Buying vs. Leasing a Car in Singapore

/Buying vs. Leasing a Car in Singapore
Buying vs. Leasing a Car in Singapore 2019-07-24T07:35:55+08:00

It will come as a surprise to nobody that buying a car in Singapore is incredibly expensive. In fact, it remains the most expensive city in the world to own your car. Thankfully, the public transport and taxi systems here are very efficient, frequent and comfortable. However, we recognise that not everybody wants to be travelling via public transport, particularly if you have a family and you’re forever nipping about the island to take the kids to various sports and activities.

Before, we get into the comparison of buying a car in Singapore compared to leasing, it’s important to outline the reason that owning a car in Singapore is so very expensive. The simple answer is to avoid too much traffic congestion. The Land Transport Authority (LTA) achieves this by applying taxes at every step of the property transaction, from the purchase to the ongoing maintenance and use of the vehicle. There are very few strategies quite as effective at reducing demand for something than by introducing high taxes for the privilege.

This week we explore the differences between buying and leasing a car here in Singapore, as well as some tips regarding when you should consider these options. Let’s first consider some of the key acronyms that you need to know when it comes to vehicles in Singapore:

  • COE – Certificate of Entitlement: This is a 10-year license or right for you to register, own and drive your own vehicle throughout Singapore. The prices can fluctuate over time, but it’s important to recognise that the cost of the COE will often be higher than the vehicle itself. The current rates range between approximately $25,000 – $40,000.
  • OMV – Open Market Value: This is the overall value of the vehicle, which is set by Singapore Customs, and will include the price paid for the car as well as the costs of transporting it to Singapore.
  • ARF – Additional Registration Fee: This is the tax paid on the registration of a new car, which is represented by a percentage of the OMV. The ARF is tiered based on value of the car and applies as follows:
    • First $20,000 – 100%
    • Next $30,000 – 140%
    • Above $50,000 – 180%
      • By way of example, a car that has an OMV of $75,000, which have an additional $107,000 payable as an ARF.
    • PARF – Preferential Additional Registration Fee: When your COE expires at the end of the 10 year period, you can de-register your vehicle with the LTA and they will pay you a specified amount back referred to as the PARF. This is designed to keep modern and efficient cars on Singapore’s roads.
    • PQP – Preferential Quote Premium: At the end of your 10 year COE period, you can also elect to pay for an additional 5 – 10 years to keep your vehicle on the road. Unless it’s a vintage car, then it is unlikely to be worth the additional cost.

Now that we’ve covered the basics, let’s explore the pros and cons of each strategy.

Advantages of Leasing a Car in Singapore

  • Less cash upfront is required
  • Flexibility with regard to how long you’ll be in Singapore
  • You can change / upgrade your car regularly
  • One payment to the leasing company rather than multiple third parties
  • Flexibility if you don’t drive often
  • No concerns about depreciation

Disadvantages of Leasing a Car in Singapore

  • Far more expensive if you drive often in the long-run
  • Possibility of less choice of vehicles
  • Higher insurance excesses when driving outside of Singapore (Malaysia for example)
  • Greater concern about any damage to the vehicle
  • Less flexibility to simply sell the car

Advantages of Buying a Car in Singapore

  • Cheaper in the long run if you plan to remain in Singapore
  • More flexibility to travel through Malaysia and Singapore
  • Cash-back rebate via the PARF at the end of your COE
  • Flexibility to sell your vehicle as you choose
  • Greater choice of vehicles

Disadvantages of Buying a Car in Singapore

  • Large upfront payment required
  • More difficult to change vehicles regularly
  • Multiple party payments for insurances, licensing etc.

Over the long run, buying a car in Singapore is a cheaper option than leasing if you plan to remain here for the medium to long term, however it’s important to be aware that this does mean a larger ‘investment’ upfront, so it’s important to do your homework here. If you’re planning on leasing, ensure that you’re aware of any other contract implications such as early termination penalties as well as reviewing the insurance T’s and C’s.

If you don’t need the flexibility or ‘freedom’ of having your own vehicle or just wouldn’t need to drive frequently, you’re likely to be far better off by relying on Singapore’s world-leading public transport system and taxi network.

 

To Your Financial Success!

Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3

Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.

To learn more about how we may be able to help you, please contact us:

✆         +65 8282 5702
✉         jarrad.brown@gfcadvice.com
☜         http://singapore.feebasedfinancialadvice.com

To discuss how these changes affect you, click here to book a complimentary consultation: http://bit.ly/Book-Your-Consultation

 

General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.

 

*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.