Car Leasing vs Car Buying in Singapore

Leasing a car in Singapore gives you the freedom and convenience of driving a new vehicle that may otherwise be too expensive for you to buy with your current finances and priorities. On the other hand, owning a car often brings a feeling of accomplishment and pride, which is hard to put a price tag on. The choice ultimately depends on your personal circumstances, budget, and specific needs. 

In this blog article, Jack Cars has put together must-know information on car leasing versus buying to help you make the right decision, so read on! 

READ: WHAT YOU NEED TO KNOW WHEN BUYING A CAR IN SINGAPORE

 

Lease vs Purchase—What’s The Difference?

A typical car rental service lets you use a vehicle temporarily, from a few hours to several weeks. Basically, car leasing is a long-term car rental, usually for a minimum period of one month. Your payments cover the car’s depreciation during the lease term, not the entire cost of the vehicle. Meanwhile, when you buy a car in Singapore, you have to pay its full price, either all at once or in installments. It means you have ownership of the vehicle.

Additionally, buying a car requires a substantial down payment, usually 30% of the car’s open market value (OMV). The owner shoulders depreciation, maintenance, insurance, and road tax costs, which can potentially strain your finances. With leasing, however, you’re typically required to pay just a deposit and administrative fees. Lease rates are inclusive of insurance, maintenance, road tax, and COE.

At Jack Cars, you are given the opportunity to drive a brand new BYD ATTO 3, the best selling electric vehicle (EV) in Singapore in 2023 and 2024, through our Plug-N-Drive Program. To cover the other end of the spectrum, we also sell new cars and pre-owned vehicles at reliable and trustworthy rates. To help you weigh your options, check out our infographics below.

Calculating Your Capability: Can You Afford a Car in Singapore?

The cost of a car here can often exceed $100,000, so we advise that you carefully assess your financial circumstances. Consider taking the following steps:

1. FAMILIARISE YOURSELF WITH THE KEY COST FACTORS 

Start by understanding the major expenses tied to owning a car in Singapore:

1. Certificate of Entitlement (COE): This mandatory license can cost a big chunk of the car’s price tag. As of 18 September 2024, COE results show:
   • CAT A $98,524
   • CAT B $110,001
   • CAT C $74,000
   • CAT D $9,900
   • CAT E $113,104
2. Open Market Value (OMV) and Additional Registration Fee (ARF): The OMV sets your car’s base value, which then determines the ARF based on the car’s value. For example, a car with an OMV of $100,000 could carry an ARF of $200,000.
3. Loan and Downpayment: You can only borrow up to 60%-70% of the car’s price, so you’ll need a downpayment of 30%-40%.

2. DO AN HONEST ASSESSMENT OF YOUR FINANCES

Assess your financial readiness for buying a car without straining your income:

• Determine your monthly available budget for a car, covering all related expenses, including loan payments, operational expenses, taxes, and maintenance costs.
• Check your debt load—your total monthly debts shouldn’t exceed 55% of your gross income, as per Singapore’s total debt servicing ratio (TDSR).
• Weigh your options carefully, especially if you’re planning major expenditures like buying a house. A high car loan might impact your eligibility for a home loan.

3. EXPLORE YOUR OPTIONS AND MAKE SMART CHOICES 

Do your research and make enquiries on how to make car buying more affordable:

• Opt for a car with a lower OMV to reduce your ARF and overall cost.
• Look for promotions that might include discounts, lower interest, or cashback.
• Use online car loan calculators to verify your financing options and what you can realistically afford based on your budget.

FINANCIAL PACKAGES TO HELP YOU BUY A NEW OR PRE-OWNED CAR

 

Our Leasing Package Includes

Car Loan in Singapore: Here’s What You Should Know

An auto financing loan is used specifically to purchase a vehicle. Typically provided by banks and private financial institutions, as well as dealerships, this loan covers the cost of the car, which the borrower then repays over time with interest. The car itself often serves as collateral for the loan, so if the borrower fails to make payments, the lender can repossess the car.

The Loan-to-Value (LTV) Ratio determines how much you can borrow. If the car’s OMV is $20,000 or less, you can borrow up to 70%. For OMVs above $20,000, you can borrow up to 60%. You can spread out your car loan payments over a maximum of seven years—this is your Loan Tenure. Interest rates for car loans typically range from 2.28% to 2.88%. These rates are flat, meaning it is calculated on the initial loan amount rather than the remaining balance, but it is also very dependent on the market sentiments at the point of borrowing the loan. Be aware of any fees and penalties for late payments, as these can increase the cost of your loan.

Before buying a car, it’s only prudent to ensure you have an emergency fund equivalent to at least six months of your income. This financial cushion can cover car loan repayments in cases of unforeseen circumstances like job loss. Remember, cars depreciate rapidly, losing 50%-60% of their value in the first year, which could complicate financial recovery during emergencies.

Keep your total debt obligations below 40% of your income, especially if you’re managing other debts like home loans or credit cards. For instance, if your income is $7,000, your debts shouldn’t be over $2,800 monthly. 

Finally, limit your monthly car expenses to 20% of your income, including loan repayments, insurance, road tax, and maintenance. For a monthly income of $7,000, car-related expenses should not exceed $1,400. 

 

Value-added Service

Unsure About Buying? Try Leasing First!

Do you want to enjoy the convenience of driving a car for your own private use, but worried about long-term financial commitments? We hear you! With the Plug-N-Drive Program by Jack Cars, you can drive your own car without stressing over maintenance or high monthly fees. Plus, you get the opportunity to transition from a petrol car to EV without having to buy one. And with the Singapore Green Plan requiring newly registered cars to be cleaner-energy models by 2030, now’s the best time to immerse in this new eco-friendly lifestyle.

The Plug-N-Drive Program showcases the BYD ATTO 3, which is popular in the competitive EV market for its sleek and sophisticated design and smart infotainment system that easily syncs with smartphones. It can cover up to 565 kilometers on a single charge under optimal conditions, making it suitable for both city commuting and longer trips. It has roomy interiors for more  legroom and comfort.

If you find yourself wanting to keep the car you are currently leasing, the Lease-to-Own scheme at Jack Cars offers a smooth and affordable way to transition from long-term renter to car owner. This includes numerous benefits such as motor insurance, servicing, maintenance, and 24-hour roadside assistance. Opting for Lease-to-Own also entitles you to additional perks like rebates and a zero down payment requirement, making it an appealing choice for those ready to make their leased car a permanent asset. For further details or to switch to this scheme, feel free to contact us via WhatsApp.

Frequently Asked Questions

1. What are the benefits of leasing a car?

Leasing a car offers several advantages:

• Lower upfront costs: Compared to buying, leasing usually requires a lower down payment.
• Fixed monthly payments: Budgeting is easier with predictable lease instalments.
• Drive newer models: Enjoy the latest features and technology every few years without the hassle of selling.
• Minimal maintenance worries: Most lease terms fall within the manufacturer’s warranty period.
• No depreciation concerns: Simply return the car at the end of the lease without worrying about resale value.
  
  

2. What is the lease term, and can it be adjusted?

Lease terms typically range from 12 to 60 months, depending on your needs. Yes, lease terms can often be adjusted to suit your lifestyle or budget. Whether you prefer a short-term option or a longer commitment, just speak with our team to find the most flexible plan for you.

 

3. What happens if I exceed the mileage limit in a lease?

Each lease comes with an agreed mileage cap. If you exceed this limit, a per-kilometre charge will apply at the end of your lease. The specific rate varies by provider, but it’s always clearly stated in your agreement. To avoid extra charges, you can:

• Monitor your mileage regularly.
• Discuss higher mileage plans upfront.
• Explore lease extensions or early buyout options if needed.

 

SOURCES

Car Leasing vs Buying in Singapore – Things to Consider – OneShift

How To Know If You Are Financially Ready For A Car Loan In Singapore – Capitall

How to Afford a Car in Singapore? – SingSaver

Leasing vs. Buying a Car: The Financial Showdown – LinkedIn

Leasing vs Buying a Car: Things to Consider – Kinto One