[top: The scheme, which began last September, allows motorists scrapping their cars to claim rebates in cash instead of credits.]
By Christopher Tan, Senior Correspondent
SINCE the Government began offering cash rebates last September to motorists who scrap their cars, it has paid out more than $400 million.
The sum was for about 18,000 cars and is part of a four-month-old plan to encourage more motorists to switch to public transport.
For the three decades before that, scrap rebates were given as credits, which car owners used to offset taxes on a new vehicle.
If they did not wish to buy another car, they had to sell the credits to motor traders, often at a sizeable discount. Experts have said that this encouraged some owners to keep on driving.
Observers, however, reckon that even the new cash rebates may not prompt motorists to switch to buses and trains.
'Politically, it's a very nice move,' said retired motor trader Lee Chiu San. 'But in practice, it's not so easy. Cars are a very difficult habit to kick.'
Still, the Land Transport Authority (LTA) is happy with the plan, which saw $410.1 million in cash rebates disbursed up to the end of last month. 'We are pleased that so many have taken advantage of the scheme,' a spokesman said. 'With this flexibility, owners have the option to keep the cash and switch to public transport.'
About 80 per cent of people who scrapped their cars opted for cash.
However, the LTA could not say how many would not buy another car.
The bold policy change appeared to be the death knell for the so-called scrap paper trade, a once-thriving business that saw dealers buy up scrap rebates from car owners at discounts of up to 8 per cent.
They then sold them to new car distributors at smaller discounts, pocketing the difference as profit.
But the impact is smaller than expected. Motor traders said margins from scrap paper trade had already plunged before the change because of an oversupply.
Some car agents were reluctant to buy rebates because of fraud cases in the past.
Parallel importer and used car dealer Albert Kek of KS Kek Agency said the paper trade has already dwindled. 'There are no more scrap papers out there because people can now get a full refund from the Government,' Mr Kek said.
Others point out that car owners who owe the bank a sizeable loan will still need a middleman to help get the refund. This is because the LTA will not disburse the cash if the vehicle still has an outstanding loan.
According to the Transport Ministry, the scheme will not influence certificate of entitlement (COE) supply as the COE quota is still largely determined by the number of vehicles scrapped.
Meanwhile, analysts expect the policy change to have an impact on government expenditure. Cash refunds per year could range from $1 billion to $2 billion.
Citigroup economist Kit Wei Zheng said: 'The Government will require to set aside provisions each year for the cash refund. This means it could be in for a bigger deficit.'
christan@sph.com.sg
This article was first published in The Straits Times on Jan 7, 2009.
