Car Insurance

Car Subscription Or Car Ownership: Which One Will Save You Money?

Car subscriptions recently rolled into Singapore with their low upfront fees and flexible rental periods. But is it really cheaper to subscribe, rather than own?

Car subscriptions have recently entered the automobile industry in Singapore, allowing people to drive their favorite cars without the high upfront costs that come with owning a car. With its term flexibility and all-inclusive monthly subscription fee, the car subscription model is rivalling traditional car ownership. We've compared the costs of car subscriptions to car ownership in order to determine where you can save money.

Car Subscriptions: Flexible Terms With Hidden Costs

Car subscription companies are the first of their kind in Singapore. Unlike traditional methods of leasing a car, car subscriptions allow Singaporeans to rent a car on a monthly basis, with no fixed term contract that binds the buyer to a rental car for a year or more. These car subscription costs take the form of a monthly fee that includes all car ownership expenses like: car insurance, road tax, warranty, and 24-hour assistance maintenance costs.

Table listing Carro's monthly subscription fee over 6 months, 1 year, and 5 years

Though one of the car subscription's selling points is that you can return it at any time, many of the cars that Carro lends actually have a minimum term of 6 months. With this in mind, you can expect a minimum payment of S$10,558 for a Kira Cerato (LX Sedan) — the cheapest subscription available. In addition to this subscription fee, Carro requires you to pay a nonrefundable S$1,000 reservation fee for new cars or a refundable security deposit for used cars that varies per car model. Similarly, the company charges an optional concierge fee of S$99 per month, which accounts for pick up and delivery services when your car is in need of maintenance.

It's important to note that your monthly payment is not fixed. Carro actually determines your car insurance by a pay-per-km model, which is then calculated into your monthly subscription. So while you don't have to pay an external premium on car insurance or maintenance fees, you may still be responsible for additional costs outside of the base fee advertised on Carro's website.

Car Ownership: High Costs With An Expiration Date

It's well-known that car ownership in Singapore is expensive. The average cost of a compact car S$92,888, which includes the COE — a pricey component of car costs that may even exceed the value of the car. In addition to the COE, you'll also be responsible for registration fees, road tax, car insurance, and a down payment for your vehicle as your upfront costs.

Total 5-Year Cost Of Owning A Car

Table showing 5 year costs of owning a Mazda 3 Series and Mercedes-Benz CLA-Class

The total cost of car ownership also depends on your car's depreciation value. Assuming you pay off your car loan, your Mazda 3 Series will still have 51% of its original value after 5 years, which brings down your total net cost to approximately S$52,856 if you decide to sell it. Similarly, you'll find that your Mercedes Benz has 44% of its original value after depreciation, so your total net cost amounts to S$94,949.

It's important to note that car insurance and car loans strongly depend on your needs and qualifications, while maintenance costs depend on the model and maintenance needs of your vehicle. Therefore, it's likely that you'll end up paying more in running costs for your car, especially if you run into unforeseen accidents.

Where Can You Save Money?

The car subscription's lower up-front costs have strong appeal against the expensive commitment that is car ownership. Just in the first year, alone, you pay almost 162% more to own a Mazda 3 Series car compared to using a subscription service, and 262% more to own a Mercedes-Benz.

Though, when it comes to subscribing or owning in the long term, we found that you can actually save money by owning, as long as you can sell your car after you've successfully completed your car loan payments. Additionally, we found that the annual recurring costs of owning a car are actually 22 to 36% cheaper than paying for a car subscription service.

Table comparing short term and long term costs of a Carro subscription versus owning a car.

In the case of these two car models, you'll save more money by owning a car if you sell your vehicle right after you pay off your loan (when the value of the car hasn't fully depreciated). By doing so, you could save 45% and 37% on total costs for your Mazda 3 Series and Mercedes Benz, respectively, as compared to using a car subscription service.

However, the upside of car ownership is that you can have a car in your name for as long as you want, so it may not make sense to sell it after a few years. In this case, it may seem like a car subscription is cheaper. For instance, by the end of the 5-year period, you will have saved up to 7% to 29% by subscribing to a Mazda 3 Series or a Mercedes Benz than if you had bought the cars. However, the longer you keep your car, the more expensive car subscription services become. Over the course of 10 years, we actually found that you'll end up paying 24% to 39% less for your car if you own it than if you subscribe to one (not counting the rebates you get for scrapping).

Between annual depreciation, high up front costs and eventual COE renewals, car ownership may not be as cost-effective as a car subscription in the short-run. Furthermore, the major selling point for a car subscription is that you can trade in your vehicle for a better one when you want to. This model works well for those who can foresee a need for a different type of car in the future, whether it's time to test out a luxury vehicle or you require more space for new additions to the family. Thus, when it comes to deciding between the two, it's important to consider not just the upfront costs of the car, but what you want to get out of it as well. If you tend to keep your car for longer periods of time between selling them, owning a car may be more worthwhile. However, if you prefer the flexibility and low-up front costs of a car subscription, then that will be the better option.

Resources From ValueChampion

Natalia Sanchez-Kumar

Natalia Sanchez-Kumar is a Research Analyst at ValueChampion. She is a History graduate of New York University and has worked in the area of social impact, Future of Work and socio-technological research in the US and India. She has co-authored policy proposals alongside the International Labour Organisation in Sri Lanka and the Maldives, as well as hosted a data privacy conference with Facebook in New Delhi.

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