Forum: Review car loan rules to prevent financial woes and safety issues
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I urge the Monetary Authority of Singapore (MAS) to review motor vehicle loan rules and close loopholes that allow some sellers to bypass lending caps.
MAS last updated car loan regulations in 2016, setting maximum loan-to-value ratios of 60 per cent to 70 per cent and loan tenures of up to seven years. Since then, certificate of entitlement (COE) premiums have soared, but the rules have not been refreshed.
Meanwhile, some dealers now openly advertise “$0 upfront” or “100% loan” packages, even on public radio. Such offers normalise high-risk borrowing and encourage households to overstretch their finances.
Car dealers also bid aggressively for COEs on behalf of buyers. While this may help individuals secure a car, it drives premiums higher for all. Combined with easy financing, this creates a cycle of over-leverage, inflating car prices and raising the risk of loan defaults.
The private hire vehicle (PHV) scheme highlights the issue. Buyers fall into two different spectrums.
On one end are those who try to circumvent car financing rules by registering cars as PHVs to access higher loan quantums and longer tenure, but use them only for personal purposes.
On the other are drivers who genuinely rely on PHVs for their livelihood. As COEs rise, these drivers may be saddled with larger debts, forcing them to work longer hours to make ends meet. This risks not only their own health, but also the safety of passengers and pedestrians.
Both situations undermine the prudent intent of MAS’ loan rules and expose households to unnecessary strain.
This misuse also runs counter to the scheme’s purpose. Acting Transport Minister Jeffrey Siow recently noted: “If you had one COE left to allocate, is it better to allocate it to a private car owner, who then drives maybe two trips a day and leaves the car in the garage? Or is it better to share the car among a much larger group of Singaporeans who can have access to the use of a car when they need it? Surely it must be the latter, right?” ( Acting Transport Minister Jeffrey Siow on COE system, private-hire cars and other transport issues
When PHVs are used as private cars, or when drivers are trapped in unsustainable debt, this principle of wider access is lost.
MAS should update lending rules to reflect today’s realities, enforce compliance with loan-to-value limits, close loopholes that allow full financing through PHV registrations not genuinely for hire, and require clearer disclosure of borrowing costs.
These measures will protect households, moderate COE volatility, and promote responsible, sustainable car ownership while supporting safer roads for all.
Raymond Ng Teck Wei
