Car Loan 'Loophole' to be Investigated

An investigation about cases of car buyers taking up larger loans through private-hire car purchase agreements as a way around the Government's loan restrictions is underway.

This notice was served by Acting Minister for Education (Higher Education and Skills) Ong Ye Kung, who sits on the board of directors at the Monetary Authority of Singapore (MAS), in response to Mr Pritam Singh (Aljunied GRC).

The MP had raised concerns that private-hire car purchase agreements created a "loophole" or "work-around" to existing vehicle loan curbs.

Some buyers are taking loans of up to 90 per cent of the car price, and paying it back over a period of 10 years. MAS currently allow buyers to borrow up to 70 per cent of the purchase price, with a loan tenure of seven years.

They do so through private-hire car purchase agreements in which they buy and register the car under a company, to be used for chauffeuring under ride-hailing apps such as Uber and Grab.

The MAS has previously said loans taken to purchase private-hire cars do not fall under its car loan restrictions.

But Mr Singh said some people could take advantage of the system.

"There is also the prospect of not running it for that purpose at all, as when you register a company for private hire under the Uber or Grab framework but, in actual fact, what you're doing is you're owning a vehicle," he said.

Mr Ong replied that both the MAS and the Ministry of Trade and Industry (MTI) will look into such cases, which would be "in violation of the spirit of the policy".

Auto dealers that sell cars to buyers on their own instalment payment programmes have to follow the Hire Purchase Act, which is administered by the MTI.

The MTI also applies the MAS car loan restrictions to non-MAS-regulated entities.

Mr Ong added that private-hire vehicles, such as those used for driving for Uber, are revenue-generating and thus fall under loan considerations for funding a business.

He also said the MAS has not had to take action against any financial institutions since the car loan restrictions were re-introduced three years ago.

Mr Ong said the MAS monitors financial institutions, including conducting on-site inspections.

"Where a financial institution is found in breach of any of our regulations, MAS will not hesitate to take regulatory action," he added.

Credits: