Overtrade options are available again for car markets
17 Aug 2013|34,166 views
Overtrade - a practice in which car firms offer a higher trade in value for used car than the prevailing market rates. It was widely used by car dealers in the 1990s when the Government first introduced loan curbs.
Now, the practice is back to help car buyers tide over the large sum of downpayment as stipulated by the latest loan curb.
For instance, a buyer of a $100,000 new car will need to put down at least $40,000 as downpayment. In overtrade, the seller will rise the car price to $110,000, and at the same time giving $10,000 more than what the trade-in car is worth.
Although the buyer now needs to pay $44,000 for his downpayment, he will receive an additional $10,000 more for his trade in. Hence effectively, he only needs to fork out $34,000 for his initial payment.
The Straits Times reported that in the current market, overtrades can range from a few thousand dollars to $50,000, with dealers of premium marques, such as Mercedes-Benz and BMW, offering the highest rates.
Borneo Motors, the authorised dealer for Toyota cars, is offering up to $16,000 overtrade for the Camry sedan.
On the other hand, Citroen and Kia cars attract up to $10,000 overtrade, as offered by local authorised dealer Cycle & Carriage. The firm also offers up to $22,000 overtrade for its Mercedes-Benz E-Class models.
However, the situation is largely different now. Previously in the 1990s, the loan curb was set at 70 percent, with 30 percent downpayment. Now, buyers will need to fork out at least 40 percent of the vehicle's price. To fully offset the heavy downpayment, sellers will need to inflate the price to a level that is much higher than the market price, and banks may not approve the loan.
Overtrade - a practice in which car firms offer a higher trade in value for used car than the prevailing market rates. It was widely used by car dealers in the 1990s when the Government first introduced loan curbs.
Now, the practice is back to help car buyers tide over the large sum of downpayment as stipulated by the latest loan curb.
For instance, a buyer of a $100,000 new car will need to put down at least $40,000 as downpayment. In overtrade, the seller will rise the car price to $110,000, and at the same time giving $10,000 more than what the trade-in car is worth.
Although the buyer now needs to pay $44,000 for his downpayment, he will receive an additional $10,000 more for his trade in. Hence effectively, he only needs to fork out $34,000 for his initial payment.
The Straits Times reported that in the current market, overtrades can range from a few thousand dollars to $50,000, with dealers of premium marques, such as Mercedes-Benz and BMW, offering the highest rates.
Borneo Motors, the authorised dealer for Toyota cars, is offering up to $16,000 overtrade for the Camry sedan.
On the other hand, Citroen and Kia cars attract up to $10,000 overtrade, as offered by local authorised dealer Cycle & Carriage. The firm also offers up to $22,000 overtrade for its Mercedes-Benz E-Class models.
However, the situation is largely different now. Previously in the 1990s, the loan curb was set at 70 percent, with 30 percent downpayment. Now, buyers will need to fork out at least 40 percent of the vehicle's price. To fully offset the heavy downpayment, sellers will need to inflate the price to a level that is much higher than the market price, and banks may not approve the loan.
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