Forum: Buyers advised to obtain vehicle loans through regulated arrangements
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We thank Mr Raymond Ng Teck Wei for his suggestions on possible measures to tighten the motor vehicle financing restrictions ( Review car loan rules to prevent financial woes and safety issues
The vast majority of motor vehicle loans extended to households are granted by financial institutions (FIs), which must abide by the Monetary Authority of Singapore’s (MAS) motor vehicle financing restrictions. These restrictions aim to encourage financial prudence.
MAS also expects FIs to provide clear, relevant and timely information so that consumers can make informed decisions on borrowing costs. In recent years, no FI has been found to have breached the motor vehicle financing restrictions.
Licensed or exempt moneylenders (regulated under the Moneylenders Act 2008) or entities that offer financing in the form of hire-purchase arrangements (regulated under the Hire-Purchase Act 1969) are also required to comply with the same motor vehicle financing restrictions under the respective legislation or regulations.
Financing schemes for the purchase of commercial vehicles, including private-hire cars (PHCs), are exempted from the motor vehicle financing restrictions so as not to constrain credit to companies and individuals who rely on such vehicles for their businesses and livelihoods. Typically, the interest rates charged on such financing schemes for PHCs are also higher than those extended for the purchase of a personal use car. If this exemption is to be changed, it should be as part of a broader policy review of PHCs.
Arrangements which purport to require zero down payment for the purchase of vehicles are unregulated, and can carry higher risks such as hidden charges and greater losses for the borrower if they default.
Buyers are advised to obtain loans through regulated arrangements instead. Agencies including MAS, the Ministry of Law, the Ministry of Trade and Industry and the Ministry of Transport will continue to monitor the situation, and take action if necessary.
Lu Xinyi
Director (Corporate Communications)
Monetary Authority of Singapore
