MAS enforces stiffer rules on motor vehicle loans

Maximum loan is 50% for units with over $20,000 OMV.

According to a release, the Monetary Authority of Singapore (MAS) will re-introduce financing restrictions on motor vehicle loans granted by financial institutions.

The maximum motor vehicle loan amount will depend on the open market value (OMV) of the motor vehicle purchased.

For a motor vehicle with OMV that does not exceed $20,000, the maximum loan-to-value (LTV) is 60% of the purchase price, including relevant taxes and the price of the Certificate of Entitlement, where applicable; and

On the other hand, for a motor vehicle with OMV of more than $20,000, the maximum LTV is 50%.

In addition, the tenure of a motor vehicle loan will be capped at 5 years.

The financing restrictions are necessary to encourage financial prudence among buyers of motor vehicles. In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves on motor vehicles.

The financing restrictions will not apply to loans for the purchase of commercial vehicles. They will also not apply to loans for the purchase of motorcycles.

The rules will take effect from 26 February 2013.