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Vehicle loan curbs, levy on additional car purchases among MPs’ suggestions to rein in COE prices

Among the suggestions raised by MPs on the issue of COE prices were closing loopholes in the vehicle loan regime and levies on those who buy more than one car. PHOTO: ST FILE

SINGAPORE - Closing loopholes in the vehicle loan regime and imposing a levy on those who buy more than one car. These were among the suggestions raised by MPs during an hour-long debate in Parliament on Monday that centred on soaring Certificate of Entitlement (COE) prices.

A total of 11 MPs sought clarifications on the topic from Transport Minister S. Iswaran. These are some of their proposals and the minister’s responses.

1. Vehicle loan curbs

Leader of the Opposition Pritam Singh asked whether there would be a whole-of-government effort to review vehicle loans restrictions and ensure that loopholes are closed.

The Workers’ Party chief said some loans can take the form of quasi-moneylending arrangements, and it is not uncommon to hear of dealerships that tout 100 per cent loans, even though car loans are restricted to 70 per cent of the selling price and their tenure limited to seven years.

Dr Lim Wee Kiak (Sembawang GRC) suggested that COEs be paid for only in cash, with car loans covering only the price of the actual vehicle.

Ms Mariam Jaafar (Sembawang GRC) also filed a question asking whether the Monetary Authority of Singapore (MAS) is considering car loan curbs, given record COE premiums.

Mr Iswaran said the issue of financing comes under the purview of MAS and, for hire-purchase schemes, the Ministry of Trade and Industry.

Replying to Dr Lim, Mr Iswaran said a standalone COE has little value until it is applied to register a car. “I’m not sure that decoupling the financing is going to be the solution to the current set of concerns,” he said.

Minister of State for Trade and Industry Alvin Tan, who is an MAS board member, said MAS will work with the Ministry of Transport to monitor the situation.

2. Changes to bidding practices

Dr Lim also suggested adopting a pay-as-you-bid system, where COE bidders pay exactly the price that they submit during tenders. This is opposed to the current system where successful bidders pay the price of the lowest successful bid.

It is an idea that has been raised repeatedly, as far back as 1997.

In response, Mr Iswaran said he understood the motivation behind it but countered that a pay-as-you-bid system would create “a great deal of variation in the market”.

“From an auction theory perspective, actually the method we use is probably the most efficient,” he added.

Ms Mariam asked for more measures to deter speculative bidding for motorcycle COEs, including tying dealer deposits to the size of their bids, allowing individuals to bid for motorcycle COEs, and providing more transparency on bidding practices.

To this, Mr Iswaran said the current practice of motorcycle dealers bidding and holding temporary COEs (TCOE) in their own name before transferring them to buyers is a “deliberate design feature” that allows buyers to more readily purchase a motorcycle.

The minister also pushed back against the idea that speculative behaviour was the main driver behind motorcycle COE prices going up.

“The fact is the market has already been functioning, and the way we know that is when the price goes up, as it did in some of the earlier cycles when the COE price for motorcycles went up to $13,000 and, subsequently, it came down, the market corrected,” he said.

He added that the recent move to shorten TCOE validity from three months to one month was meant to hasten the return of forfeited COEs to the market.

On raising the bid deposit from $800 to $1,500, he said the Government “exercised restraint and caution” in raising the deposit because if high deposits cause motorcycle prices to rise even further, “then it will harm precisely the group that the Member wants to help”.

3. Open market value as a criterion

Progress Singapore Party (PSP) Non-Constituency MP Leong Mun Wai suggested adding the open market value (OMV) of a car as a criterion for Category A COEs, which are used to register smaller, less powerful cars. This is to ensure affordability and equity, he said.

Mr Iswaran noted that the median OMV of Category B cars, which are bigger, more powerful and tend to be pricier, is about 75 per cent higher than the median OMV of Category A cars.

Hence, there is already a differentiation between the two categories, he said, adding that unlike engine capacity or power output, OMV is not an objective criterion. He said: “There are a lot of other variables. For example, if exchange rates move, the OMV of the car changes. How would you account for that?”

4. Balloting, additional purchase levy

Mr Liang Eng Hwa (Bukit Panjang) asked whether some COEs could be balloted, rather than bid for, while PSP NCMP Hazel Poa asked if a points-based system could be introduced to allocate COEs based on factors such as nationality and needs.

Ms Poa also asked if the authorities would consider introducing a levy for additional vehicle purchases, similar to the additional buyer stamp duty (ABSD) used in the housing market.

Mr Iswaran said a balloting system may aggravate issues related to price and unevenness. “What justifies such a ballot? Who qualifies and how do we do it?” he asked, adding that there are also questions about how to price such balloted COEs as it may lead to a windfall for some.

He said a points-based system is a variation on balloting, and the better way to help those in need is through targeted measures that defray costs.

While he said he was sympathetic to households that either have children or elderly parents that need looking after, tough choices have to be made given the constraints on land use and carbon emissions.

And given the fact that the proportion of households that own multiple cars has remained consistent over the years, Mr Iswaran said the idea of an ABSD scheme for vehicles may be popular but does not address the root of the current problem.