The Monetary Authority of Singapore (MAS) is looking into measures to curb circumvention of existing rules on car financing, the agency said in a Forum letter to The Straits Times published today.
MAS was responding to a Sunday Times report on Aug 18 that highlighted how individuals registered private cars as rental cars to get around loan curbs.
This allowed them to be exempted from MAS' car-financing rules that restrict loans to no more than 70 per cent of the purchase price and seven years of tenure.
Mr Jerome Lee, director of corporate communications at MAS, said in the letter: "Rental cars fall under the broad category of private-hire cars which are used by individuals and companies for hire and reward.
"MAS has exempted the purchase of private-hire cars from the car-financing rules so as not to constrain credit to companies and individuals who rely on the use of private-hire cars for their businesses and livelihoods."
He added that individuals who exploit this private-hire car exemption by registering private cars as rental cars, with no intent of running a genuine business, are deemed to be circumventing the car-financing rules.
Mr Lee said: "This is neither above board nor legitimate."
He added that MAS takes a serious view of attempts to circumvent the car-financing rules.
"Individuals should not carry out such acts. Individuals who do so are also liable for higher charges compared with purchasing a private car. Private-hire car owners have to pay higher interest rates on their car loans and higher premiums on their commercial car insurance," he noted.
Mr Lee also reiterated the need for individuals to ensure that they can afford the debt they are taking on to finance major purchases such as cars.
"While the prudent use of credit can help to finance one's housing and transport needs, over-indebtedness creates distress for the borrower and his or her family," he added.