3/04/2016

McQueen Rentals in Singapore explains the economics of a car rental business in Singapore.


Eho!
I've been to Singapore in 2014 and I've found it a really amazing city, today I would like to share with you some information about car rental there. Take a look, cars are very expensive there, but it makes the city much better (not hell traffic), on this text I explain you why is it so expensive and how to rent a car with a nice rate.

McQueen Rentals points out that Singapore is the only place in the world where the ride-sharing business UBER has set up a car rental subsidiary which owns cars. Globally, it would appear that UBER is an asset-light new-economy company, but bucking all trends, UBER has set up a wholly owned subsidiary – Lion City Rentals in Singapore. Industry insiders says that UBER’s subsidiary owns more than a thousand cars today in Singapore.

Singapore is one of the most expensive places in a world to buy a car. Today, the right to own a car for the first ten years of its life (a COE) costs in the region of USD 30,700 to USD 33,550 (using an exchange rate of USDSGD 1.40). There are also taxes on car which start at 100% of market value with a graduated scale of up to 180%.

What this also means that it is very expensive to own a car in Singapore.  What this also means is that a lot of drivers who drive for UBER or its competitor GRAB (in Singapore) are unable to afford to own a car themselves or even have the wherewithal to take a loan out on a car.

As a result, the economics of a car rental business are outstanding says McQueen Rentals.
UBER X allows sub 10 year cars to be used pretty much around the world. This dovetails nicely with the 10 year COE. Accordingly the vast majority of rental cars in Singapore are 9 year old cars. And most are used for UBER and GRAB.

If we were to take a nine year old, say with a one year depreciation of SGD 10,000 that costs say a capital value of SGD 22,000. (There is a defined scrap value of a car as the Singapore Government returns a fraction of the initial taxes paid if a car is taken off the road before 10 years).
-        Today the market rate per day for renting a car runs at about SGD 65 dollars a day. Assume a car rental company rents it out for 340 days a year. We get to SGD 22,000 a year.
-        Commercial insurance and road tax costs SGD 3,000 for a year.
-        Let’s assume maintenance costs three thousand for a year.

So the total cost is 11,000 + 3,000 + 3,000 which comes up to 17,000

$22k less $17k gets to $5k gross profit. 5k over 22k capital value gets an ROE of 22.7%. In Dec 2015, there are now more rental cars on the road then there are taxis. No wonder car rental is one of the fast growing businesses in Singapore. Check out McQueen Rentals’  website today for car rentals today.