Explainers
Published Date: 26 May 2016

Rules for Motor Vehicle Loans

Adjustments to the value of a used motor vehicle to take into account depreciation when calculating the applicable loan-to-value limit.

Adjusting the Value of Used Motor Vehicles

The value of a used motor vehicle depreciates over time. When calculating the applicable loan-to-value (LTV) limit for a used vehicle, FIs should take the depreciation into account by using the following formula:

OMV – [Age of motor vehicle (in months)/120 months x OMV]

To illustrate, these examples show a used motor vehicle with open market value (OMV) of $25,000.

Example 1

A motor vehicle was imported into Singapore as a new vehicle:

First/original registration date in Singapore 1 January 2010
Agreement to purchase date 10 February 2013
Age of motor vehicle at point of purchase by borrower 37 months
(3 years, 1 month and 9 days, rounded down to the nearest full month)

Applicable OMV = 25,000 – [37/120 x 25,000] = $17,292

The applicable LTV limit is 70%.

Example 2

A motor vehicle was imported into Singapore as a new vehicle:

First/original registration date in Singapore 1 January 2002
Agreement to purchase date 10 February 2013
Age of motor vehicle at point of purchase by borrower 133 months
(11 years, 1 month and 9 days, rounded down to the nearest full month)

Applicable OMV = 25,000 – [133/120 x 25,000] = $0
(when the result is negative, the applicable OMV will be zero)

The applicable LTV limit is 70%.

Example 3: Used vehicle

A motor vehicle was imported into Singapore as a used vehicle. Its OMV was derived based on its age.

Original registration date overseas 1 January 2005
First registration date in Singapore 3 February 2007
Agreement to purchase date 10 March 2013
Age of motor vehicle at point of purchase by borrower (A1) 98 months
(8 years, 2 months and 9 days, rounded down to the nearest full month)
Age of motor vehicle before registration in Singapore (A2) 25 months
(2 years, 1 months and 2 days, rounded down to the nearest full month)

Applicable OMV:

OMV – [(A1 – A2) x OMV/(120 months – A2)] = 25,000 – [(98 – 25)/(120 – 25) x 25,000] = $5,789.

The applicable LTV limit is 70%.