Leasing a car is an attractive option for individuals and businesses in Singapore that want a vehicle without committing to ownership. Local leasing companies typically offer flexible lease terms, with 12-month and 24-month car lease options being the most popular. Cost, convenience, and individual needs are frequently the deciding factors when choosing between these two lease terms.
Although lengthier leases often have lower monthly payments, there are additional considerations that may affect how affordable a 24-month car lease is, in general, compared to a 12-month lease.
12-Month vs. 24-Month Car Lease Cost Comparison
A key advantage of a 24-month lease is that leasing companies usually offer lower monthly rates than a 12-month car lease. The longer commitment allows the leasing company to spread the vehicle’s depreciation, maintenance, and administrative costs over a longer period, reducing the monthly financial burden. A 12-month lease, on the other hand, often comes with higher monthly payments since the leasing company must recover its costs over a shorter term.
For example, a 12-month lease on a mid-range sedan might cost around SGD 2,000 per month, whereas a 24-month lease for the same vehicle could be SGD 1,800 per month. The difference may seem small every month, but over time, a 24-month lease can provide significant savings. However, while monthly payments are lower for a longer lease, the total amount paid over two years will be higher than for a one-year lease, as you are paying for an additional 12 months.
Additional Costs and Savings Considerations
Beyond the base monthly fee, other factors can influence whether a 24-month lease is cheaper than a 12-month lease. Insurance, maintenance, and road tax are often included in lease agreements, but the total cost can vary depending on the duration. Some leasing companies in Singapore offer bundled packages where a longer lease term results in better value-added services, such as free servicing or lower insurance premiums.
A 12-month lease may have more flexibility, allowing users to switch to newer models or adjust their vehicle needs after a shorter period. However, it might also involve higher renewal fees if the lessee decides to extend the lease. A 24-month lease typically locks in the same rate for two years, shielding the lessee from potential price increases.
Depreciation and Lease Term Impact
Car depreciation is a significant factor in lease pricing. Remember, vehicles depreciate faster in the first few years of ownership. Local leasing companies account for this depreciation when structuring their lease terms. Since a 12-month lease covers a shorter period, it generally absorbs a larger portion of the vehicle’s monthly depreciation. A 24-month lease, on the other hand, allows the leasing company to distribute depreciation over a longer period, lowering the monthly cost.
However, a longer lease also means that the lessee may end up driving an older vehicle in the second year of the lease. While this may not affect those prioritising cost savings, those who prefer to drive newer models frequently might find a 12-month lease more suitable.
Lease Termination and Flexibility
One of the primary drawbacks of a 24-month lease is the commitment. If a lessee needs to terminate the lease early, they may face significant penalties or loss of deposits. A 12-month lease offers more flexibility, making it a better option for expatriates, business professionals, or individuals with uncertain long-term plans. Local leasing companies usually charge early termination fees, which can offset any savings gained from a lower monthly rate on a 24-month lease.
Additionally, market conditions, personal preferences, and changes in car availability could make a 12-month lease more appealing. If newer models become available or the lessee’s needs change, a shorter lease provides the flexibility to adapt without a long-term commitment.
Conclusion
A 24-month lease is generally cheaper on a monthly basis than a 12-month car lease, as leasing companies spread costs over an extended period. However, the total cost over two years will be greater compared to a one-year lease. Remember, a 12-month lease offers more flexibility but comes with higher monthly payments. The lessee’s budget, degree of commitment, and preference for flexibility over cost savings ultimately determine the choice. Evaluating one’s financial status, personal transportation needs, and prospective changes in car preferences is necessary before deciding on a lease term.
Contact Eurokars Leasing to enjoy the freedom to drive a reliable vehicle without a long-term commitment.
