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SINGAPORE, March 1 \u2014 Exploiting legal \u201cgrey areas\u201d and inflated invoices, car dealers here are flooding social media with S$0 down-payment schemes that bypass central bank rules.<\/p>\n
Such predatory tactics have helped push household motor vehicle debt to a 12-year high of S$12.4 billion (RM43 billion), sparking urgent warnings from authorities over the risks of \u201cdeceptive\u201d financing and potential fraud, Th Straits Times<\/em> reported.<\/p>\n The advertisements, ubiquitous on Instagram and Facebook, promise buyers they can skip the mandatory 30 per cent or 40 per cent down payment required by law.<\/p>\n By offering \u201c100 per cent in-house loans\u201d and \u201cguaranteed approval,\u201d smaller industry players are enticing buyers into high-interest debt cycles that circumvent the Monetary Authority of Singapore\u2019s (MAS) cooling measures.<\/p>\n The \u2018grey area\u2019 of in-house financing<\/strong><\/p>\n While banks and licensed moneylenders are strictly regulated by MAS and the Ministry of Law, in-house financing by car dealers operates in a regulatory vacuum. Acting Transport Minister Jeffrey Siow recently warned that these arrangements are effectively \u201cunsecured personal loans\u201d masquerading as hire-purchase agreements.<\/p>\n Yio Chu Kang MP Yip Hong Weng has called for a level playing field, noting that if a contract mirrors a loan, it should carry the same consumer protections.<\/p>\n \u201cWe should not normalise 100 per cent financing in a way that leaves families one unexpected setback away from financial stress,\u201d Yip said.<\/p>\n \u201cEasy financing can make cars appear more affordable than they truly are.\u201d<\/p>\n One of the most common and dangerous tactics involves \u201cprice padding.\u201d To secure a larger loan from a financial institution, dealers artificially inflate the car\u2019s sale price on paper.<\/p>\n For instance, if a car actually costs S$120,000, a dealer might submit an invoice for S$170,000. Under MAS rules, a bank can lend up to 70 per cent of that value, roughly S$119,000, which covers almost the entire real cost of the car, leaving the buyer to pay nothing upfront.<\/p>\n \u201cThat\u2019s not a creative financing structure. That\u2019s deception,\u201d said Ben Charoenwong, associate professor of finance at INSEAD.<\/p>\n He said that both the buyer and seller could be committing fraud.<\/p>\n \u201cThe brazenness\u2014openly advertising on social media\u2014tells you exactly how dealers perceive the regulatory environment: they don\u2019t fear consequences.\u201d<\/p>\n The e-hailing loophole<\/strong><\/p>\n An investigation by ST revealed that four out of five dealers were willing to offer 100 per cent financing.<\/p>\n Beyond price padding, some dealers encouraged buyers to register their vehicles as Private-Hire Cars (PHCs), Singapore\u2019s equivalent to e-hailing vehicles for platforms like Grab or Gojek.<\/p>\n Because PHCs are classified for commercial use, they are exempt from MAS\u2019 car financing restrictions. Authorities are now monitoring this \u201cphantom\u201d registration trend, where owners claim commercial intent solely to secure a full loan.<\/p>\n The financial burden of these \u201ceasy\u201d loans is immense. In one case, a dealer quoted a 10-year loan for a car worth S$178,000 inclusive of the Certificate of Entitlement (COE).<\/p>\n With a monthly instalment of S$2,000, a buyer would ultimately pay S$240,000 or a S$62,000 premium in interest and hidden costs.<\/p>\n MAS has sounded a note of caution, stating that unregulated schemes carry significantly higher risks, including hidden charges and greater losses for borrowers in the event of default.<\/p>\n The authority now expects financial institutions to conduct independent valuations rather than relying on dealer-submitted invoices to counter mark-up practices.<\/p>\n<\/p><\/div>\n