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Looking to buy a car in Singapore? You've probably tackled the idea of car leasing. Here are the pros and cons to help you make a decision.
Category: Car Buying Advice
While car leasing might sound like a big word, it actually refers to the arrangement to rent a car for a fixed period of time, usually between two to five years. Don’t feel too bad if you don't know what car leasing is, as it is an arrangement that is more commonly practiced in the world of commercial fleets.
So, why would you want to lease a car instead of buying one? Wouldn't it make more sense to take out a loan for your own car and make those monthly repayments? Well, read on to find out the differences with each option.
Initial cash outlay
As with any high-value purchase, chances are you will be taking out a loan for the purchase. Due to Singapore's regulations for car financing, you will have to pony up a hefty downpayment of either 30% or 40% depending on the OMV of the car that you are buying - this can easily come up to $30,000 of upfront cost.
Should you opt for leasing, there will be much lesser upfront costs involved, you will however end up paying more in the long run, through the costlier monthly recurring payments.
So, with buying a car, you have to come up with a significant sum, but get to make a saving in the grand scheme of things, as compared to leasing a car. This is one of the biggest trade-offs that you should consider when deciding between leasing and purchasing a car.
Maintenance and running costs
A car isn't something you buy and forget about. When you own a car, there are various running costs to be concerned over, things such as petrol, parking and other costs come to mind.
There are also various maintenance costs to be considered. Consumables such as tyres, brake pads and wiper blades are to be replaced from time to time. Additionally, maintenance work such as fluid changes, along with repairs will all result in additional spending.
On the other hand, barring accident repairs, most leasing companies will be responsible for the maintenance, wear and tear items replacement as well as general repairs.
By leasing a car, you will pay a fixed amount every month, avoiding the uncertainty of additional costs incurred due to repairs - don't be mistaken though, you are not getting all these for free, it is all included in the fixed sum you pay every month.
Choice of cars
Going for an expensive luxury car will translate to a hefty downpayment, and unless you are able to come up with a substantial amount, the range of cars that you can buy will be extremely limited. With leasing, however, the cost is spread over the term of the lease, making more expensive cars within reach.
While many might have the misconception that leasing, or rental cars are all cheaper, budget oriented options, that is untrue. Not only are there companies that offer the leasing of brand new cars, authorised dealers of luxury car brands such as Mercedes-Benz, Audi and BMW also have their own leasing programmes.
Want to try a new car or even a luxury car without the initial cash outlay? Leasing might be the perfect option for you!
Period of commitment
A car is a long term purchase, you buy one with the intention of an extended period of ownership. All new cars come with a fresh 10-year COE, and if you were to sell before the COE is up, you might end up with a higher depreciation. Depending on the market forces, you might also face issues with selling your car within the timeframe you desire.
If you are planning to stop driving in just a couple more years, or are an expat that will not be living in Singapore for more than a few years, leasing a car can be a hassle-free solution for you.
By leasing a car you can avoid the intricacies of car ownership and the risk of making a loss when selling it at the wrong time. All while still getting to have a personal car at your disposal for the period agreed upon.
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