It’s not new to anyone that owning a car is ridiculously expensive in Singapore. Most of us are left either with public transport or taking Grab and taxis.
But there are certain stages in life when a car really comes into handy, like when your children simply can’t sit still (and you risk annoying everyone on the train) or when you’re working in a sales job that require you to traverse the island multiple times a day.
This is where car leasing could be the solution.
What is car leasing?
Car leasing refers to renting a car for a fixed lease period of between 2 and 5 years. Popular sedan cars like a Mazda 3 or a Honda Vezel cost approximately $1,700 a month to rent.
|1 year||2 years||3 years|
Car leasing companies usually have a fleet of brand new or relatively young cars that they lease out for several years at a time.
Or, you could lease directly from a car company like Daimler Fleet Management, BMW, Volkswagen and Porsche. An advantage of leasing from a car company is that they will service the vehicle as if you bought the car from them, but the lease could be longer, stretching from 4 to 8 years.
The main benefit of car leasing is that it allows you to pay less upfront but still enjoy the benefits of driving a car.
How much more expensive is car leasing?
Leasing anything from houses to graduation gowns follows the same principle. You pay less upfront, but you end up paying more in the long term due to the accumulated costs.
That’s fair, but is car leasing in Singapore worth the money? Let’s run some numbers to compare.
A 1.6A Standard Toyota Corolla Altis costs $93,000 based on current COE prices (June 2019). If you get the maximum loan of 70% based on the under $20,000 OMV, you’d be loaning $65,100 at an interest rate of 2.78% per annum, maximum loan tenure being 7 years.
This means that you will pay a downpayment of $27,900 upfront and $926 for monthly instalments. At the end of the loan tenure of 7 years, you would have paid $77,759 in car loan payments, which adds up to be a total of $105,659.
(Googly eyed at all the abbreviations? Don’t worry, read about them in our car prices explainer before coming back to the comparison.)
But car costs are never just about the purchase price, or even just about the extra interest you have to pay for your car loan. It’s the upkeep of the car. So, making some assumptions and taking conservative estimates about usage, we have come up with this table of how much owning a car and leasing a car will cost you. Swipe right to see full table.
One of the cheapest car leasing rates that we came across was a Toyota Corolla Altis for $1,600.
|Owning a Toyota Corolla Altis||Leasing a Toyota Corolla Altis|
|Upfront cost||$27,900||$1,500 to $5,000 (refundable deposit)|
|Cost||Per month||1 year||2 years||Per month||1 year||2 years|
Usually, the costs of road tax, insurance as well as servicing and maintenance are included in the monthly rate when you lease a car.
But the insurance excess is higher, which means that when you get into an accident, you may have to pay more upfront.
Not included in this price comparison is the fact that leasing a car comes with a long list of terms and conditions. For instance, if you are someone who loves going to JB, you will probably hate that the excess in your car insurance will be doubled for a leased car.
In the event that you damage the car, you’d have to return the car to the original condition, while if you owned the car you can be more flexible as to when you choose to repair it.
When you add up the upfront costs and accumulated instalments, it seems that owning a car costs slightly more than leasing a car, but don’t forget the PARF rebate you can get back when you de-register a car that is less than 10 years old. The amount of PARF rebate is at least 50% of the ARF paid, pegged to the remaining OMV at the point of de-registration.
Owning a car obviously also gives you more freedom and doesn’t tie you down to a contract.
Overall, you are spending $700 more a month by leasing. Do take into account the one-time costs as well as they can be substantial.
Should I lease a car in Singapore?
While the monthly costs are slightly higher for leasing a car, one important upside is that you don’t have to pay the hefty downpayment of 30% to 50% of a car’s purchase price.
1. You need the car urgently and cannot afford the downpayment
You’re a student who cannot get a room on campus, or a financial adviser who simply needs to get around the island to meet with clients.
If a car is a necessity but the downpayment is too expensive to afford, you might want to consider leasing a car.
2. You want to test out several models before you decide on which car to buy
Another group of people who might consider car leasing is car buyers who want to buy cars but are undecided about which cars to buy.
To see how the car fits your lifestyle, you might want to lease for 3 months to 6 months and switch around to see what car fits you best.
3. You’re not staying in Singapore for long
Expats will benefit from leasing a car because there is little point in getting educated about the ins and outs of buying a Singapore car only to have to sell it again in half a year or two. The monthly cost of leasing a car already includes road tax, insurance and servicing so leasing a car takes up very little brain space in terms of administrative effort.
4. You intend to stop driving in a few years
Having a car is like having a pet. It’s a big commitment. If you’re nearing your 70s or going to retire, you might be pondering about how long you intend to drive for.
If you only see yourself driving for another four or five years, it might be better to lease a car. There are better places to invest your money, especially if your income stream is slowing.
5. You want to indulge in luxury models
If your dream car looks like a Porsche or something, you might never afford the 50% downpayment and a 5-year car loan. But if you lease, you may be able to pretend like you own it.
Not a MoneySmart move if you’re barely making ends meet, but if you are able to afford the monthly rental cost and just want to have a taste of what it’s like, why not? I guess it’s great for businessmen who regularly meet high net worth clients, leasing a luxury car is a low-commitment way of signalling that their ventures are making money.
Many car leasing companies offer high-end cars at affordable monthly prices, though the security deposit may be 10 times or more than a regular sedan.
|Buy a car||Lease a car|
|Have upfront cash to pay for the downpayment (30% to 40% of OMV)||Don’t have tens of thousands, but can at least afford the security deposit|
|You’re aware of the various costs that come with owning a car in Singapore such as road tax and maintenance costs||You don’t really want to care about the nitty gritty and just want to pay a monthly lump sum even if it can be slightly more|
|Live in Singapore long term||Only staying in Singapore for short periods of time|
|Travel to Malaysia often||Don’t really travel to Malaysia|
|Want the flexibility to sell your car anytime||Able to commit to a contract term|
|Want to feel less worried about repairs and scratches||Able to upkeep the car in original condition until you return the car|
|Want a brand new car||Don’t necessarily need a brand new car|
|Want to enjoy rebates, like PARF||Okay with no rebate whatsoever|
Any other car leasing costs I should be aware of?
Like any other contract, a car lease contract will likely come with termination penalties, so do read up on that before you commit.
When it comes to your car insurance, make sure to check the excess and if it covers additional drivers.
Would you consider car leasing in Singapore? Comment and let us know!