Car buyers are taking out bigger financing loans following an ease on car loan curbs last May while the number of defaulters has gone down, according to a study by Credit Bureau Singapore (CBS).
In December last year (2016), the study results released on Monday (Feb 6) found that motorists borrowed an average of $65,868 to finance both new and second-hand car purchases.
This is an increase of 22.5 percent from May 2016 when the Monetary Authority of Singapore (MAS) eased car loan curbs and a 10.9 per cent increase from December the previous year (2015), when the average loan amount was $59,408.
Last May, the MAS announced that for cars with an open market value (OMV) of $20,000 or less, up to 70 percent of a car’s purchase price could be borrowed, up from 60 percent previously.
For cars with OMVs of more than $20,000 up to 60 percent of the purchase price can be borrowed, up from 50 percent. The loan tenure was also increased to seven years, from five previously.
The restrictions on car loans were put in place in 2013. Previously buyers were allowed to take a loan for 100 percent of a car’s purchase price , with a tenure of up to 10 years.
The study – based on the 244,488 car loan holders in the CBS database – also found that despite the heavier debt commitment, the number of delinquent debtors had dropped.
Last December, about 1.3 percent of car loan holders had an instalment that was overdue by more than 30 days, a drop from the delinquency rate of 2 in Dec 2015.
“Motor loan delinquency rates have dropped to very healthy levels. The delinquency rate of 1.3 percent in December last year represents a 66 percent drop from the high of 3.82 percent recorded in 2012 prior to the institution of curbs on motor vehicle loans by MAS,” said CBS executive director William Lim.
He added that the larger loans and lower delinquency rates were a result of lenders offering “responsible loans” based on more comprehensive data, and car buyers practicing financial prudence ahead of forecasts of a sluggish economy.
“We expect the situation of rising loan balances and stable delinquency to continue, barring any economic distress.”
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