Weighing your options on whether to buy or lease a car in Singapore? We discuss this debate to see what's the best option for your family. Read on for the pros, cons and costs of car ownership in Singapore.
We all know that zipping around Singapore by public transport is super affordable, as are taxis (and child safety in cabs and ride shares is an absolute priority). But all that waiting around for the next bus, planning your route and stressing about portable car seats is hard. Sometimes we’d chew off our own arm for the freedom cars provide. Despite the astronomical costs of owning a car in Singapore, sometimes nothing beats having your own set of wheels. So here’s the kicker: is it better to buy or rent a car? We’ve weighed up the pros and cons of buying or leasing cars. Now, for the next step: converting your driver’s licence…
Buy or lease? Your complete guide to owning cars in Singapore
Why are cars so expensive in Singapore?
Singapore is pretty darn expensive, full stop. And that doesn’t stop with owning a car. Size-wise, it’s a small city that’s already got a large number of vehicles on the road. This means the Land Transport Authority (LTA) limits the car population in an attempt to avoid traffic congestion – and that’s through taxes. Yep, owning a Singapore car will cost you when you buy, register and even drive your four-wheeled cocoon. Yikes.
To buy or not to buy?
Parents are no strangers to making big life decisions; the same goes for when you’re weighing up your buy or lease options. At HoneyKids HQ, some of us mums swear by public transport and taxis for getting around town. There’s no huge cost outlays and no worrying about repairs, parking, petrol, traffic, etc. With many of our essential go-to’s on our neighbourhood doorstep, getting around on foot is pretty easy.
However, car enthusiasts swear by the freedom that having a car brings to family life. Having multiple kids attending different Singapore schools can be a real juggle with drop-off and pick-up times, and a car makes lighter work of that. Cars in Singapore can also make it a lot easier to get out and about exploring and can be a godsend if you live in a quieter area that isn’t as well serviced by public transport. Whether you buy or lease a car, it’s also peace of mind to have your own vehicle that you can keep a permanent child car seat in.
Cars in Singapore: the need-to-know acronyms and costs
There are several things to consider if you’re pondering the costs of buying a car in Singapore.
- Open Market Value (OMV). This is the value of the car. It’s like the baseline price for the particular make and model; it’s what people in other countries would pay for the same car.
- Additional Registration Fee (ARF). This is a tax that’s payable on registration of a new car, and how much you pay depends on the vehicle’s OMV. It’s worked out on a percentage model; the higher the OMV, the higher the ARF. For example, for Singapore cars with an OMV of under $20k, your ARF will be 100%. It goes up from there.
- Excise Duty and GST. More tax (you’ll hear that a lot). Excise Duty is a tax imposed on goods – in Singapore, we pay it on items such as alcohol, cigarettes, petrol and cars. The rate is 20% of the car’s OMV, and then on top of that goes another 7% for GST. Yowsers.
- Certificate of Entitlement (COE). Lasting for 10 years, it’s a licence that gives you the right to register, own and drive a car in Singapore. Since it’s market-driven, COE prices can fluctuate dramatically. In times of high car demand, the COE has spike dramatically, which in turn cause prices of cars to increase. Eugh, it’s a vicious cycle. However, it works both ways, and has been known to dip to more affordable levels, too. You can check out the most recent COE bids here. It can run in excess of $50k, often costing more than the car itself!
- Road tax. Yep, more tax. Every registered vehicle in Singapore must have valid road tax. You need to renew it every six to 12 months, and it’s calculated based on the engine capacity of your car.
- Electronic Road Pricing (ERP). Now comes the driving part… and that will also cost you! ERP is a system of electronic road tolls that increase during peak hours. All cars have internal units installed with a cash card to automatically pay tolls and car parking charges. You’ll need to keep it regularly topped up to avoid fines! You can also register for backend payment services for ease.
- Done with your car? You’ll need to deregister it. As a ‘thank you’ for taking your car off the road, the LTA will pay you the Preferential Additional Registration Fee (PARF). So long as it’s less than 10 years old and you meet the eligibility criteria, you’ll get a nice little rebate. The newer your Singapore car you deregister, the more cash you get back in your pocket. It’s all about keeping newer, more fuel-efficient cars on the road—fewer breakdowns = less traffic jams.
- Once your COE for your Singapore car expires, you can renew it for five or ten years, depending on the category of your vehicle and its lifespan. You can do this by paying the Prevailing Quota Premium (PQP).
So… buy or lease a car in Singapore? What’s best?
When it comes to your Singapore car, here are our suggestions on how to make your decision.
BUY a car in Singapore if you:
- Have the upfront cash for the deposit
- Will be in Singapore for at least two years
- Want flexibility to sell your Singapore car at any time (as there’ll be no contract you’re tied into)
- Want to feel less worried about dents/scratches/kids wrecking the car (if you own a car, the choice to repair is up to you. Lease a car, and you’ll find even minor issues must be fixed)
- Want a newer/premium brand car
LEASE a car in Singapore if you:
- Don’t want to pay a large cash deposit upfront.
- Have a company paying for your monthly lease.
- Are new to Singapore and apprehensive about finding a good local car repair workshop. If you lease a car, you won’t need to worry about repairs.
- Are not sure how long you will be staying in Singapore.
- Are looking for a small, standard-brand, older car.
Expert tips on whether to buy or lease cars in Singapore
We reached out to Presto Expat Motoring for their take on the buy or lease debate. Here’s their weigh-in:
|1. Owner bears cost of road tax, insurance, service and maintenance (on top of monthly loan repayment).
|1. The cost of road tax, insurance, service and maintenance is included in the monthly rate.
|2. Insurance excess is lower.
|2. Insurance excess is higher.
|3. Owner has flexibility and is not bound by terms of a rental agreement.
|3. Rental terms and conditions can be restrictive (e.g. Singapore driving only, only two named drivers allowed).
|4. The car can be sold at any time.
|4. The hirer pays for the remaining months of a contract period if they terminate early.
|5. Owner must pay an upfront cash deposit of 30% to 40% of the car price (determined by remaining Open Market Value (OMV)).
|5. The upfront deposit is one to two months of the rental rate (much lower).
|6. When the owner scraps or sells the car, there is a guaranteed Preferential Additional Registration Fee (PARF) rebate from the LTA.
|6. At the end of the rental contract, the deposit is refunded.
Whatever you decide, here’s to the fun, flexibility and freedom that buying or leasing a car in Singapore provides.