News Article Analysis
Topic: Demand and Supply
Headline: Used- car shortage looms as curbs bite
Source: The Strait Times
Date: 25th May 2013
Supply of used-cars has decreased from 7000 to 2400 because MAS (Monetary Authority of Singapore) lifted loan curbs on these vehicles for 60 days. Moreover, suppliers are unable to increase supply of used cars since owners are not selling due to future loan restrictions. Under the old scheme, car buyers can borrow up to 100 percent of the purchase price of both new and used cars and repay over 10 years. Under the new scheme, the loan will cap at 60 percent and must be paid back within 5 years. SVTA (Singapore Vehicle Traders Association) said most used-cars sold are mid-, lower-end models, mass market models and newer cars. Higher end models are left unsold.
Related economic concept
Non-price determinant of demand and supply of used cars and new cars
Price determinant that affects the demand of new cars:
* Under the new scheme by MAS, there is higher down payment for new cars. This increases price of new cars for the buyers. Hence there is an upward movement along the demand curve from point A to B. This causes the quantity demanded for new cars to decrease.
Non Price determinants that affects the demand of used cars: * Price of substitute goods like new car prices are more expensive then used car prices. The article says that new car has a downpayment of 40% of its price which is too expensive for the customers. * Customers can take higher loans when buying used cars than new cars. Customers prefer higher loans hecne the higher demand now. * The old scheme can take full 100% loans and the tenure is longer. Since MAS is switching to new scheme in 60 days which is unfavourable to the buyers, they demand more now. Due to the above factors demand for used cars will increase. This will cause the demand curve to shift right. Used-cars
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