Is Leasing a Car the Answer to all Your Problems with transport in Singapore ?

From Money$mart.sg :

Here’s a lifehack for all of you couples. There’s only one correct response to “Does this dress make me look fat?” Bite your tongue, resist the urge to say something “funny” and then bring her out shopping for a new one. It’s a trick question.

Want another trick question? “Why the COE prices go up?” Yes, it’s true, COE prices have gone up again in March, despite last month’s drop in premiums. So stop waiting for the “best time” to buy a car, and consider leasing one instead.

What is the cost of leasing?

I’m not going to lie to you, the benefit of leasing a car may not be immediately obvious.

For example, buying a new Toyota Altis today would cost you about $120,000, with COE. If you take a car loan of 5 years, you could find yourself paying about $1,100 per month.

Alternatively, you can lease a new Toyota Altis for $1,850 per month over 3 years.

So although you don’t have to pay 50% of the car’s price as a down payment, you still end up spending about $750 more each month.

So why should I bother to lease a car then?

It’s getting harder and harder to afford a car in Singapore these days. Not only is the COE at an exorbitant price that’s never going to go lower than $60,000 in the near future, you now have to cough up at least 40% of the price before you can even smell the car.

Not only that, but car loans can only last for a maximum of 5 years, and while you’re servicing that loan, you need to worry about whether you can get a home loan with the new TDSR requirement. If that wasn’t enough financial pressure you still have to pay for car insurance and road tax yearly.

Suddenly leasing a car doesn’t seem so bad in comparison, huh?

What do I need to know about leasing a car?

Subject to availability, most used vehicles should be leased for at least a year, while new cars need a leasing period of at least 2 years. While there’s technically no maximum lease period, most companies consider periods longer than 3 years on a case-by-case basis.

When you lease a car, you don’t own it, the leasing company does. That means road tax, insurance premiums and maintenance costs are covered by the company, not you. So even though it seems like you may be paying more each month for the car at first, once the car gets older, you may find yourself relieved that you don’t have to pay to replace parts due to wear and tear.

Plus, in the case of a breakdown or during servicing, you get your car fully replaced at no extra cost.

So who should lease a car?

Typically, you would lease a car if you need it for less than 5 years. Why is this? Because it doesn’t make sense to buy a car and commit so much money for the down payment as well as for the car loan over 5 years if you’re not going to use it after that.

Trying to find a buyer for your 5-year old car can go either way: there are many benefits to a used car in Singapore but there are also a fair bit of costs to consider.

You don’t have to worry about any of this when you lease a car. Once you’re done with the contractual period, just return it to the company. Better still, take the opportunity to “upgrade” and lease a bigger, better model!

You should also consider leasing if your current needs and your financial situation don’t seem to match. For example, you have several school-going children but you can only afford a tiny vehicle. Instead of having your family look like they were training to be clowns, lease a bigger vehicle that can comfortably give you the space to make their daily commute convenient.

And if you’re worried that these larger cars will drastically increase in petrol costs, consider getting a best petrol credit card to offset your bill.

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