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Car Ownership vs Car Renewal vs Car Rental – The Ultimate Comparison

Are you on the fence of renewing your car’s COE, buying a new car or simply scrapping your car and getting a car rental instead? With so many options on how to manage your daily commute, we have summarized some of the main key points (though not exhaustive), that could tip your decision making one way or another. 

Buying A New Car Renewing COE Car Rental 
Pros
  1. Enjoy rebates and 
  2. Lower road tax
  3. Low car maintenance 
  1. Lower initial costs 
  1. Flexibility in meeting commuting needs
  2. Promotes administrative ease
  3. Cost efficient
  4. No car maintenance 
Cons
  1. Higher initial costs 
  2. Limits to car loans 
  3. Time consuming & effortful 
  1. Forfeit rebates (COE & PARF) 
  2. Higher taxes & maintenance 
  1. Can be more pricey
  2. Logistical constraints

 

Buying A Brand New Car

Pros 1: Enjoy Rebates 

Drivers who decide to buy a brand new car can get to enjoy Certificate of Entitlement (COE) and Preferential Additional Registration Fee (PARF), which will be given when you deregister and/or scrap your car, of which can be used to offset the purchase of a new car. However, do note that if you were to wait till the COE of your previous car fully expires to scrape your car, you will only be entitled for a minimum PARF rebate (50% of ARF). It is also noteworthy that for cars that are within two years of registration will only be entitled to a maximum of 80% of the Quota Premium or Prevailing Quota Premium paid. 

Pros 2: Lower Road Tax

For cars that are more than 10 years old, you would have to pay for a road tax surcharge on top of your vehicle’s original road tax. Shockingly, the road tax goes up by 10% each year after 10 years of the vehicular life, up to 50% once your vehicle reaches more than 14 years old! 

Age of Vehicle Annual Road Tax Surcharge
More than 10 years old 10% of road tax
More than 11 years old 20% of road tax
More than 12 years old 30% of road tax
More than 14 years old 50% of road tax

Source: https://onemotoring.lta.gov.sg/content/onemotoring/home/owning/ongoing-car-costs/road-tax.html

Pros 3: Lower Maintenance 

With a new vehicle, chances are that it is in a more pristine condition than its counterparts. Barring exceptional situations where new cars are recalled due to factory malproductions, buying a new car would enable you to enjoy maintenance perks suchs as warranty coverages and maintenance discounts. This would also help to amount to a lower amount of maintenance fees needed to service newer vehicles. 

 

Cons 1: Higher Initial Costs 

For potential car owners, one would be privy to the recent onslaught of rising COE costs – the biggest single fee levied on car owners. In January 2020, COE for Category A (cars up to 1600cc) and Category B cars (cars more than 1600cc) were hovering between $35,000 to $37,000. With the “Zero Growth” policy for cars in place, the exponential upward pressure on COE has caused it to rise to as much as $81,089 for Category A and for Category B, hitting all time records of $110,000! That’s a whooping $70,000 increase for the same Category B car bought 2 years ago! Hence, car owners could be forking out high upfront costs as compared to other options. 

Moreover, another big factor of consideration is higher depreciation costs as it could amount to more than 20% for the first year. With each passing year, it is common to see depreciation of about 10% per year in the first 4 to 5 years of the car’s life-span. With a new car, one should be prepared to have the car worth about 40% of the cost price of a car half way through the COE. 

Cons 2: Limits to Car Loans 

Notwithstanding the high amounts that one has to fork out for car ownership, one could only obtain car loans of up to 70% loan of the car’s purchasing price. The amount of loans that you are entitled to is also determinant on the car’s Open Market Value (OMV), for a loan tenure of 5 to 7 years. Hence, one has to definitely plan ahead financially to ensure that the cost of purchasing the car is covered. 

Open Market Value of Car  Maximum Car Loan 
Less than S$20,000 70% of purchase price or valuation price, whichever is lower
More than S$20,000 60% of purchasing price or valuation price, whichever is lower 
Car loan tenure: 5-7 years 

Cons 3: Time Consuming & Effortful 

Last but not least, buying a car can be a time consuming process! From doing the research, liaising with a car dealer, conversing about loan servicing and following up with paperwork – there’s so much to be done just to get around with purchasing the car. Not to mention the mundane but absolutely necessary process of conducting regular maintenance, car washing and administrative road tax & bills, the list goes on! Surely, purchasing a car is no easy feat. 

 

Renewing Your COE 

Pros 1: Lower Initial Costs

In essence, one of the biggest advantages of One of the biggest costs in renewing your car’s COE is the Prevailing Quota Premium (PQP), which is computed from averaging of the previous three months of COE prices. The benefits of having PQP rather than COE is its relative stability in prices. Moreover, you are able to choose between renewing your COE for 5 or 10 years. If you are renewing for five years, you only have to pay for half the PQP, allowing you to be more economically prudent along the way. Lastly, depreciation is at one of its lowest for renewed cars, as the car is considered to be fully paid for! 

 

Cons 1: Rebates Forfeited 

When you opt to renew your car, you will be forfeiting the COE and Preferential Additional Registration Fee (PARF) rebates, a sum of money the Land Transport Authority (LTA) bestows upon the car’s deregistration. These two amounts equate to your car’s scrap value, which is the amount of money you are estimated to get for scrapping your car. 

Cons 2: Higher Taxes & Car Maintenance

For car users who decide to renew their COE, cars above 10 years old have an additional surcharge levied on their road tax, of which increases by 10% over the car’s regular road tax every year, up to a maximum of 50%. Moreover, since they are relatively older, they experience more wear and tear over the years, which could amount to more fees paid via regular maintenance. It was also noted in previous articles on “Renting a car vs buying a second hand car” where for older models, some of the car parts may have phased out, amounting additional challenges for car owners to have their car fixed. 

 

Opting For Car Rental 

Pros 1: Flexibility in meeting commuting needs

Especially during this climate of high inflationary pressures on goods and services, having the flexibility in managing your commuting needs by renting a car when you absolutely need one, and returning it when there are more effective ways of commuting. Be it a one-time off rental or one that is of longer stint, renting is an ideal choice when flexibility of schedule and need of vehicle is of priority. 

Pros 2: Promotes administrative ease 

For a hassle-free experience in commuting, car rental companies have it easy to rent a car. With a simple application process that secures the rented car, the car rental company does most of the administrative work for you. From insurance, to delivery and even car maintenance, car rental companies are a go-to one-stop shop that handles all of one’s administrative concerns. 

Pros 3: Cost efficient

Moreover, with the financial flexibility to rent anytime, anywhere, it promotes a cost efficient way of maximising the monies spent on commute while keeping it limited to the time use of the vehicle, which varies across most car users throughout the lifespan of the car. What’s more, one could appreciate the “zero risk” of car depreciation over the years when opting for a car rental. 

Pros 4: No car maintenance 

To ensure a smooth journey for car rental customers, car rental companies would tend to ensure that the cars in their catalogue are regularly maintained. For unfortunate situations of car breakdowns or malfunctions, a simple call to the support team would suffice and a substitute vehicle would be provided to you to ensure continuity and minimal commuting disruptions. 

 

Cons 1: Can be more pricey. 

Depending on the type and duration of the car rental, car rental may not be the most financially savvy option. However, this may be a misconception as with proper planning, the cost of renting a car may not be as costly as one would imagine. To debunk this misconception, we have recently done an article on “Is Taking a Taxi More Expensive Than Long Term Car Rental” to evaluate the financial commitment of cab hailing versus long term car rental. Moreover, it is common-place that car rental rates do generally get cheaper as the rental period extends. 

To get the bigger bank for your buck, here are some tips that you can adopt for your next car rental.

  • Opt for long term car rental should you have a more consistent/sustained usage of the car. 
  • On the other extreme, reserve the rental car only for the days that you need it. Moreover, do some research to rent only the type of car that you need. For example, bigger cars require more fuel, which would cost you quite a bit should you be on the road frequently. 

Cons 2: Logistical Constraints 

Car rental customers might have qualms of having trouble picking up and dropping off cars at specific points (perhaps at the car rental company itself, or at a designated showroom flat). However, at BizLink Rent-A-Car, regardless of whether you have a short term car rental or a long term car rental contract with us, simply inform us of the car pick up and drop off point and we will be able to retrieve or send your vehicle to you, without quality customer service provided, creating a fuss free rental experience. 

 

Hence, with this one-stop comparison of what’s better for you in the long run in deciding on the type of commute one would opt for in this economic climate, it’s safe to say that there is an option for everyone, and anyone. 

 

Unclear of what’s better for you, or not sure whether car rental is the right choice? Speak to our friendly sales associates and they would be the best person to assist you in your commuting decisions.