Second-hand car dealers sell off most of their stock; dip in supply expected

The glut in used cars is over and a shortage looms.

Second-hand car dealers have managed to sell most of the cars in their inventory after a two-month reprieve from the authorities.

At the same time, they are not buying used cars as drivers hold on to their wheels in the wake of drastic loan curbs.

A Land Transport Authority spokesman said about 4,600 of the 7,000 used cars that dealers had acquired before the car loan restrictions kicked in had been sold as of Monday.

This happened after the Monetary Authority of Singapore, responding to repeated appeals from used-car dealers, last month lifted loan curbs on these vehicles for 60 days.

This reprieve will last until June 4, after which anyone buying a used car will not be able to take a loan of more than 60 per cent of the car's purchase price. Also, the tenure must be no more than five years.

These rules - for both new and used cars - took effect on Feb 26. Previously, car buyers could borrow up to 100 per cent of the purchase price and repay the loan over 10 years.

Mr Raymond Tang, secretary of the Singapore Vehicle Traders Association (SVTA), said most of the cars that have been sold so far are mid- and lower-end models, such as cars with an engine capacity of 1,600cc or below and mass- market models like the Toyota Camry and Honda Civic.

Newer cars have also been popular.

Those left unsold tend to be the higher-end models, he added.

Used-car stocks will run low after the 60-day window, predicted Mr Tang, who is also the director of Yong Lee Seng Motor.

He said: "Fewer people are selling their cars because, at this time, the prices offered by used-car dealers are low. A lot of consumers won't want to sell."

Mr Mike Wee, director of Mayfair Motoring, said he cleared his stock of about 30 cars under the old scheme within three weeks.

But he, too, expects sales to slow down after June 4.

"Many people are not changing their cars. It's the higher down payment that kills," said Mr Wee.

Mr Tang said the SVTA is still in talks with the authorities on easing loan restrictions for used cars.

The SVTA has proposed that used-car buyers be able to take an 80 per cent loan with a tenure of eight years.

Said Mr Tang: "We've found that this is a comfortable range that consumers can afford."

Governance analyst Lim Jun Yao, 28, is among those who bought a used car during the 60-day window.

For three months he mulled over getting a new car. In the end, the combination of a higher loan and lower car price prompted him to plump for a used car.

He took a 90 per cent loan and bought a two-year-old Volkswagen Polo for $75,000.

The same model cost $109,000 at the beginning of this year, he said.

"I wanted a car to drive my family around, but prices were still expensive and it was too much to pay 40 per cent of the price up front," he said.