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As car buyers dally, rental firms get a boost
CAR rental companies are enjoying a surge in business as motorists who are putting off buying a new car raise demand for longer-term rentals, with some customers even taking on driving jobs to offset the cost of renting.
Cars are usually rented for shorter periods such as a day, week or month, compared to car leasing, which starts with yearly contracts.
At Komoco Car Rental, business has risen 15 per cent since June. The company, which belongs to Komoco Motors (the authorised distributor for Hyundai and Chrysler Jeep), says demand for rental periods of 3-6 months has increased.
"Before June, most of our rentals were for daily, weekly or monthly use," said manager Yunos Samad. "But now, we are getting more medium-term rentals."
He said the demand comes mainly from those people who have scrapped their cars and are waiting for certificate of entitlement (COE) premiums to fall before buying a new car.
"Some people also need a car temporarily while they decide what to do or what to buy," Mr Yunos added.
Daily rates at Komoco, which has a rental fleet of some 350 cars, start from S$70 for a Hyundai Avante and range all the way up to S$250 for a Jeep.
Over at Kah Motor, the authorised Honda distributor which has a rental division with about 200 cars, general manager Nicholas Wong has been seeing a steady increase in his rental business for six months now.
Monthly rentals have risen "30 per cent" in that period, with demand coming from people who have recently scrapped their cars and are hoping for COE premiums to soften.
"These are people who are waiting for the right time to enter the market and buy a new car," said Mr Wong. "And they are renting with monthly renewals because it is cheaper than renting on a daily basis."
Monthly rates at Kah Motor start from S$1,200 for a Honda Jazz hatchback, and rise to S$2,500 for an Accord sedan or CR-V crossover.
Alpine Car Rental may have experienced the rental boom more recently, but it is getting longer-term business. Demand for its six-month and one-year rental packages has jumped in the past two months.
Alpine Car Rental belongs to the Alpine group, which distributes Opel and Chevrolet, and daily rates for its fleet of 800 rental vehicles are from S$60-80.
This new batch of customers used to be car owners who have recently deregistered their ageing vehicles, said general manager George Lee.
"Because of the prices, they are not buying another car for the time being, and are renting or leasing instead," he explained.
"In the last two months, we have had a 100 per cent increase in the number of people signing long-term rentals or short-term leases," said Mr Lee, referring to six-month and one-year contract periods.
One interesting corollary is that some of these renters are driving part-time for car-booking app Uber to defray the rental fee.
"By driving a couple of hours each day, they can recoup the daily cost of the rental car," he said. "So it's like using the car for free."
However, Mr Lee pointed out that if a renter is using the vehicle for this purpose, a different class of insurance with a higher premium is required.
As to whether the rental boom will last, Mr Lee expects it to continue for as long as COE premiums stay firm.
"The trend depends on COE remaining in the S$50,000-60,000 range," he said. "But if COEs drop to, say, S$10,000-20,000, then it makes more sense to buy than rent."