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How The Circuit Breaker Extension Impacts Car Rental Companies

Derrick Neo is the director of Supertec Limousine whose car rental company has sustained significant financial impact since the Circuit Breaker measures were implemented. Neo acknowledges that the government has indeed rolled out a slew of assistance schemes to alleviate the issues. However, he still feels that car rental companies are neglected despite all the help readily available. 

Ever since the outbreak of COVID-19, Neo and his hirers have been having a hard time coping with the situation. Car rental companies have been seeing hirers “throwing keys” almost every other day as their earnings dwindled like never before, even their paymasters are also owing rental themselves. In addition, many have returned cars citing that jobs are few across all ride-hailing platforms and they are unable to make a livelihood after paying for rental and petrol.

The assistance rendered so far were targeted at PHV drivers as well as SME businesses with local and foreign workers. Still, nothing specific has been addressed to the suppliers of PHV vehicles. Car rental companies have been struggling like them, biting to pay the heavy monthly hire purchase instalments and bank loans for the past few months.

Nevertheless, Neo was hopeful whenever DPM Heng spoke but stated that he only returned with disappointment each time. 

Firstly, being an SME, their scale only requires two men to operate. The Job Support and Wage Credit Schemes, to a large extent, have not been helping much. Waiver of foreign worker levy has not been applicable to them because their employees are locals. Whereas other labour-intensive industries such as F&B and manufacturing would stand to benefit but car rental companies, like Supertec Limousine, whose operating cost is based largely on instalments and loans from banks and in-house financing are mostly excluded from the waiver.

Secondly, the bill passed to defer contractual obligation requires both willing parties to come to a mutual agreement. According to Neo, it is pointless to just formally inform the banks or hire-purchase companies and then procrastinate for six months, because eventually, at the expiration of this bill, he is still legally obligated to repay the amount owed to creditors. Moreover, in the case of a vehicle hire purchase agreement, they may even have to pay the hire purchase instalment beyond the expiry of COE in the long run. It will only come as a huge cost to him since his revenue is dependent on the rental payment received from hirers. The lifespan of a vehicle is limited to the COE entitlement so basically, they are encumbered in this aspect when without a vehicle to generate revenue. 

In addition, they are still required to pay for the insurance and road tax during the circuit breaker. Unfortunately, no help was mentioned about this during all the conferences and speeches in Parliament so far. On their end, they have also slashed their rental rates to 50% off during this period in order to appease their existing hirers and to keep them on the road. Their car park is packed to the brim with only about 30% of their fleet on the road now. The 50% rebates given to hirers during this period are out of our own pocket with no form of relief from the government or other affiliated agencies as well. 

In essence, car rental companies are lost ships trying to navigate themselves in open seas when the government is said to be throwing a variety of assistance schemes to help SMEs pull through this pandemic.

Lastly, the bridging and working capital loans which were restructured to encourage lending by banks looked to be helpful on the surface. However, application is subjected to banks’ internal borrowing criteria and other mitigating factors such as borrower’s industry, age of company, annual turnover and bank statement etc. Often than not, most banks tend to shun the car industry for reasons unknown. Besides, the whole loan application process takes time and disbursement may be too late in stemming our cash flow problem. Nonetheless, loans obtained have to be repaid with interest. Hence, although it may help in the short term, their liabilities would have increased considerably.

In view of the above, Neo hopes that the government will address their plight and situation they are facing now. 

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