reporter2
08-04-14, 16:44
http://www.businesstimes.com.sg/archive/saturday/premium/top-stories/leasing-letdown-20140405
Published April 05, 2014
Leasing letdown
After experiencing an initial spike in demand for car leasing, distributors now find most buyers prefer not to choose this route to motoring
By samuel ee [email protected]
Singapore
DISTRIBUTORS who jumped on the car-leasing bandwagon last year are seeing the business hit a speed bump owing to cultural preferences and other factors.
Some companies began to offer leasing programmes to local customers after tough vehicle-financing restrictions introduced in February 2013 began to bite.
Almost everyone - from premium manufacturers BMW, Mercedes-Benz, Porsche and Lexus to mid-range and volume marques such as Mini, Volkswagen, Opel and Kia - introduced leasing deals.
Leasing is traditionally a popular option among expatriate and corporate customers.
But since the loan curbs require up to a 50 per cent cash downpayment, distributors believed leasing - which is essentially a long-term car rental plan - would be a good alternative to traditional hire purchase.
The distributors were initially encouraged by the response, which although small appeared to be steady. But more than half a year after the rash of leasing plans hit the market, demand has dwindled for a few reasons.
The first has to do with the Singaporean attitude to car ownership.
The managing director of a luxury dealership said that with leasing, some people feel that despite paying for the car every month, they still do not own it.
"So even if cars have become more expensive, most Singaporeans prefer to buy it rather than lease it," he said. "That is also the reason why so many buy property instead of rent, and why freehold is more popular than 99-year leasehold."
Another reason is the lack of tax incentives. "In some countries, there are tax breaks for leasing," said the managing director. "But not here.''
In the past, companies which leased vehicles for their employees used to be able to write off the leasing costs from their tax claims, but not any more.
But perhaps the biggest reason for not taking up a lease is that most people believe that the supply of certificates of entitlement (COEs) will expand in the next few years on the back of an expected increase in vehicle deregistrations.
The sales director of another luxury dealership said that when the loan curbs were first announced last year, there was "panic".
"Some people ran to leasing because COE premiums were shooting up and financing was tightened," he said. "They were afraid they would not be able to drive a new car again."
But now that the dust has settled, he said, most prospective buyers were less anxious.
"They plan to keep their cars longer as they wait for more COEs to be released and premiums to eventually fall," he explained. Still, the sales director isn't giving up on leasing just yet. He believes that there is potential amid high COE premiums because there are some motorists who cannot wait and need to change their ageing cars soon.
"For this group of people, leasing still makes sense because they prefer to keep their cash in the bank instead of using it for a downpayment," he explained. "So with a leasing plan, I can facilitate their goal of driving a new car, instead of having to settle for a cheaper car or a used car."
He said that leasing remained a good alternative, even though the monthly payment is "slightly higher" than the monthly instalment for a hire-purchase scheme.
"With a lease, you don't have the hassle of maintenance or paying for road tax," said the sales director. "And you definitely don't need to worry about your resale value three or four years down the road."
Published April 05, 2014
Leasing letdown
After experiencing an initial spike in demand for car leasing, distributors now find most buyers prefer not to choose this route to motoring
By samuel ee [email protected]
Singapore
DISTRIBUTORS who jumped on the car-leasing bandwagon last year are seeing the business hit a speed bump owing to cultural preferences and other factors.
Some companies began to offer leasing programmes to local customers after tough vehicle-financing restrictions introduced in February 2013 began to bite.
Almost everyone - from premium manufacturers BMW, Mercedes-Benz, Porsche and Lexus to mid-range and volume marques such as Mini, Volkswagen, Opel and Kia - introduced leasing deals.
Leasing is traditionally a popular option among expatriate and corporate customers.
But since the loan curbs require up to a 50 per cent cash downpayment, distributors believed leasing - which is essentially a long-term car rental plan - would be a good alternative to traditional hire purchase.
The distributors were initially encouraged by the response, which although small appeared to be steady. But more than half a year after the rash of leasing plans hit the market, demand has dwindled for a few reasons.
The first has to do with the Singaporean attitude to car ownership.
The managing director of a luxury dealership said that with leasing, some people feel that despite paying for the car every month, they still do not own it.
"So even if cars have become more expensive, most Singaporeans prefer to buy it rather than lease it," he said. "That is also the reason why so many buy property instead of rent, and why freehold is more popular than 99-year leasehold."
Another reason is the lack of tax incentives. "In some countries, there are tax breaks for leasing," said the managing director. "But not here.''
In the past, companies which leased vehicles for their employees used to be able to write off the leasing costs from their tax claims, but not any more.
But perhaps the biggest reason for not taking up a lease is that most people believe that the supply of certificates of entitlement (COEs) will expand in the next few years on the back of an expected increase in vehicle deregistrations.
The sales director of another luxury dealership said that when the loan curbs were first announced last year, there was "panic".
"Some people ran to leasing because COE premiums were shooting up and financing was tightened," he said. "They were afraid they would not be able to drive a new car again."
But now that the dust has settled, he said, most prospective buyers were less anxious.
"They plan to keep their cars longer as they wait for more COEs to be released and premiums to eventually fall," he explained. Still, the sales director isn't giving up on leasing just yet. He believes that there is potential amid high COE premiums because there are some motorists who cannot wait and need to change their ageing cars soon.
"For this group of people, leasing still makes sense because they prefer to keep their cash in the bank instead of using it for a downpayment," he explained. "So with a leasing plan, I can facilitate their goal of driving a new car, instead of having to settle for a cheaper car or a used car."
He said that leasing remained a good alternative, even though the monthly payment is "slightly higher" than the monthly instalment for a hire-purchase scheme.
"With a lease, you don't have the hassle of maintenance or paying for road tax," said the sales director. "And you definitely don't need to worry about your resale value three or four years down the road."