Not sure if you should buy a car or lease one?

Given Singapore’s size, the government has attempted to control the number of cars through high taxes and fees for car owners and drivers. This includes registration fees, road tax, excise duty, and the Certificates of Entitlement (COEs).

Those who are unable or reluctant to part with a hefty sum for the COE, especially when this increases, may want to turn to car leasing instead.

Here are some advantages and disadvantages of buying vs leasing a car that you can consider.

Pros of leasing a car in Singapore

• You do not need to pay a downpayment; just a refundable deposit of usually 1-3 months is collected.
• Road tax, insurance, servicing and maintenance costs are typically covered.
• You are not committed to the same car for a long time, i.e. you can change to a different car at the end of the lease.
• Your Total Debt Servicing Ratio (TDSR) is unaffected.
• There is zero depreciation risk.
• You get a replacement car during servicing or during repairs.

Cons of leasing a car in Singapore

• You need to return the car in its original condition.
• If you get into an accident and depending on the insurance coverage, you may have to partially pay for major repairs.
• Depending on who you lease the car from, there may be terms and conditions e.g. mileage limits.

Pros of buying a car in Singapore

• You pay less money over the long term compared to leasing.
• Since you own the car, you can customise it to your liking.
• You can repair the car at your leisure.
• When you are done making payments, the car is yours.

Cons of buying a car in Singapore

• You must pay for road tax, insurance, and maintenance costs. 
• You pay a high downpayment.
• You are committed to the same car for a long period of time. 
• If your car is not in a good condition, you cannot return it to the seller or change to another vehicle. 

When might you want to lease a car

Whether it’s better to lease or buy a car comes down to your preferences and needs.

Leasing a car will cost less upfront than buying one but it will cost more in the long run. But it is ideal for those who need a car now and do not want to fork out a large downpayment.

Also, if you have been eyeing that luxury car that you can’t afford a loan for, leasing is an option for you to enjoy one.

Since purchasing a car is a big commitment, leasing a car is also ideal for expats who may have to leave the country at notice or for those who intend to stop driving within the next few years.

That said, there are car hiring alternatives such as car sharing (usually by the hour), short-term car rental (typically for a week at the minimum), car subscription (paying a recurring fee for the use of one or more cars) or lease to own option that may suit the specific needs of various drivers. Do your research and your sums and see which works best for you.

Have some questions about leasing a car? Speak to our leasing consultants to find out more.

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What’s the difference between car rental and car leasing?

The main difference is in the length of time you are committed to using the car. Car rental tends to refer to a short-term agreement while car leasing covers a longer contractual period, usually more than a year in Singapore. When you sign an agreement to rent or lease a car, you will pay a fee which allows you the full use of a car for a pre-determined period. At the end of it, you need to return the vehicle in good condition back to the car rental or car leasing company.