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Content from:  Torque

If you are stretched out of budget for brand new cars, do not worry - there are plenty of leasing options to explore.

Category: Car Buying Advice

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Despite the increase in Certificate of Entitlement (COE) supply, COE premiums are still sky high, which lead to equally astronomical car prices. 

Besides COE, the tiered ARF (Additional Registration Fee) scheme plus the stricter financing rules implemented earlier this year also played a part in raising the barriers of car ownership, leaving aspiring car owners in a quandary.

A Toyota Vios now costs $115k (as of 18th March) - twice as much as it did five years ago

The previous lending regulations, which allowed banks to extend 'full' loans with a repayment period of 10 years, have been abolished. Under the new rules, buyers who intend to purchase a car (including used ones) with an Open Market Value (OMV) less than or equal to $20k can only borrow 60 percent of the vehicle's price (COE included), and must repay the loan in five years.

If the car's OMV is above $20k, a buyer can only borrow 50 percent of the car's price and must settle the loan within five years.

Specifically, it's the hefty down payment that is a big hurdle to many people. Buying a Toyota Vios, for example, requires one to fork out a $46k down payment. Acquiring a Camry 2.0 -which is listed at $150k at press time - would mean handing over $75k should you decide to purchase one.

If you can't afford to buy a car, we'll demonstrate how you can still "own" one. Even if you could purchase a car outright, we'll show you how leasing could potentially save you a good amount of cash.
The advantages 

Apart from not having to hand over a big chunk of your savings as a down payment, most leasing contracts also stipulate that  the leasing company will be responsible for expenses such as road tax, insurance and vehicle maintenance (see sidebar overleaf for potential 'savings'). 

Some dealers even offer the use of a courtesy car while the leased vehicle is being serviced. Of course, the lessee remains responsible for ERP charges, parking fees and any fines incurred for the duration of the lease.

The greatest advantage leasing holds is that since you don't own the car, you don't have to contend with depreciation and
resale issues when changing vehicles. This is significant as, generally speaking, a new car loses 15 percent of its value within the first year alone.

Car leasing does without the hefty downpayment but requires a larger sum of monthly repayments

If you're planning to lease a new car, it is possible to choose specifics such as colour and standard equipment. But if you're
leasing a used vehicle, you'll be limited to whatever the dealer in question currently has in stock. A new car is, of course, more expensive to lease than an older one.

Most firms will also allow you to use your own registration number on the car you intend to lease (as long as you pay the necessary LTA transfer fee, of course). 

In contrast to owning a car, leasing also gives you the opportunity to change vehicles sooner, without having to worry
about settling the outstanding loan for the car in question.
Torque The article first appeared in the October 2013 issue of Torque. Log on to their website to subscribe.
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