Should we own a car or sign up for a car subscription?

Should we own a car or sign up for a car subscription?

Owning a car has always been a dream for most millennials. It brings prestige, convenience and saves us on travelling time every day. Depending on the market situation, the price can be exorbitant – more than what a working-class adult can afford to finance monthly. 

This has led to the emergence of car subscription services, which have made driving even more accessible to the masses. With just a small downpayment, almost anyone can ‘own’ a car in Singapore.

Now, let’s delve into the pros and cons of owning a car and opting for a car subscription service.

Upfront Costs/Fees

Buying a car in Singapore requires you to make a downpayment. By law, the minimum downpayment is 30% or 40%, depending on the car’s Open Market Value (OMV). This also depends on the car loan you can secure for yourself. If you can’t secure a 70% loan for the car you want, then you’ll need to cover the balance with cash upfront.

For car subscription services, most would require you to pay a paltry fee upfront, and there are options for that too. For CARRO Leap, the fee is only applicable for brand new cars; it’s fully refundable for used cars under their service. 

Monthly Fees

Owning a car in Singapore comes with your maintenance and servicing costs, road tax, petrol, parking and insurance. On top of these costs, there’s still your monthly loan repayment. 

For car subscription services, apart from parking and petrol costs, you’ll only have to pay its monthly fee.

Car Loan

Most of us would have to take up a car loan to cover the cost of the car, which will be subject to interest charges. Also, if you’re planning on getting a new house, the car loan might affect your Total Debt Servicing Ratio (TDSR). 

With a car subscription service, you’d need to pay the monthly fees to start driving. You might be saving more each month and providing yourself with some financial independence and freedom.

Insurance Premiums 

Car insurance is mandatory in Singapore and it’s illegal to drive without valid coverage. Insurance premiums for comprehensive coverage may be costly and you’ll need to factor this in with the costs of owning a car.

There is also usage-based insurance, a coverage that some car subscription services offer. As the name suggests, the programme charges drivers based on how much you drive for the month. So the lesser you drive, the lesser you’ll pay. This is beneficial for drivers who want to own a car but don’t drive often or for long distances.

Currently, usage-based insurance comes exclusively with a CARRO Leap car subscription. Given out as a rebate on your monthly subscription fee, you can potentially save up to $800/year with the pay-as-you-drive insurance.

Depreciation Concerns

Cars are depreciating assets – at an average rate of $1,000 a month.

From the downpayment to the other costs associated, you’ll be spending a considerable amount of your money on something that loses value by the day.

With car subscriptions, you won’t be “losing” money the moment you drive off because you don’t technically own the car, you’re simply paying to use it. Instead, the subscription company will be bearing all the depreciation costs.

Market Risks

When it’s time to sell your car, finding a good deal will take up some time and effort. It might take you a few months before getting the right buyer at the right price. 

Furthermore, your car’s valuation depends on the market. If COE prices are low, potential car buyers would be looking to buy brand new cars instead. In turn, the value of your car would be lower.

With car subscriptions, you can skip this altogether. You pay for how long you want to drive and return the car after. There won’t be a chance for you to lose out on your hard-earned cash due to market fluctuations. So overall, it might offer more protection to your bank account.

Conclusion

Over a period of 10 years, the face value of buying a car and subscribing might be quite similarly priced. But when you take into account the depreciation, unpredictable market fluctuations and additional loan interest or early loan settlement fees, it might cost more to outright own a car. Car subscriptions get rid of these unpredictable costs and alleviate the constraints on your wallet.

But of course, this isn’t accounting for the numerous deals currently running as car dealerships look to bounce back in this market. And simply owning a car provides you with the convenience of having something that’s yours and using it whenever you want to. After all, that’s been discussed, it’s important to assess your finances before deciding on either getting that brand new car or opting for a subscription service. 

Need access to a car but don’t want to fork out thousands for a downpayment? Check out CARRO Leap Car Subscription service that allows you to own a car with zero downpayment and save more each month!