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Long Term Car Rental vs Car Ownership

The Economical Perspective

Many economists argue about car ownership being an investment. Advocates of car ownership deem having a vehicle as an asset, where you can sell and earn money. However, unlike other assets like housing equities which tend to appreciate over time, the value of cars depreciates. Nevertheless, it is often described as a hefty but necessary purchase. Regardless of the COE, road tax, and high maintenance costs involved, the demand for car ownership in Singapore has been increasing over the years and the trend seems to be on a steady but rising trajectory.
We all know that renting a car is relatively more expensive than car ownership. But by how much more?
From an economical standpoint, here is a breakdown of one of the more common rental cars (E.g. Mazda 3) if bought and rented, for a 5 year period, for example.

Car Ownership Car Rental
Insurance ~$100/mth (Subjective amount, depending on no-claim discount [NCD]) (Inclusive in monthly payment)
Road Tax ~$60/mth (Inclusive in monthly payment)
Maintenance ~$100/mth Inclusive in monthly payment – 1-1 car replacement – Regular servicing – Workshop repair
Price (with COE) $92,688 (as of July 4, 2019) NIL
Downpayment ~ $27806 Currently, the downpayment is equivalent to 30% down payment of the full amount of the car loan. This might be a hefty amount to pay upfront to purchase a car, especially in this COVID-19 pandemic climate. There is a downpayment component as a security deposit (refundable by the end of the rental contract) required for each long term car rental booking. Normally, the deposit is equivalent to the monthly rental fee which is about $1700 (according to the Monthly Rental Payment of Mazda 3).
Monthly Payment There is a downpayment component as a security deposit (refundable by the end of the rental contract) required for each long term car rental booking. Normally, the deposit is equivalent to the monthly rental fee which is about $1700 (according to the Monthly Rental Payment of Mazda 3). ~$1,700
Carpark ~$100/mth ~$100/mth
Total (Monthly) ~$1,845 ~$2,080
Petrol ~$200/mth ~$200/mth
ERP ~$80/mth ~$80/mth

  • Disclaimer: these are approximate rates.

Of course, like any car make and model, the prices vary with timing of purchase, and other extraneous factors. However, from this table here are these few key takeaways:

  • For car rental, there are no high down payment costs, unlike car ownership.

  • However, the monthly costs of car rental is higher as compared to its counterpart.

  • Insurance, road tax and maintenance costs are already included within the monthly fees for car rental.

CONS OF CAR RENTAL VS CAR OWNERSHIP

  • Moreover, even though you are able to pay less upfront; this could definitely lead to paying more in the long run.

  • You might need to abide by the terms and conditions of the car rental companies. For example, there may be certain restrictions and changes in the insurance policies in which the car rental company has put in place should you want to travel to Malaysia over the weekends with the rented car.

  • Moreover, more often than not, there tends to be a minimum age limit of about 23 years old and a valid driving licence with more than 2 years of driving experience to be qualified as a driver for car rental.

Situations where Long Term Car Rental is Preferred:

EXPATS STAYING IN SINGAPORE FOR THE SHORT TERM

  • If you’re an expat and are staying in Singapore in the short term, then car rental is the way to go. You might be able to find various expat car rental services in Singapore that might cater to a more long-term, yet sustainable form of transport.
  • Car ownership is a long term purchase. A typical COE lasts for 10 years. So unless you are certain that you are staying in Singapore for 10 years or more and will be able to commit to the terms and conditions of the lease, it would be highly recommended if you take up the long term car rental package.
  • You are not so concerned about it being a ‘brand new car’.

FUSS FREE MONTHLY PAYMENT

As shown in the table, there are various different payments that must be made to service a bought car throughout its minimally 10-year span with you. Car maintenance, road tax and insurance being the top 3 additional monetary expenditures that you would have to hassle over if you were to purchase the car.
Should you want a fuss free option of simply paying a monthly fee with inclusive insurance, road tax, servicing and maintenance costs, long term car rental may be the option for you. This, however, may be about $224 more expensive per month.

QUESTIONS ABOUT AFFORDING THE DOWN PAYMENT

Even though there are a slew of car loans, prudent financial planning is required to ensure that one is able to afford the down payment. The option to rent a car may still be a wise one if you need a car urgently during a certain period of time but is unable to pay for the high down payment costs.

REPLACEMENT CAR PROVIDED IN EVENT OF CAR BREAK DOWN/COLLISION.

In the unfortunate event of car breakdowns or collisions, the car rental company would be able to provide you with a similar interim car for usage, while they settle the relevant insurance and administrative work for you, allowing you to enjoy the convenience and fuss-free car rental experience.

The Emotional Perspective

Despite its hefty price tag, there may be some occasions and life stages where long-term car rental or car leasing may be the most viable and extremely handy solution for you.

Imagine this: Holding your highly energetic toddlers around the public transport sending them to and from private classes, clinics and other extracurricular activities. For a father of 2, in example, paying that extra $224/month may be the cost he is willing to bear to have a piece of mind. Bringing his kids to school, travelling to different parts of Singapore for mini excursions over the weekends and the convenience of buying groceries without lugging them on the crowded and cramped public transport. Or if you are a dog owner and loves to bring your 3 golden retrievers to the dog run.

Even though cars are not bought as an investment, it is, however, an emotional yet necessary purchase. Convenient commuting being one major emotional push towards the expensive purchase, but maybe the alternative of signing up for a long term car rental package may be an ideal solution for your commuting woes.

To Rent or Not to Rent? Emotional vs Economical Decision

Regardless of the economics of long term car rental vs car ownership, at the end of the day, the decision is up to you. It’s the cost-benefit analysis between the tangible losses and intangible gains; or vice versa.

Irrespective of the decision, whether to rent a car or to purchase it, the due diligence of understanding your needs, and the costs involved, and how the car can benefit you and contribute to your lifestyle, would play an immense role in your decision.

If you wish to learn more about car rental services and packages, be it long-term car rental or short-term car rental, please do not hesitate to contact our friendly sales associates at BizLink Rent-A-Car Pte Ltd and they will strive to understand your preferences and work out the most suitable rental package for you.

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