The Straits Times reported that it is legitimate for individuals to register private cars as rental cars in order to be exempted from the car-financing rules (Rule change allows car buyers to access bigger loans, Aug 18).

Rental cars fall under the broad category of private-hire cars (PHCs), which are used by individuals and companies for hire and reward.

The Monetary Authority of Singapore (MAS) has exempted the purchase of PHCs from the car-financing rules so as to not constrain credit to companies and individuals who rely on the use of PHCs for their businesses and livelihoods.

Contrary to what was reported, individuals who exploit the PHC 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. This is neither above board nor legitimate.

MAS takes a serious view of attempts to circumvent the car-financing rules, and individuals should not carry out such acts. Individuals who do so are liable for higher charges compared with purchasing a private car. PHC owners have to pay higher interest rates on their car loans and higher premiums on their commercial car insurance.

MAS is looking into measures to curb circumvention of the car-financing rules.

We reiterate 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.

Jerome Lee

Director (Corporate Communications)

Monetary Authority of Singapore