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Can Leasing A Brand New Car In Singapore Be Cheaper Than Buying One?

As COE prices continue rising, leasing is starting to be the more attractive option.

The conventional wisdom is that leasing a car would usually be more expensive than buying one. After all, those who lease a car are unwilling to commit to long-term ownership, and the trade-off for the flexibility is that they should expect to pay more compared to others who are willing to purchase a car.

Given the current high COE prices (as of 2nd bidding September 2023, it’s $105,000 for Cat A COE and $144,889 for Cat B COE) and the increase in Additional Registration Fee (ARF) earlier this year, cars in Singapore are currently selling at a record-high COE price. For example, a brand new BMW 2 Series Gran Coupe currently costs $232,888 (down payment of at least $93,155 required) while an entry-level Audi A3 Sedan 1.0 will set you back $208,809 (down payment of at least $83,524) down. A Japanese car like the 7-seater Toyota Sienta (down payment of $72,395) costs $180,988.

Being able to buy a car also means needing to fork out a down payment. In Singapore, a down payment of at least 40% is required for cars with an OMV of more than $20,000. For cars with an OMV of $20,000 or less, it would be 30%.

With the high cost of buying a brand-new car, leasing a car would naturally be more expensive. If you are hoping to drive a brand-new car for the next few years, could leasing be cheaper than buying?

Why Lease A Car?

Leasing a car has increasingly become a popular alternative for those unable or unwilling to meet the high upfront cost of buying a brand-new car. It’s also a realistic option for drivers not looking to own the car for the full 10-year lifespan of the COE. For example, if the intention is to drive the car for two years before selling it in the used car market, then perhaps leasing the car could be the more convenient and (possibly) cheaper option.

There are also more car companies these days providing leasing options. The lease duration could range from one month to five years or more.

Typically, the lease would include essential items such as regular servicing and maintenance, insurance and road tax. It makes sense for the car companies to provide these services to upkeep the car because ultimately, the car belongs to them. From the driver’s point of view, this is also a valuable benefit because it means not having to worry about additional costs.

How Much To Buy A Brand New Car In Singapore?

We looked at three car models – the BMW 2 Series Gran Coupe, Audi A3 Sedan 1.0 & the 7-seater Toyota Sienta.

  BMW 2 Series Gran Coupe Audi A3 Sedan Toyota Sienta
Purchase Price $232,888 $208,809 $180,988
40% Down Payment Required $93,155 $83,524 $72,395
Monthly Instalment (7-year loan, interest rate of 2.98%) $2,010 $1,803 $1,562

While looking at the purchase price of a car and the monthly instalment is one way of calculating affordability, it isn’t a like-for-like comparison if we compare it to leasing a car.

To compare it to the cost of leasing a car, it would be better to look at annual depreciation.

Typically, if we buy and hold the car for 10 years, we can calculate it based on a straight-line 10-year depreciation.

  BMW 2 Series Gran Coupe Audi A3 Sedan Toyota Sienta
Purchase Price $232,888 $208,809 $180,988
PARF Rebate (After 10 Years) $12,363 $7,964 $7,895
Annual Depreciation $22,053 $20,085 $17,310

However, the reality is that most cars will depreciate by a higher amount in the first few years and a lower amount in the later years.

For example, within the first two years of car ownership, the depreciation you incur could be 30% of the total depreciation (15% each year) for the car over 10 years (instead of 20%).

The next three years could see you incur 30% (10% each year) of the total depreciation of the car, and the remaining five years could see you incur the final 40% (8% each year) of the depreciation incurred. It’s usually not a straight-line depreciation unless you own the car for 10 years.

Assuming you only intend to drive for two years, this means the depreciation that you incur for the cars will be higher by 50% each year, for the first two years.

You will also have to add annual road tax and insurance to the cost of your ownership. We assume an insurance premium of $1,500 a year.

  BMW 2 Series Gran Coupe Audi A3 Sedan Toyota Sienta
Annual Depreciation (first two years) $33,080 $30,128 $25,965
Road Tax $684 $390 $714
Insurance $1,500 $1,500 $1,500
Total Each Year (first two years) $35,264 $32,018 $28,179
Monthly Cost (first two years) $2,938 $2,668 $2,348

How Much Does It Cost To Lease A Brand New (Or Relatively Brand-New) Car In Singapore?

While many car leasing companies provide their information upon request, we did manage to find a few online sources that share how much it would cost for us to lease a similar car.

Source 1:

Toyota Sienta – $2,348 per month (for 12 months)/$2,328 per month (for 24 months)

BMW 2 Series Gran Coupe – $2,958 per month (for 24 months)

Source 2:

Audi A3 Sedan – $3,258 per month (for one month)

Source 3:

BMW 2 Series Gran Coupe – $3,030 per month

Read Also: Cheapest Cars That You Can Buy In Singapore

Interestingly, the cost of leasing such cars matches up very closely with our back-of-the-envelope calculation of buying a brand-new one. The exception would be the Audi A3. However, the rate quoted is for a monthly rental and even then, it was just a few hundred dollars more. A longer lease period would likely result in a lower cost each month.

Despite the cost of leasing a car being very similar to buying one and selling it after two years, leasing a car also comes with some advantages. These include not needing to pay a hefty down payment, which is likely a barrier for many car owners, not needing to worry about repair and servicing costs, and potentially getting a poorer-than-expected resale value if one sells the car after two years.

Of course, if we want to own the same car for the next 10 years, then it’s likely more worthwhile for us to buy it instead of leasing. However, if the intention is to drive a car for one to two years before selling, it’s possible that leasing could prove to be the better decision.

Read Also: Why New Luxury Cars In Singapore Are Less Likely To Be Scraped After 10 Years

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