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Business Advice

Car leasing lures locals and goes mainstream

More distributors offering it as an alternative to hire-purchase as financing curbs bite
The Business Times - August 14, 2013
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Car leasing lures locals and goes mainstream

[SINGAPORE] More and more distributors are offering car leasing to Singaporeans, who seem to be warming to it as an alternative to hire-purchase as vehicle financing rules begin to bite.

Leasing has been a popular option among expatriate and corporate customers, with manufacturer-backed deals already available from luxury makes such as BMW, Mercedes-Benz and Porsche.

But recently, Category A brands such as Volkswagen, Mini, Opel and Kia have begun targeting individuals by offering what is essentially the long-term rental of a car to get around tough loan curbs requiring up to a 50 per cent cash downpayment.

Two weeks ago, Opel distributor Auto Germany launched its Opel Break Free leasing programme. The company is part of the Alpine Group, which has more than 30 years' experience in the rental and leasing business with a fleet of more than 500 cars. But while previous lease packages were mainly aimed at corporate customers, Opel Break Free is for individuals who are Singaporeans or permanent residents.

According to director of sales David Pang, the lessee is allowed to share his or her vehicle with family, friends and colleagues.

"Consumers can view this as an extension of the car-sharing idea," he said. "Previously, we had restrictions on usage and user but most of these have been done away with."

Leases start from three years "but can be packaged to suit the customer's needs". For instance, a new $140,000 Opel GTC with a five-year lease costs $1,690 a month, including road tax, insurance and full service and maintenance.

So far, 10 locals have signed up, which is unusual considering that car leasing is predominantly an expatriate or company-related business.

"We were able to convince them of the benefits, such as peace of mind and not tying up their cash," said Mr Pang.

Over at Kia, the Korean brand is working with Mercedes-Benz Financial Services to offer leasing packages of three, five and seven years. Kia and Mercedes-Benz are both distributed here by Cycle & Carriage.

For example, the average leasing rate for a $119,000 Kia Forte K3 starts from about $1,800 per month for three years or $1,600 for seven years.

"This fixed monthly amount includes the road tax, insurance and maintenance of the car. We even take care of the tyres," said a spokesman.

He added that the leasing option for Kia has always been available through a leasing company.

"But now, we are trying to make it more convenient by offering it in-house," he said.

Even Lexus has got in on the act. Last month, the Japanese luxury brand began directly offering potential customers the option of leasing a car instead of buying it. In the past, Lexus would have been involved in leasing only when it was contacted by a leasing company with a client interested in its cars. But now, with the financing restrictions, customers are also offered this alternative.

The response, however, has been slow. Lexus commercial director William Choo said the feedback received so far includes complaints that leasing is more expensive than hire-purchase, and that because the leasing company is the legal owner of the car, customers' no-claims discount and licence registration numbers are affected.

"But the most important issue is that they don't own the car even after paying for it," said Mr Choo.

The Kia spokesman agreed that ownership is a major concern.

He said: "The Asian mindset is that if I lease it, I don't own it. At the end of the lease period, I have to return it to the company. So it's like a long-term rental. And like property, people prefer to buy rather than rent."

But Opel's Mr Pang is more optimistic. He is targeting "more mature and sophisticated buyers".

He said: "Those who have travelled and lived overseas can identify with the merits of leasing as opposed to buying."

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