Explainers
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%.