A hire purchase that covers vehicles in Singapore is an agreement drawn up to rent a vehicle and to buy it soon after. If you come into a hire purchase agreement, you therefore give your consent or you agree to hire the vehicle until you have completely settled what you owed to the bank or financing company.
At this point you might be asking, “how can I know whether my hire purchase application falls under the Hire Purchase Act? The acquisition of vehicles which total value does not exceed $55,000 is governed by the Hire Purchase Act 1969 and the successive Hire Purchase Amendment Act 2004, whether it is a new car or a second hand one.
The trouble begins when you, the hirer, fall short of your monthly instalment obligations under your hire purchase agreement. Late or non-payment of instalments means breach of contract. In case of payment defaults, the bank may terminate the agreement or may repossess your car. In such circumstances, it will be your chosen guarantor who will be accountable for your payment failure.
Payment Default and Repossession In a Hire Purchase Agreement in Singapore
A “default” in a hire purchase agreement only means that you’ve failed to comply with your duties and obligations to the bank, which is the owner of the car. In an event like this, the bank has the legal right to repossess your car, as specified in the hire purchase agreement.
For this reason, keep in mind to provide your regular monthly instalment payments, otherwise not only your car may be repossessed but you may also be obliged to pay additional penalty fees for delayed payments. In case of difficulties to keep up with your commitment, it will be better to contact immediately your bank to come up with an effective solution.
The Legally Recognized Car Repossession Process In Singapore
- A written notice from the bank will be served to you, the hirer, informing you about repossession. In this case, you will have 7 business days to take the necessary steps.
- You are left with two options: you can provide payment of the delayed monthly instalments plus other charges or you can return the vehicle. Otherwise, the bank will go on with repossession.
- In the event no payment has been provided by you or by your guarantor, the only alternative is repossession of the vehicle. Repossession will be made by a registered repossessor. Your vehicle will be delivered to the bank.
- After the repossession procedure is concluded, the bank must provide all the details of repossession to you. This document must also include the total amount of money you have to pay in order to recover the car.
- At this point, you are obliged to inform the bank of your intention to repay the arrears and to demand for the return of the repossessed car. You also have the right to request the bank to sell the car to a person chosen by you (e.g. a close friend or relative).
- In absence of action on your part or your guarantor, the car will be put on sale after 7 business days.
- After selling the car, the bank can still avail of its right to demand any loss from you, the hirer, in the event the total value of the repossessed car is not enough to cover your payment arrears under the hire purchase agreement.
- Nevertheless, if the total value of the car goes above the arrears you still owe to the bank, you may demand for such money from the bank.
Method of Repossession
Most often, unfair and harsh measures are carried out by individuals in order to proceed with repossession and sell of the car in a cheaper rate. Remember that legal actions can be assumed in case the repossession process is not undertaken in accordance with the Hire Purchase Act 1969 and the consecutive Hire Purchase Amendment Act 2004.
It is a general praxis that repossession of vehicles is done only by a registered repossessor. The following policies should be strictly observed by registered repossessors:
- No hostilities or repressive manners should be used in carrying out the work.
- Adequate notice should be given to the “hirer” in relation to the repossession process and time in order to permit him/her to take his personal effects from the vehicle to be repossessed.
- The individual in charge of repossession may come into the premise only after receiving permission from the dweller.
Possible Solutions Concerning Repossession
- Look for a buyer. One of the viable road to take is to look for a buyer who will be agreeable to acquire the vehicle according to the price specified in the notice you receive after repossession.
- Talk it out with the bank if you have troubles in coping up with your monthly instalment payments. The bank may be prompted to modify your monthly repayments to facilitate you with your difficulties. Nevertheless, the bank is not obliged to do that for you.
- File a complaint or get a legal advice. In the event you feel you are a victim of unfair repossession procedures, you can file a complaint to the bank with which you have drawn up your hire purchase agreement. However, the best thing to do is to seek your own legal counsel or initiate civil solutions in the Magistrate’s Court or the District Court, as the need arises, You can also seek advice and assistance to the Consumer Mediation Unit, Consumers Association of Singapore or Singapore Mediation Centre.
Responsibility of the Guarantor in a Hire Purchase Agreement
Guarantors are responsible or liable for your financial obligations to the bank or finance company. This is an essential element of the hire purchase agreement. As a guarantor, he/she is liable to provide payment of your debts in the event you fail to do so.
All The Rights of a Guarantor
The rights of a guarantor under the Hire Purchase Agreement are the following:
- Right to get a copy of the hire purchase agreement.
- Right to be liberated of any liability against claims by the bank when the total amount owed has been fully settled.
- Right to initiate a legal action against the “hirer” for any violations of the hire purchase agreement.
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