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From CNA. I am quite surprised that about 3,000 people defaulted on their car loans from Jan-Nov 2010.
Car loan rates reach new lows
By Lynda Hong | Posted: 04 January 2011 2312 hrs
SINGAPORE: The shrinking car market -- as a result of the cut in Certificate of Entitlement (COE) quotas -- has forced car financiers and dealers to slash interest rates to new lows.
Since the fourth quarter of last year, interest rates across the board for car loans were cut to as low as 1.88 per cent -- a significant dip compared to the corresponding period in 2009 -- when interest rates ranged between 2.22 per cent and 2.50 per cent.
In November last year, Borneo Motors even temporarily offered a 1.49 per cent interest rate on loans for its Toyota cars, which came bundled with a package offering maintenance services and five years of unlimited mileage warranty.
The rate has since been reverted to the prevailing market rate of 1.88 per cent.
By press time, Borneo Motors had not said why the rate was raised.
To be announced this month, new COE quotas for the February to July period are expected to sink even lower.
This is expected to result in higher COE prices.
But it's the fewer COEs available, rather than higher prices, that have brought about lowered interest rates on car loans, said Tan Chong Motors general manager Ron Lim.
However, he feels a further cut of interest rates from the current 1.88 per cent is unlikely.
This is because the first company to lower interest rates cannot hold on to its gain of market share for long, as the other companies will follow suit to remain competitive.
Hence, most if not all companies will not reduce rates.
But the official dealer of Honda, Kah Motor, said a lower 1.65 per cent interest rate would have been possible if not for the three free maintenance service offered as part of the loan package.
Most car financiers like Hong Leong Finance, UOB and DBS -- which work with car distributors to offer car buyers loan packages bundled with freebies -- have remained tight-lipped on whether rates will go below the current 1.88 per cent.
Potential buyers of used cars are also being wooed with low interest rates on loans.
The honorary secretary of the Singapore Vehicle Traders Association (SVTA), Mr Raymond Tang, noted that car loan interest rates started falling in mid-2010, when the rates dipped from 2.5 per cent to the current 1.88 per cent.
Mr Tang also noted that its members are offering bundled promotions like petrol vouchers, GPS devices and "intensive cash rebates" that can be about 0.5 per cent of the total loan amount.
Despite the attractive car loans, car owners are not rushing to replace their current vehicles. Instead, they are now more disciplined with their loan repayments.
The number of car owners who have defaulted on their car loans -- which could have been acquired to finance the entire cost of a car -- has dropped.
According to the Credit Bureau Singapore, 3,038 consumers defaulted on car loans from Jan to Nov 2010, down by 6.58 per cent during the same period in 2009.
-CNA/wk
Car loan rates reach new lows
By Lynda Hong | Posted: 04 January 2011 2312 hrs
SINGAPORE: The shrinking car market -- as a result of the cut in Certificate of Entitlement (COE) quotas -- has forced car financiers and dealers to slash interest rates to new lows.
Since the fourth quarter of last year, interest rates across the board for car loans were cut to as low as 1.88 per cent -- a significant dip compared to the corresponding period in 2009 -- when interest rates ranged between 2.22 per cent and 2.50 per cent.
In November last year, Borneo Motors even temporarily offered a 1.49 per cent interest rate on loans for its Toyota cars, which came bundled with a package offering maintenance services and five years of unlimited mileage warranty.
The rate has since been reverted to the prevailing market rate of 1.88 per cent.
By press time, Borneo Motors had not said why the rate was raised.
To be announced this month, new COE quotas for the February to July period are expected to sink even lower.
This is expected to result in higher COE prices.
But it's the fewer COEs available, rather than higher prices, that have brought about lowered interest rates on car loans, said Tan Chong Motors general manager Ron Lim.
However, he feels a further cut of interest rates from the current 1.88 per cent is unlikely.
This is because the first company to lower interest rates cannot hold on to its gain of market share for long, as the other companies will follow suit to remain competitive.
Hence, most if not all companies will not reduce rates.
But the official dealer of Honda, Kah Motor, said a lower 1.65 per cent interest rate would have been possible if not for the three free maintenance service offered as part of the loan package.
Most car financiers like Hong Leong Finance, UOB and DBS -- which work with car distributors to offer car buyers loan packages bundled with freebies -- have remained tight-lipped on whether rates will go below the current 1.88 per cent.
Potential buyers of used cars are also being wooed with low interest rates on loans.
The honorary secretary of the Singapore Vehicle Traders Association (SVTA), Mr Raymond Tang, noted that car loan interest rates started falling in mid-2010, when the rates dipped from 2.5 per cent to the current 1.88 per cent.
Mr Tang also noted that its members are offering bundled promotions like petrol vouchers, GPS devices and "intensive cash rebates" that can be about 0.5 per cent of the total loan amount.
Despite the attractive car loans, car owners are not rushing to replace their current vehicles. Instead, they are now more disciplined with their loan repayments.
The number of car owners who have defaulted on their car loans -- which could have been acquired to finance the entire cost of a car -- has dropped.
According to the Credit Bureau Singapore, 3,038 consumers defaulted on car loans from Jan to Nov 2010, down by 6.58 per cent during the same period in 2009.
-CNA/wk
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