The Monetary Authority of Singapore (MAS) will take into account depreciation calculating the open market value (OMV) of a used motor vehicle to determine the loan-to-value (LTV) ratio for car loans.

“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,” MAS said in a press release.

It was said that the move is in response to feedback that the OMV listed in the original vehicle registration documents does not reflect the depreciated value of a used vehicle.

To determine the applicable LTV Limit, MAS will take into account the depreciation of the value of a used vehicle by dividing its OMV over 120 months multiplied by the age of the motor vehicle.

See the below examples to understand further on how applicable OMV is calculated and the LTV limit is determined.
To illustrate, suppose that the OMV of a used motor vehicle is $25,000.

Example 1:

Cars Original Date of Registration: 1st of January 2010
Date of Borrower’s Agreement of Purchase: 10 Feb 2013

Thus, age of vehicle at point of purchase by borrower is 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%.

Example 2:

The motor vehicle was imported into Singapore as new motor vehicle. The first registration date (which would also be the original registration date) of the motor vehicle in Singapore is 1 January 2002. The date of borrower’s agreement to purchase the used motor vehicle is 10 February 2013.

Age of motor vehicle at point of purchase by borrower = 133 months.

For the purpose of determining the applicable LTV Limit:

Applicable OMV = OMV – [age of motor vehicle (in months) / 120 months x OMV]
= 25,000- [133/120 x 25,000]

= $0 (Where the resulting number is of a negative value, the applicable OMV will be zero.)

– The applicable LTV limit is 60%.