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Bigger car loans taken last year, but fewer are delinquent, says study

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The biggest car loan taken by an individual last year was S$837,135, still lower than the record S$1,075,766 borrowed by a single motorist the year before.


THE biggest car loan taken by an individual last year was S$837,135, still lower than the record S$1,075,766 borrowed by a single motorist the year before.

The Credit Bureau Singapore (CBS) revealed this in a study, which showed that seven months after the relaxing of vehicle-financing curbs, car buyers are taking out bigger loans.

Yet, the number of delinquent debtors has dropped.

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Data based on loans for both new and second-hand motor vehicles disbursed by CBS member banks show that last December, motorists borrowed an average of S$65,868 to finance their car purchases.

This was up 22.5 per cent from S$53,777 in May 2016, and up 10.9 per cent from S$59,408 in December 2015.

In May 2016, the Monetary Authority of Singapore raised motor-vehicle loan limits for cars with an open market value (OMV) of S$20,000 or less from 60 per cent of the purchase price to 70 per cent.

For cars with an OMV above S$20,000, it was eased from 50 per cent to 60 per cent.

The loan tenure was also increased from five years to seven.

Despite the heavier debt commitment, however, the number of delinquent debtors fell. Just 1.3 per cent of car loan holders had an instalment that was overdue by more than 30 days in December 2016 - a new low since January 2015; the delinquency rate was 2.0 per cent in December 2015.

The CBS study also showed that motorists took up 76,942 new motor vehicle loans from January to December 2016, up 25.6 per cent from the previous 12 months.

Last year, an expanded certificate of entitlement (COE) quota put 87,504 new cars on the road, up 52 per cent from the year before.

From the study, motorists aged 50 and above made up the largest group of new motor vehicle loan holders, accounting for about four in 10 motorists who took up a loan in 2016.

The second largest segment of loan holders was made up of those in their 40s (32.4 per cent), followed by those aged between 30 and 39 (27.0 per cent).

At 4.9 per cent, consumers in their 20s were least likely to commit to a new vehicle loan.

The biggest borrowers were motorists in their late 40s (that is, aged 45-49); the highest monthly average principal amount was S$67,859 in 2016, or a 6.1 per cent spike from S$63,959 in 2015.

As for the highest principal amount borrowed by an individual - S$837,135 - one car distributor did not find it unusual.

Michael Lim, chief executive of the Motorway Group, is used to such loans in his line of business. As one of the biggest and best-known dealers of used super sports and luxury models, Motorway currently has cars ranging from a nine-year-old Bentley (going at below S$200,000) to a Rolls-Royce with a S$1.2 million price tag.

He said: "Customers normally ask for a loan that is half of the car price."

Mr Lim, who is also the authorised distributor of the over-S$6 million Koenigsegg, said that a prospective buyer of the Swedish hypercar had considered a loan of S$3 million.

"It depends on the car you are buying," he said.