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Regulating the Car Industry

By Blogger on 18 Jan 2011

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Thanks to our unique tax structure, the car typically ranks as the second largest expenditure for the average Singaporean after their house. As the housing industry gears up for the CEA and a regulatory framework, it is timely to note that the car industry (both pre-owned and new) attracts an equally large number of grouses and could do with a regulatory framework of its own.

The benefits to potential car buyers and sellers are too numerous to list. The framework would assist such consumers and prevent them from being exploited or cheated by unscrupulous companies. The most important task under the framework would be to provide a standard form sales and purchase agreement for vehicle sales. This is to prevent consumers (who are in the weaker position) from being subjected to onerous terms and conditions in the sales contract which companies put in for their own advantage. Critically, one clause must provide for the buyer to be able to rescind from the contract upon proving that there has been a crucial misrepresentation as to the car (mileage, accident record, servicing record etc) or upon proving that one has received a lemon car (for new cars). To give the framework teeth, there must also be a panel much like the Small Claims Tribunal where disputes over car sales can be heard quickly and without the need for lawyers. The other details can be worked out after consultation with the public, LTA and car dealers.

To fund this framework, car buyers and sellers may have to fork out a larger sum in administrative or transfer fees when buying or selling vehicles. Alternatively, a portion of the taxes levied on cars can be diverted towards the framework. Fines and penalties imposed under the framework may also prove to be another source of financing the framework and body.

From the perspective of car dealers, such a framework may initially seem like an onerous burden and disadvantageous to them. But they ought to adopt a long term perspective of matters and look at its potential benefits. The framework will only serve to benefit those honest and scrupulous car dealers. In the current situation, it hardly pays to adopt the best business practices. But, as the framework takes effect and weeds out the unscrupulous car dealers, honest car dealers will definitely find that they can seize a larger portion of the pie. Furthermore, as buyers have more faith in dealers under the framework, they would no longer resort to buying only from the most established dealers. Parallel importers and smaller players in the industry can give consumers an equal amount of confidence and do not have to suffer the ignominy of being tainted by the few black sheep in the market or the scare stories being bandied about. All in all, the car industry would become more vibrant.

The regulatory framework can potentially create a win-win scenario for both car buyers and sellers and is, in my opinion, long overdue. What say you?

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