CNA Explains: Will new loan limits for private-hire cars mean less COE demand or higher ride-hailing prices?

Carro’s Singapore country head Kyran Wong said the vast majority of the firm’s customers take on normal loans or pay in cash.

“It is not common for car buyers to register their car as a PHV just to take on a 100 per cent loan,” he said.

As of September this year, there were 98,621 private-hire cars in Singapore, according to the Land Transport Authority.

Mr Vincent Ng, business consultant at Vincar Group, said his company has customers who own their vehicles and use them to provide ride-hailing services part-time, but the numbers are not significant.

However, in other segments of the market such as for parallel imported cars, he said some car dealers actively tout and promote the 100 per cent loan, meaning some customers may have made use of the loophole.

Will demand for COEs fall?

However, it remains unclear whether the changes will lead to lower demand for COEs.

On one hand, removing the financing advantage should reduce demand from buyers who were primarily using private-hire car registration to access larger or longer loans, said Assistant Professor Lee Kwok Hao of the National University of Singapore’s (NUS) Business School.

“However, some affected buyers may still purchase private cars under the conventional financing rules, while others may consider company ownership or alternative financing arrangements,” he said.

The net reduction in COE demand depends on how many buyers leave the car market rather than change their registration or ownership arrangement, he added.

The Singapore University of Social Sciences’ Walter Theseira made a similar point: “It depends on the marginal decision taken by the prospective buyer.”

Some buyers can still afford the same vehicle with a regular loan, said the associate professor of economics, noting that the lowered interest rate would mean lower overall cost. 

They may have registered the car as a private-hire vehicle mainly to maximise cashflow, and may still purchase the car.

Others may buy a car, but choose a cheaper vehicle so they can afford the downpayment, said Assoc Prof Theseira.

Lastly, some may now find themselves priced out of the market now that the option of a 100 per cent loan has been removed. 

At the same time, he believes the market is currently driven by more premium buyers who are able to afford buying cars under normal financing arrangements.