tenures as MAS eases curbs"; yesterday).

For a Category A buyer who can borrow up to 70 per cent of the purchase price with a loan tenure of seven years, the long-term implication is that the buyer is paying more for his car.

Mr Ang Hin Kee, deputy chairman of the Government Parliamentary Committee for Transport , was quoted as saying that lifting the previous restrictions would make it easier for the average buyer to compete for certificates of entitlement (COEs) against companies such as Uber-owned Lion City Rental, which has secured about 1,700 COEs in the past two months ("Car buyers fear COE prices will be driven up"; yesterday).

I beg to differ.

The individual marginal buyer who is just able to fund his purchase will end up paying higher COE prices, as well as higher and more instalments, as private companies have the means to secure their COEs with higher bids.

Easing car loans just three years after implementing them makes it appear as though the Monetary Authority of Singapore (MAS) and Land Transport Authority (LTA) policies are not working in synergy.

LTA has been spending millions of dollars to make Singapore a "car-lite" nation, and it can succeed only when more people opt not to buy cars.

If the current easing of curbs does not achieve the desired results, is MAS going to ease its curbs further?

MAS and LTA should work together to come up with more consistent long-term policies that work, instead of changing the goal posts from time to time.

Ronnie Lim Ah Bee

A version of this article appeared in the print edition of The Straits Times on May 28, 2016, with the headline 'Easing of car loan curbs sends mixed signals'. Print Edition | Subscribe