The Monetary Authority of Singapore (MAS) has announced that it will take into account depreciation when calculating the Open Market Value (OMV) of a used car to determine which tier the vehicle falls under with regard to the loan-to-value ratio.
According to MAS’ press release, “MAS will adopt a straight-line depreciation in the value of the original OMV over 120 months to derive an applicable OMV for purpose of determining the appropriate LTV ratio.”
For instance, a used car with an original OMV of $25,000 will actually have an applicable OMV of $17,292, assuming that the age of the car when the borrower buys it is 37 months. As such, the borrower qualifies for a car loan of 60 per cent of the purchase price.
See the illustration below:
Cars Original Date of Registration: 1st of January 2010
Date of Borrower’s Agreement of Purchase: 10 Feb 2013
Age of vehicle at point of purchase by borrower: 37 months.
Where the number of months left is 83 months (120 – 37)
For the purpose of determining the applicable LTV Limit:
Applicable OMV = OMV – [age of motor vehicle (in months) / 120 months x OMV]
= 25,000- [37/120 x 25,000]
= $17,292
As the applicable OMV is below $20,000, the LTV limit is 60%.