The motor industry has found ways to get around car loan curbs - a development that is keeping vehicle demand and certificate of entitlement prices buoyant.
Checks revealed that used car dealers, parallel importers and credit companies offer financing that is effectively 80 per cent to 90 per cent of a car's purchase price, with repayment of up to 10 years.
This exceeds the Monetary Authority of Singapore's (MAS) 2013 curb, which restricts loan quantums to not more than 60 per cent of the purchase price and a repayment period of up to five years.
The curb is breached by offering one or more of the following:
• Overtrade - a practice of offering a buyer substantially more for his trade-in vehicle. This is practised mostly by authorised agents.
• Disguised leases - in a lease agreement, the car is registered under the lessor's name, and the monthly rental is substantially higher than instalments in a hire-purchase. But dealers are readily offering "leases" that allow the car to be registered under the end-user's name and with relatively low monthly payments via a buyback offset.
• Invoice inflation - if a car costs $170,000, the seller will inflate it to, say, $270,000, so as to secure an 80 per cent loan from the bank.
• Balloon scheme - a seller subtracts the car's scrap value from the instalment calculation, resulting in lower monthly payments. At the fifth year, the consumer "scraps" the car to settle the outstanding amount, or refinances the car.
All the schemes come with higher interest rates, but consumers who cannot afford to fork out a hefty down payment under the MAS ruling have been snapping them up.
An MAS spokesman said: "As part of MAS' supervision of financial institutions (FIs), we check on their compliance with the rules. If an FI breaches the rules, MAS will not hesitate to take regulatory action."
The MAS, however, would not say if any lender has actually been taken to task for any of these schemes. It added that it expects lenders "to take reasonable steps to ascertain the veracity of the purchase prices of cars quoted in loan applications".
Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said the various schemes that bypass the loan curb show that "there is a lot of grey areas".
"We hope MAS can enforce it better," he added. "Then we can have a more level playing field."
A businessman who bought a used Bentley Flying Spur recently told The Straits Times that the invoice for the car - which was selling for $400,000 - was inflated to $700,000. Mr Y.Z. Liu, 66, said: "It was blatant cheating. If the car was indeed $700,000, then the first owner should be compensated."
Mr Michael Lim, president of the Singapore Vehicle Traders Association, said the association of used car dealers and parallel importers has been appealing to the Finance Ministry for the loan limit to be raised.
He played down the high financing deals and said: "Most of these are rental and leasing packages."
However, classified ads in The Straits Times and car portal sgCarMart are rife with offers of "low down payment", "80 per cent loan" and repayment over 10 years.
One credit company, Century Tokyo Leasing, has been advertising a balloon scheme that promises a monthly instalment of about $800 for a Honda Vezel - nearly 40 per cent lower than the $1,250 required for a normal hire-purchase deal.
Mr Anthony Lim, a veteran car financier, said: "These companies are flush with foreign funds and they are eager to do business here. But... if a loan contract is in breach of the law, it is not binding. So the lender may have no recourse if the borrower decides to stop paying."