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Car loan amounts hit 10-year high in Singapore

People are borrowing at ever bigger amounts to buy a car in Singapore.

The average size of a new car loan taken by motorists reached $90,401 last year, a 10-year high, according to a study by Credit Bureau Singapore.

The amount is nearly 131 per cent more than the $39,161 average amount recorded back in 2003.

The surge in the car loan amounts came as prices of certificates of entitlement (COEs), which are needed to own a car in Singapore, reached record highs for several types of vehicles last year.

“The loan quantum reflects the higher COE prices. In addition, the higher COE prices may have also encouraged would-be buyers to consider higher-priced premium marques," said William Lim, executive director of CBS.

However, CBS said that despite the bigger borrowings, motor loan delinquency fell over the past decade to an all-time low in 2012.

According to the bureau's analysis, last year 2.69 per cent of car loan holders had an installment that was overdue by more than 30 days.

“It is interesting to note that delinquency rates on motor vehicle loans have remained low in the last 10 years despite the increase in loan quantums – in fact, even lower than delinquency rates on credit cards," said Lim.

CBS’ data also showed that the demand for new loans for motor vehicles dipped
to its lowest in 10 years in the past three years.

In 2010, 2011 and 2012, consumers took up 65,398, 64,807 and 64,838 loans, respectively.

The figures include loans taken by consumers for new and second-hand motor vehicles. Also, only motor vehicle loans disbursed by the member banks of CBS
are included in the study.

The CBS study also further showed the effects of gender and age on motor vehicle loan trends:

• Young motorists exhibit the highest delinquency rate while consumers above 54 have the lowest delinquency rate. This trend is consistent with other loan products.

• Male motorists tend to take bigger loans than female motorists. They also make up over 70% of loan holders. However, the proportion of female motor vehicle loan holders is rising in the last decade, from 22.08 per cent in 2003 to 26.20 per cent in 2012.

• In the past 10 years, the age groups of 40-44 and 35-39 appear to borrow the highest principal amounts. In the past three years, the 45-49 year-olds have also joined their 40-44 year-old counterparts in the record books. In 2012, these two age groups (i.e. 40-44 and 45-49) each incurred average loan quantums of close to $100,000.

• The proportion of seniors taking new car loans continue to defy high COE prices to set new highs each year. Consumers over 54 years old made up 13.58 per cent of new car loan holders in 2012, a steady climb from 8.76 per cent in 2003. However, the top customer segment for new loans in terms of number of consumer accounts remains the 30-39 year-old age group in the last 10 years, followed by the 40-44 year-olds.

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