Pay to end car lease early to save money?
Discussion
I am fed up of having a household income of circa £75k and living month to month. So I am looking to do a proper budget and trim costs and cut all debt except our mortgage.
I have about £800 on a credit card, so that will be easily taken care of.
My current lease is £392 a month. This is higher than it was, because I added excess miles (at 50% the rate I would have had to pay ant the end of the lease). 6 payments to go, so cost would be £2,356.
I can end the lease early if I pay 55% of the payments (£1,296).
So I would 'save' £1,060, but obviously have to pay to replace the car.
Despite not wanting debt, I would need a loan to buy a car. Looking at a £7k loan to buy a £6k car, plus the early settlement amount. I would look to repay the loan as quick as possible.
I am assuming the new car would lose about £150 month in value as i do 20k miles a year. So assuming all other costs are equal the 'saving' after depreciation is probably only a couple of hundred at best?
Am I looking at this correctly? If so, I think I may as well keep the lease until the end?
I have about £800 on a credit card, so that will be easily taken care of.
My current lease is £392 a month. This is higher than it was, because I added excess miles (at 50% the rate I would have had to pay ant the end of the lease). 6 payments to go, so cost would be £2,356.
I can end the lease early if I pay 55% of the payments (£1,296).
So I would 'save' £1,060, but obviously have to pay to replace the car.
Despite not wanting debt, I would need a loan to buy a car. Looking at a £7k loan to buy a £6k car, plus the early settlement amount. I would look to repay the loan as quick as possible.
I am assuming the new car would lose about £150 month in value as i do 20k miles a year. So assuming all other costs are equal the 'saving' after depreciation is probably only a couple of hundred at best?
Am I looking at this correctly? If so, I think I may as well keep the lease until the end?
You need a car, and at that mileage I wonder if anything older is going to be false economy.
Car question aside I would look at where you are spending elsewhere. For example I ditched sky TV for freesat, sky broadband for a BT deal, moved direct debits over to Santander for cash back (also got 20k in so debatable with £5pm charge if worth it tbh). Make sure all credit cards interest free. Happy with my mobile so SIM only rather than buy a new phone at inflated price on a contract I don't need.
Car question aside I would look at where you are spending elsewhere. For example I ditched sky TV for freesat, sky broadband for a BT deal, moved direct debits over to Santander for cash back (also got 20k in so debatable with £5pm charge if worth it tbh). Make sure all credit cards interest free. Happy with my mobile so SIM only rather than buy a new phone at inflated price on a contract I don't need.
Similar to me actually, I cut down on loads of outgoings in the past year because I wanted some 'net worth'. But I did come to the realisation that being 'debt free' is not the be-all and end-all. Just cut out the expensive stuff, I still have some debt but it's either interest free (Ikea kitchen) or car leases. Like the poster above, I now have a 3yo phone on a £10 a month contract and want to see my monthly commitments as a lower % of my total salary.
The way I'd look at it, if you want to be less frivolous, then lease another car but set a budget and you might end up with a car you don't necessarily want but that's not the point, right? 20k miles could well be a false economy on a car at x years old, so maybe a lease at £250 per month is a better option in your circumstances.
The way I'd look at it, if you want to be less frivolous, then lease another car but set a budget and you might end up with a car you don't necessarily want but that's not the point, right? 20k miles could well be a false economy on a car at x years old, so maybe a lease at £250 per month is a better option in your circumstances.
I have changed energy bills, mobile contract is £7.50 a month etc.
When I look at my outgoings, it is the lease and fuel that are by far the biggest expense after mortgage and where I can make a real difference.
I hear what you are saying about a lease, having to spend £800 on my old volvo for clutch was part of the reason I went for a lease.
When I look at my outgoings, it is the lease and fuel that are by far the biggest expense after mortgage and where I can make a real difference.
I hear what you are saying about a lease, having to spend £800 on my old volvo for clutch was part of the reason I went for a lease.
OP - Before Audemars comes along and telling you that you cannot even afford a car...
Here is a link to some Budgeting spreadsheets. Simple and eyeopening when you see the money that can be spent/saved.
(Apologies if I am teaching you to suck eggs...)
https://www.spreadsheet123.com/ExcelTemplates/budg...
Here is a link to some Budgeting spreadsheets. Simple and eyeopening when you see the money that can be spent/saved.
(Apologies if I am teaching you to suck eggs...)
https://www.spreadsheet123.com/ExcelTemplates/budg...
Thanks turbo, will take a look. We are not too bad with money but current process seems to be pay our bills, then spank the rest.
Current idea is to do a budget to work out how much we can save (so spreadsheets look useful) , take that out on pay day and then restrict ourselves for the rest of the month and see how hard we can push the saving without having no life at all!
Current idea is to do a budget to work out how much we can save (so spreadsheets look useful) , take that out on pay day and then restrict ourselves for the rest of the month and see how hard we can push the saving without having no life at all!
Hi
I would not get another loan for £7k for a car. I would get saving over the next six months and keep the fancy lease car. If you could save £500PM it would allow you to get a £3k car - which would hopefully last 12 months without too much hassle. Over that time you could easily save £500PM (now the lease has gone) and save another £6k which with your £2.5k Part ex you would get something better/ more reliable.
We recently moved from a combined salary of about £90k down to a single salary of £55k (ish). We were 'spunking' money away. Things we changed were
1) Change energy supplier
2) Buy our phones outright
3) Do not eat out two/ three times a week .... now only about once per month.
4) Remortgaged
5) Stopped the cleaner
6) No foreign holidays
7) No luxury 'special' purchases
8) Charity shops for certain items
It sounds like hardship but we really have made a difference - mortgage overpayments have gone up, savings of approx. £200 PM for next car(s)/ emergency repairs and we now do loads of stuff with the kids which we did not do before (cycling, free events, more picnics, camping in the UK more often etc. etc.)
Mike
I would not get another loan for £7k for a car. I would get saving over the next six months and keep the fancy lease car. If you could save £500PM it would allow you to get a £3k car - which would hopefully last 12 months without too much hassle. Over that time you could easily save £500PM (now the lease has gone) and save another £6k which with your £2.5k Part ex you would get something better/ more reliable.
We recently moved from a combined salary of about £90k down to a single salary of £55k (ish). We were 'spunking' money away. Things we changed were
1) Change energy supplier
2) Buy our phones outright
3) Do not eat out two/ three times a week .... now only about once per month.
4) Remortgaged
5) Stopped the cleaner
6) No foreign holidays
7) No luxury 'special' purchases
8) Charity shops for certain items
It sounds like hardship but we really have made a difference - mortgage overpayments have gone up, savings of approx. £200 PM for next car(s)/ emergency repairs and we now do loads of stuff with the kids which we did not do before (cycling, free events, more picnics, camping in the UK more often etc. etc.)
Mike
Do you need a 100% reliable car, or can you get the bus to work if it breaks? Can you work on an older car yourself to save money on repairs?
I don't think lease vs loan is a financial choice; it's a lifestyle choice. First decide what kind of car you need and then decide how to fund it.
Also, take a look at YNAB. It was quite instrumental in my month-to-month budgeting turnaround and is designed around getting out of the month to month cycle (increasing the age of your money, in YNAB speak).
And I agree, zero debt isn't as important as net worth. It's fine to have low-cost debt (0% finance deals, cheap loans) as long as you're not geared too highly and can get out of it if your circumstances change unexpectedly.
I don't think lease vs loan is a financial choice; it's a lifestyle choice. First decide what kind of car you need and then decide how to fund it.
Also, take a look at YNAB. It was quite instrumental in my month-to-month budgeting turnaround and is designed around getting out of the month to month cycle (increasing the age of your money, in YNAB speak).
And I agree, zero debt isn't as important as net worth. It's fine to have low-cost debt (0% finance deals, cheap loans) as long as you're not geared too highly and can get out of it if your circumstances change unexpectedly.
Why not lease another car? Just a cheaper one? It's dull but for £144 a month for15k miles my hyundai i30 is getting the job done for now.
Our biggest saving has been on food. Write a meal plan for the month. Buy only what you need using click and collect. Make it so it's full meals so frozen veg and what not. This stops you from going into a shop and buying stuff you don't need. We've just managed 2 months for £160, we'll have to top up milk and bread and such but this can be turned into a weekly only occasion.
The advice about switching utilities is sound too.
What your TV package like? Can you get away at cutting this down? Just free view or even getting some now tv boxes instead? Every "black friday" the 6 months entertainment boxes are on sale for £20. We have the best pick of sky channels and on demand stuff for £40 a year.
Our biggest saving has been on food. Write a meal plan for the month. Buy only what you need using click and collect. Make it so it's full meals so frozen veg and what not. This stops you from going into a shop and buying stuff you don't need. We've just managed 2 months for £160, we'll have to top up milk and bread and such but this can be turned into a weekly only occasion.
The advice about switching utilities is sound too.
What your TV package like? Can you get away at cutting this down? Just free view or even getting some now tv boxes instead? Every "black friday" the 6 months entertainment boxes are on sale for £20. We have the best pick of sky channels and on demand stuff for £40 a year.
I think you'll struggle to find another way to save £200 per month.
And is it £200 per month?
If you keep the car for 4 years, you'll add 80k miles and if you pay back £150pm you'll have paid back £7,600, ie more than necessary.
Keep it for 5 years and you can pay it back at £116 per month (plus interest on the capital). Even if the car has 160k miles at that point it will be worth more than zero at that point, so you could cut back the payments a bit more. Buy wisely and it needn't cost you an arm and a leg in maintenance
If you can, then get an offset mortgage and fund the car out of that to get a cheap interest rate.
And is it £200 per month?
If you keep the car for 4 years, you'll add 80k miles and if you pay back £150pm you'll have paid back £7,600, ie more than necessary.
Keep it for 5 years and you can pay it back at £116 per month (plus interest on the capital). Even if the car has 160k miles at that point it will be worth more than zero at that point, so you could cut back the payments a bit more. Buy wisely and it needn't cost you an arm and a leg in maintenance
If you can, then get an offset mortgage and fund the car out of that to get a cheap interest rate.
mike9009 said:
Hi
I would not get another loan for £7k for a car. I would get saving over the next six months and keep the fancy lease car. If you could save £500PM it would allow you to get a £3k car - which would hopefully last 12 months without too much hassle. Over that time you could easily save £500PM (now the lease has gone) and save another £6k which with your £2.5k Part ex you would get something better/ more reliable.
We recently moved from a combined salary of about £90k down to a single salary of £55k (ish). We were 'spunking' money away. Things we changed were
1) Change energy supplier
2) Buy our phones outright
3) Do not eat out two/ three times a week .... now only about once per month.
4) Remortgaged
5) Stopped the cleaner
6) No foreign holidays
7) No luxury 'special' purchases
8) Charity shops for certain items
It sounds like hardship but we really have made a difference - mortgage overpayments have gone up, savings of approx. £200 PM for next car(s)/ emergency repairs and we now do loads of stuff with the kids which we did not do before (cycling, free events, more picnics, camping in the UK more often etc. etc.)
Mike
Some good ideas there! I'm moving house soon so looked at quite a few of these myself! Interesting to see how others thinkI would not get another loan for £7k for a car. I would get saving over the next six months and keep the fancy lease car. If you could save £500PM it would allow you to get a £3k car - which would hopefully last 12 months without too much hassle. Over that time you could easily save £500PM (now the lease has gone) and save another £6k which with your £2.5k Part ex you would get something better/ more reliable.
We recently moved from a combined salary of about £90k down to a single salary of £55k (ish). We were 'spunking' money away. Things we changed were
1) Change energy supplier
2) Buy our phones outright
3) Do not eat out two/ three times a week .... now only about once per month.
4) Remortgaged
5) Stopped the cleaner
6) No foreign holidays
7) No luxury 'special' purchases
8) Charity shops for certain items
It sounds like hardship but we really have made a difference - mortgage overpayments have gone up, savings of approx. £200 PM for next car(s)/ emergency repairs and we now do loads of stuff with the kids which we did not do before (cycling, free events, more picnics, camping in the UK more often etc. etc.)
Mike
1) Change energy supplier - Agree
2) Buy our phones outright - Sometimes works depending on the deals, I've done this
3) Do not eat out two/ three times a week .... now only about once per month. - Agree
4) Remortgaged - Agree
5) Stopped the cleaner - Agree
6) No foreign holidays - WHAT! uh uh!
7) No luxury 'special' purchases - Every now and then this should be OK, shouldn't deprive yourself of anything nice
8) Charity shops for certain item - Far too much effort!
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