Buying a car in Singapore is an expensive decision that is usually met with scrutiny and highly opinionated views from others. (Come on, a Mustang is a beautiful car.) However, committing to a car loan may not be an option for everyone, especially if you only need the car for a short period. Could leasing be a better option?
Sometimes you might need a car for extra convenience during the first few years as you start your own family, or you might be an ex-pat staying in Singapore for a couple of years and find out the atrocious cost to own a brand-new car.
If you only need to own a car for the short term, you can consider buying a car with a year or so left on its COE or leasing a car. With a wider variety of car-leasing options these days and COE prices in the clouds, what would be a better option for those seeking temporary vehicle command?
Read Also: Guide To Understanding How COE Bidding System Works In Singapore
Leasing A Car Reduces Various Vehicle Liabilities
Owning a car usually comes with heaps of paperwork and a lot of “huh, I need to pay for these too?!” Some might hurry to look for a reliable workshop for servicing & maintenance while others are wondering if the price is right.
Renting or leasing a car reduces the administrative burden of car ownership. Various other documents and car work like road tax, car inspection, optimal tyre pressure, engine overhaul/maintenance, etc, are all taken on by the leasing company themselves. All you need is to pay the monthly fee to the leasing company.
Insurance is also taken care of by the leasing company. All you need to worry about is the excess that you must top up if you get into an accident. Leasing also reduces the time and money spent maintaining, overhauling, or upgrading your car, as the company will do the necessary repairs and upgrades within their partner workshops. Thus, leaving you with fewer worries and more time spent doing what you want.
Leasing Allows You To Test Different Rides
Some people crave novelty and driving a different car ever so often can scratch that itch for something new. There may also be practical reasons to only drive a car for a short period. You might want to test a particular car before committing to own one, or if it makes sense to have a car for the family without the full commitment of getting one.
Leasing gives you greater flexibility to switch to a different model, type, or brand of car you like, without the massive paperwork and financing involved. Unlike car sharing which is meant for ad-hoc use, leasing offers you the assurance that you will have the car the next day when needed and no need to watch the clock for every minute of your car use.
Leasing Reduces Hefty Initial Cash Outlay
When buying a car, a deposit of 30-40% of the total cost (Open Market Value) will be needed by you. This can eat up a substantial chunk of your available savings. On top of that, the loan will need to be paid off too. Leasing on the other hand works similarly to a subscription plan. All you have to handle is the leasing monthly cost and the standard daily operating costs of the car (e.g., cash card, fuel, parking) – thus, reducing personal cash flow issues.
Not to mention, if you buy a car that is poorly maintained, you will need to fork out a lot more just to get it back to acceptable levels for the road.
Buying Allows Greater Driving Flexibility
A good car does not just bring you from point A to B – it takes you places. Having that flexibility to switch drivers or allowing members of your family to drive the car makes a stark difference in convenience. Since you own the car, you will most probably take greater care of it, and in turn, the car takes care of you by having fewer maintenance visits and upkeep-related issues.
A leased car usually is tagged to an individual and any extra persons using it might need to pay an additional fee. This is due to the legal liabilities in the event of an accident and the mileage calculation used before leasing the car out to you.
Some leasing companies will not allow you to drive into Malaysia and many charge you an extra cost just for entering. With your car, you can even drive up to Thailand and have that amazing road trip with your friends and family.
Buying A Car Allows More Privacy & Ownership
Owning a car with a few years left allows the owner to appreciate the car just a little bit more. You will be making decisions to change the tyre quality, service quality and overall making sure that your car stands out and stands up when needed to. For those who like to customise their ride, owning the car allows you to add upgrades to make the ride smoother and safer.
If you need greater liquidity, you can sell the car at any time and thus reducing the eventual cost of owning the car (less the interest and fees incurred). However, leasing forces you into the term contract and for some, breaking it might incur additional fees.
Leasing also comes with hidden prices that the leasing company might add to its terms and conditions. The devil is truly in the details, so do understand what you are signing for.
Read Also: Cost Of Owning A Car In Singapore Over 10 Years
Buying Might Prove To Be The Cheaper Alternative: If You Need A Car
If you need a car for your family, the convenience and comfort will likely make buying a car a better option. Buying a car with only a few years left on its COE may also be a cheaper option, depending on the car type, brand, and year in which it is bought.
Many factors will affect the purchase price of a car, especially a loan interest rates and insurance costs. However, just based on the comparison below, leasing a car is slightly cheaper. However, once we account for the PARF value, which you will get back after selling, or the scrap value after its original 10-year COE, buying a car may still make financial sense.
On top of that, you still must cover any damages that the leased car incurs that are not wear and tear items. That includes dents, scratches, or broken interior/exterior fittings. The two tables below show a rough breakdown of the cost difference between buying (a few years left in COE) to leasing a car.
Do note that numbers are taken off sgCarMart and Carro for comparison and assuming variables like the drivers’ age, number of season parking needed, mileage and driving behaviour.
Second-Hand Car Price Breakdown
$347.8 (63l)
| OWNED | |||
| Car | Audi A4 1.8 MU (2013) | Hyundai Elantra 1.6A GLS (2015) | Subaru Forester 2.0 XT Sunroof |
| Down Payment (calculated as per month) | $741.43 (14 months left) | $383.14 (35months left) | $490.76 (47 months left) |
| Monthly Instalment (@2.48% p.a.) | $1,780.00 | $959.00 | $1,256.00 |
| Fuel (@$2.76/l 95) topped full twice a week |
$276 (50l) | $331.2 (60l) | |
| Cashcard | $50.00 | $50.00 | $50.00 |
| Season Parking | $130.00 | $130.00 | $130.00 |
| Servicing & Maintenance (calculated as per month) | $150.00 | $150.00 | $150.00 |
| Road Tax (calculated as per month) | $81.30 | $61.50 | $100.83 |
| Insurance (calculated as per month) | $141.70 | $141.70 | $141.70 |
| Total: | 3,422.2 | $2,151.33 | $2,650.49 |
*Numbers are based on an average of ~20,000km usage per year. Fuel prices are as of 4/10/2022. Monthly p.a. is based on the average rate as of 4/10/2022. A 30-year-old individual is used as a reference for the insurance cost.
Leased Car Costs
$347.8 (63l) $347.8 (63l) $347.8 (63l)
| LEASED | |||
| Car | Audi A4 1.8 MU (2013) | Hyundai Elantra 1.6A GLS (2015) | Subaru Forester 2.0 XT Sunroof |
| Monthly Cost (Includes Road Tax, Maintenance, and Insurance) |
$2,260.46 | $1,912.80 | $2,070.88 |
| Fuel (@$2.76/l 95) (topped full twice a week) |
|||
| Cashcard | $50.00 | $50.00 | $50.00 |
| Season Parking | $130.00 | $130.00 | $130.00 |
| total: | $2,788.26 | $2,368.80 | $2,582.08 |
*Numbers are calculated based on an average of ~20,000km usage per year, for a 1-year loan.
The post Leasing A Car For A Year VS Buying A Car With 1 Year Left On Its COE: Which Makes Better Financial Sense appeared first on DollarsAndSense.sg.
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