Should You Lease or Buy a Car in Singapore?

Deciding whether to lease or buy a car in Singapore is a significant financial decision. Car ownership in Singapore is notoriously expensive due to factors such as the Certificate of Entitlement (COE), road tax, and other regulatory costs.

Leasing has emerged as an increasingly popular alternative for some drivers, especially for those seeking to avoid substantial upfront costs, long-term financial commitments, or the hassle of vehicle depreciation and resale. However, buying a car (whether new or used) still has its draws: you’ll be working towards long-term ownership and you have greater financial flexibility.

As both options have their advantages, the central question remains: is it better for you to lease vs buy a car?

This article will guide you through seven key considerations to help you determine whether leasing or buying a car is the right choice for your financial needs and situation in Singapore.

Understanding your driving habits is crucial when deciding between leasing or buying a car in Singapore. Reflect on your typical daily commute, the frequency of school runs or errands, and whether you frequently embark on long cross-island trips or even trips up to Malaysia.

Car leasing contracts in Singapore often come with mileage caps, typically ranging from 20,000 to 25,000 kilometers per year. And while some leasing packages may offer mileage add-ons at an extra cost, it's not a universal feature.

Exceeding your allocated mileage can result in penalties. For instance, exceeding the limit by 5,000 km at a rate of S$0.15/km would incur a cost of S$750—and those costs can add up quickly.

Buying a car means you won’t have to worry about such caps and can drive to your heart’s content, even for cross-border excursions. But if your only trips are between home and work and school and the supermarket, for example, then maybe a mileage cap won’t be much of a consideration.

Next, consider your car maintenance habits when deciding between leasing vs buying a car, as it will significantly impact your costs and responsibilities.

Namely, leased cars must be returned in good condition at the end of the lease period. You’ll typically be liable for repair charges for damage exceeding "normal wear and tear”; this can include stained upholstery, deep scratches or dents, or cracked windshields.

If you have young children or pets that could cause interior damage, or live an active lifestyle involving transporting sports equipment or goods that might cause scratches or dents, leasing may be less suitable for you. In this case, owning a car would provide you with greater control over repairs and maintenance: you decide which repairs to undertake, when to do them, and at what cost. However, you will need to bear the full responsibility for all maintenance costs.

When comparing the monthly financial outlay for leasing vs buying a car in Singapore, keep in mind the long-term cost implications.

Taking a look at Sgcarmart, leasing a mid-range sedan such as a Toyota Corolla Altis or Toyota Vios typically ranges between S$1,300 to S$1,6000 per month with the potential for even higher payments. While this varies based on the car model and lease duration, you will have to ensure you have the liquidity or capital to make these payments for the duration of the lease period.

As for owning a mid-size sedan, your monthly costs will be determined by your car loan repayment, insurance, maintenance, road tax, and COE depreciation. A rough estimate may be S$1,800 a month but this can fluctuate based on factors like COE prices and loan terms.

Comparing the two, leasing often involves lower upfront costs and potentially lower monthly payments in the short term. This is because lease payments are based on the car's depreciation during the lease period, not its entire value. Leasing agreements may also bundle expenses like maintenance and insurance, further reducing immediate out-of-pocket costs.

However, perpetual leasing (continuously leasing new cars) can become more expensive than buying a car over the long run. You might end up paying more than you would have for a car ownership loan in the same time period, especially considering Singapore’s COE cycle.

Leasing also doesn't build equity. You return the car at the end of the term, with no resale value. While buying a car allows you to potentially recoup some of the initial cost through resale or PARF (Preferential Additional Registration Fee) rebates when the COE expires.

» MORE: How to calculate your car loan payment

Buying and leasing have different implications on your vehicle ownership and financial freedom.

When you lease a car you’re obligated to make continuous monthly payments until the lease expires. These payments are also to cover the car’s depreciation, not going towards the vehicle’s cost. When you buy a car, you have a substantial downpayment to make—but all other payments after that go towards ownership of a vehicle that’s wholly yours. Plus, you won’t have to make monthly payments once your car loan is fully repaid.

While some people may feel like they never fully ‘own’ a car thanks to Singapore’s COE scheme, buying a car does offer you some options to play around with this. You can choose to drive the car until the COE expires then get a COE and PARF rebate; renew the COE for another five or ten years (at prevailing quota premium); or sell the car for its remaining PARF value. While the value of the car would have depreciated over time, ownership provides some avenues for asset recovery.

When you lease a car, asset recovery options are a bit more narrow. Some leasing companies may offer a lease buyout option at the end of the term, allowing you to purchase the car. However, this is rarely cost-effective in Singapore due to COE depreciation and other market factors.

Overall, if you’re a buyer who’s planning to keep a car for an extended period, ownership offers better long-term value with options for asset recovery down the road.

Comparing the upfront payment requirements for leasing vs buying a car in Singapore shows some marked differences on your cash flow.

If you’re buying a car, take note of Singapore’s LTV (loan-to-value) rules related to the OMV (open market value) of the vehicle. The LTV determines the maximum amount of the OMV that can be covered by a car loan.

If the OMV is less than or equal to $20,000, your LTV is 70% (your loan can only be for up to 70% of OMV) for a maximum tenure of seven years, so you’ll have to pay a 30% downpayment. If the OMV is greater than S$20,000, your LTV is 60% for a maximum tenure of seven years, and you’ll have to pay a 40% downpayment.

Counting COE prices and other taxes, the initial cash outlay for buying a new car in Singapore can be substantial, often reaching tens of thousands of dollars.

Leasing requires a lower upfront cost, typically with minimal or no downpayment. You usually only need to pay a refundable security deposit or the first month's rental before beginning monthly leasing payments. It's a "pay-as-you-go" approach, freeing up cash flow for other financial goals such as a downpayment on a property, investments, or savings.

However, upfront leasing payments may not be recoverable if the car is involved in an accident or is stolen. Ownership offers more security in this aspect, as you own the asset and can potentially recover some value through trading in your car or scrapping.

Many car dealerships, online car sales websites, or car leasing companies offer different promotions, rebates, or perks when you buy or lease a car.

Buying a car in Singapore from a dealership may come with cash rebates or discounts on accessories, free servicing packages or extended warranty options, low-interest rates on car loans from in-house financing or partner banks, or complimentary insurance packages or road tax coverage. Buying an eligible Electric Vehicle (EV) in Singapore may also come with additional perks such as the EV Early Adoption Incentive (EEAI) discount (up to 45% off Additional Registration Fee (ARF), capped at S$15,000) and Vehicular Emissions Scheme (VES) rebates (up to S$25,000 for Band A1, up to S$5,000 for Band A2).

Leasing companies may offer lower upfront deposits or security deposits, first-month-free promotions or discounted rental rates, all-in-one bundles that include maintenance, insurance, and road tax, or convenience-focused perks like car swaps or flexible mileage plans.

If you’re deciding between buying vs leasing, comparing the different options may be a good idea. But be sure to always compare the total cost of leasing vs buying a car over the entire lease or loan period, rather than focusing solely on upfront promotions.

Additionally, be cautious of overly attractive lease offers based on inflated residual values, as this can limit your options if you want to buy the car after the lease.

» MORE: Find the best car loans in Singapore in 2025

Finally, consider the range of car models available to you when you lease or buy a car.

Leasing allows drivers to upgrade to a new car model every few years, which can be appealing for those who value access to the latest automotive technology, safety features, and infotainment systems, or a polished image that can help you stand out personally and professionally. This can be particularly attractive in Singapore, where COE cycles and potentially long loan periods can make regular car upgrades less frequent for owners.

Keep in mind that while some car leasing companies in Singapore may allow model swaps mid-contract, these often come with fees and restrictions. Breaking a lease early can incur significant early termination penalties, which can be a major upset if you’re hoping to jump ship to a newer model.

When you buy and own a car, however, you can trade in or sell your car whenever they want a new model. Any resale value (or PARF rebates if COE remains) can even be used towards the next car purchase—a significant factor for drivers who prioritise long-term value over frequent model updates.

Ultimately, the decision to lease or buy a car is highly individual and depends on your specific circumstances.

Car leasing in Singapore is generally better for those seeking lower upfront costs; short-term car usage (e.g. expatriates or drivers wanting a trial period before committing to ownership); or drivers who prioritise driving newer models with minimal maintenance hassle.

On the other hand, buying is generally a better option for those planning to keep the car for a longer period; drivers with high mileage needs; and individuals who want ownership, potential resale value, and financial freedom from monthly car loan installments after the loan ends.

Before making the decision for yourself, revisit the seven key questions we’ve covered to assess your financial priorities. Reflect on your budget, your typical driving patterns, your long-term financial plans, and your overall concerns when it comes to vehicle ownership.

You can then make the right option that best aligns with your budget, driving habits, and long-term mobility goals in Singapore.