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Three ways to drive a car — without a car loan

Subscription, short-term leasing, lease-to-own schemes are putting drivers into cars without the need to borrow.

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Borneo Motors' Lex'plore, a lease-to-own scheme, lets customers drive a Lexus UX 200 for S$2,176 a month, no down payment and no impact on a customer's Total Debt Servicing Ratio.

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"We see the shift globally from ownership to usership," says Ritu Chandy, regional CEO of BMW Group, Financial Services for Asia Pacific.

Singapore

HAVING a car to drive in Singapore usually means buying one or leasing one, but other options are starting to appear (apart from the age-old one of pinching someone else's car keys).

Lexus distributor Borneo Motors recently launched a scheme called Lex'plore that amounts to a lease-to-own arrangement, while BMW Financial Services Singapore and Sime Darby Services launched a service in July that gives people access to BMW cars by subscription.

The Access by BMW programme initially entailed at least a month's subscription, but the shortest period is now one week. For S$740, the service will deliver a BMW 118i to the customer's doorstep and collect it after seven days.

Conversely, the service also recently extended its maximum subscription period to a year. Unlike conventional car rentals, however, Access by BMW allows users to pause their subscriptions, which is especially useful for frequent travellers.

BMW also launched Flow by BMW this year, a more traditional leasing scheme with contract periods as short as 18 months.

Ritu Chandy, regional CEO of BMW Group, Financial Services for Asia Pacific, says such services are a response to evolving customer tastes.

"Consumer behaviour is changing rapidly, whether that be how we buy books, listen to music, or use our cars. Personal mobility preferences will continue to be an individual choice, and we see the shift globally from ownership to usership," she told The Business Times.

She added that such programmes are for drivers who want to be able to financially plan their commitments and not worry about insurance, maintenance and so on. This is where all-inclusive schemes like Access can help.

In contrast, Borneo's Lex'plore programme is still geared towards ownership. Customers pay a monthly fee to drive a new car for either five or seven years, after which they keep the car or give it up for a cash rebate.

The difference between that and a traditional car loan? It circumvents hire purchase requirements, so there's no down payment to make.

The programme's cheapest car is the Lexus UX 200 Executive, a compact sport utility vehicle (SUV). To drive one, a customer would pay for insurance and commit to paying S$2,176 a month. After seven years, the customer chooses between keeping the car or collecting a S$38,140 cash rebate.

To buy, the Lexus costs S$162,800 with certificate of entitlement. Assuming the maximum loan amount, financing the same car for seven years would require a down payment of S$65,120 and monthly installments of S$1,348 at an interest rate of 2.28 per cent.

Borneo is also offering Lex'plore with the NX, a larger SUV, as well as the IS and ES, the brand's compact and mid-size sedans.

Compared to a hire purchase agreement, the scheme costs slightly more in total. The UX 200 Executive costs S$182,784 altogether under Lex'plore, while financing the car with a seven-year loan costs S$178,390.

Lex'plore suits buyers who are either cash-poor but have the income to meet the monthly payments, or have better things to do with cash than place a down payment on a car.

"Lex'plore is an initiative aimed at drivers who wish to enjoy the freedom of owning a car without having to make a significant down payment as with typical vehicle purchases," Samuel Yong, director of marketing and business strategy, Borneo Motors Singapore, said in a statement.

The company says that signing up for a new Lexus with Lex'plore also doesn't impact a customer's Total Debt Servicing Ratio (TDSR), which would otherwise affect the buyer's ability to qualify for a housing loan.

The same is true of both Access by BMW and Flow by BMW.

Ultimately, it's subscription that best suits today's increasingly commitment-phobic consumers, BMW's Ms Chandy said.

"As there's no large commitment you lose nothing if you try," she said. "In addition, mobility needs can change in line with your personal and professional life, such as having a family or a new job with a lot of travelling required - these will change your choice of vehicle or the way you use your car."

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