Leasing Advice/Questions/Tips

[IanCress]

If a car needs servicing every 12 months, and my lease is for 24 months, do I need to get that 2nd service done before I hand it back?

[V8forweekends]

I would like to know more about the "business lease" requirements - I understand the VAT thing, but why do providers want a car allowance and/or business mileage? I don't get why these are qualifiers (it they really are).

[TheBroker]

V8forweekends said:

I would like to know more about the "business lease" requirements - I understand the VAT thing, but why do providers want a car allowance and/or business mileage? I don't get why these are qualifiers (it they really are).

The qualifiers are put in place by the funders not the brokers. The reasons behind it are the underwriters want greater security of their funds so if you can prove you are a business user you are likely to be a safer bet (lower risk profile)

But you can get a personal lease with certain business focussed funders if you can prove you are a business user (cc allowance/claim mileage/co director)

If you can prove you are a business user, different interpretations exist amongst funders, you can get the better rates

Edited by TheBroker on Monday 2nd March 19:21

Edited by TheBroker on Monday 2nd March 19:22

[TheBroker]

IanCress said:

If a car needs servicing every 12 months, and my lease is for 24 months, do I need to get that 2nd service done before I hand it back?

In short, yes.

If it's a maintained contract then it's no cost to you
If it's non maintained then you must pay. If you have a new car on order to arrive in time you could consider handing your old one back a little earlier to avoid a service, unless the service indicator is on. Also have a quick read of your contract to see if there is a clause to prevent this

[TheBroker]

timetex said:

No there's no choice for a car - just the allowance. I just wondered if being in receipt of an allowance, plus being paid per mile for businesss travel, I could opt for a business lease.

I know an M5 (although there's no Touring model), E63 or RS6 is going to be above my allowance but that's OK.

I wouldn't take an uber barge as a 'company car' anyway - always the allowance would be better.

I do want to stay in something like an AMG, M or RS (currently in an RS6 Avant) - I wouldn't want to change for a fast diesel.

Do I qualify for a 'business lease'?

You don't qualify for a business lease as you are not a business, but certain funders will offer business lease'esque pricing for personal customers in receipt of a car allowance or are a director or can claim mileage from employer

[V8forweekends]

TheBroker said:

The qualifiers are put in place by the funders not the brokers. The reasons behind it are the underwriters want greater security of their funds so if you can prove you are a business user you are likely to be a safer bet (lower risk profile)

But you can get a personal lease with certain business focussed funders if you can prove you are a business user (cc allowance/claim mileage/co director)

If you can prove you are a business user, different interpretations exist amongst funders, you can get the better rates

Appreciate the answer - in my case (no car allowance, business miles reimbursed by employer) my current situation is much less risky than when I was the director of my own Limited Company - but I realise we're living in a "computer says no" world :-)

[ED209]

Are these personal leases really personal or do you need some kind of business mileage allowance to be able to get them?

I can claim business miles but hardly ever do, probably less than 100 miles a year, would i qualify for a personal lease?

[TheBroker]

ED209 said:

Are these personal leases really personal or do you need some kind of business mileage allowance to be able to get them?

I can claim business miles but hardly ever do, probably less than 100 miles a year, would i qualify for a personal lease?

They are personal, but some require business usage to qualify (see earlier post).

Less than 100 miles a year is nominal but if your employer will write a letter saying you can claim
Business mileage then you should get through.

Most of our funders don't have such stipulations but a couple do.

[gingerbeard]

Excuse me if these are stupid questions but I know nothing little about financing a car. I have always just paid cash or taken out a personal loan.

1. How much do the deals differ on financing new/used cars? Is the same APR etc available.

2. Is there a general rule of thumb for finance vs personal loan with regards to total cost of car and depreciation? By this I mean: If I were to borrow 15k on a personal loan at £300/mnth over 5 years I could then buy a car for 15k and own it at the end. At what price point would it be reasonable to say but a car worth £30k financing part of it over several years and then having a balloon payment at the end for roughly the same monthly cost? ie £300/mnth but then owe about 15k again at the end? This obviously has the downfall that you do not own the car for years but the upside is you can have a newer/more expensive car. (figures just made up for illustration)

3. If a car is generally seen as an appreciating asset (eg M3 CSL etc), is this taken into account by the broker and so the GFV of the car will be much higher and thus the monthlies lower or is it more of a case that you still pay high monthlies as no-one has a crystal ball and so would set the GFV much lower than it is likely to be and you just end up with a car that is worth more at the end of the term?

4. If you are in a deal PCH/PCP etc, how easy is it to swap to a different car during that time? I would assume this is easier if you are buying from the manufacturer and want to swap to another car of the same brand?

Thanks for taking the time to look at this, I think this thread is a good idea BTW but could keep you very busy with replies!

GB

[TheBroker]

gingerbeard said:

Excuse me if these are stupid questions but I know nothing little about financing a car. I have always just paid cash or taken out a personal loan.

1. How much do the deals differ on financing new/used cars? Is the same APR etc available.

2. Is there a general rule of thumb for finance vs personal loan with regards to total cost of car and depreciation? By this I mean: If I were to borrow 15k on a personal loan at £300/mnth over 5 years I could then buy a car for 15k and own it at the end. At what price point would it be reasonable to say but a car worth £30k financing part of it over several years and then having a balloon payment at the end for roughly the same monthly cost? ie £300/mnth but then owe about 15k again at the end? This obviously has the downfall that you do not own the car for years but the upside is you can have a newer/more expensive car. (figures just made up for illustration)

3. If a car is generally seen as an appreciating asset (eg M3 CSL etc), is this taken into account by the broker and so the GFV of the car will be much higher and thus the monthlies lower or is it more of a case that you still pay high monthlies as no-one has a crystal ball and so would set the GFV much lower than it is likely to be and you just end up with a car that is worth more at the end of the term?

4. If you are in a deal PCH/PCP etc, how easy is it to swap to a different car during that time? I would assume this is easier if you are buying from the manufacturer and want to swap to another car of the same brand?

Thanks for taking the time to look at this, I think this thread is a good idea BTW but could keep you very busy with replies!

GB

gingerbeard said:

Excuse me if these are stupid questions but I know nothing little about financing a car. I have always just paid cash or taken out a personal loan.

1. How much do the deals differ on financing new/used cars? Is the same APR etc available.

2. Is there a general rule of thumb for finance vs personal loan with regards to total cost of car and depreciation? By this I mean: If I were to borrow 15k on a personal loan at £300/mnth over 5 years I could then buy a car for 15k and own it at the end. At what price point would it be reasonable to say but a car worth £30k financing part of it over several years and then having a balloon payment at the end for roughly the same monthly cost? ie £300/mnth but then owe about 15k again at the end? This obviously has the downfall that you do not own the car for years but the upside is you can have a newer/more expensive car. (figures just made up for illustration)

3. If a car is generally seen as an appreciating asset (eg M3 CSL etc), is this taken into account by the broker and so the GFV of the car will be much higher and thus the monthlies lower or is it more of a case that you still pay high monthlies as no-one has a crystal ball and so would set the GFV much lower than it is likely to be and you just end up with a car that is worth more at the end of the term?

4. If you are in a deal PCH/PCP etc, how easy is it to swap to a different car during that time? I would assume this is easier if you are buying from the manufacturer and want to swap to another car of the same brand?

Thanks for taking the time to look at this, I think this thread is a good idea BTW but could keep you very busy with replies!

GB

Hi,

In answer to your first question, the difference can be substantially in favour of new over used (if you're comparing with up to 18 months old). The reason for this is the manufacturers offer additional financial support to the lenders to promote CH deals to shift new cars as its all about selling new cars not used. Also the APR rates can be 1/2 on a new vehicle PCP against a used vehicle PCP. I am working on a deal at the moment where it is touch and go as to whether my customer will take a used RS7 for £70k on finance against a brand new one as the cost of borrowing is so close. So no the used/new APR's are not the same.

With regards to a rule of thumb, generally there is not as there are so many contributing factors, you are also talking about entirely different financial solutions. The way CH works is that you take a car worth for example £30k, and will be handing it back in 3 years, the market/funder will assign a Residual Value (RV) to that vehicle of say £15k after 3 years. You are then taking a loan out for the depreciation (£15k) plus interest. BUT, as funders receive additional support from manufacturers, the car worth £30k new may be acquired by the funder for only £25k, so you are now only funding £10k plus interest (although naturally the funder will keep some of the discount as profit for themselves (they are not charities after all).
Comparing this with taking a personal loan out for £15k to buy a car for £15k, and paying back maybe 18k. For 18k your vehicle after 3 years may be worth X for example so you could have that equity left. Now you can work out your cost of borrowing and compare it to getting a new car worth twice as much for perhaps the same amount (but you hand it back). It can be complicated hence me not being able to give a straight answer.

In response to your 3rd question. A funder will never treat a vehicle as an appreciating asset otherwise they would end up paying you money. Unfortunately the broker has no say in RV whatsoever. But the GFV will reflect an improved %RV against a standard 3 Series for example. Ultimately you will still pay more than on a standard 3 Series but not proportionately so. A good example has been the silly deals last year on the C63AMG.

I get asked your 4th question a lot, and many don't like the answer. With PCH there is no route to change your vehicle whatsoever. It would be considered early termination which can result in not only you handing the vehicle back but also paying up to 97% of the outstanding rentals. So its not worth it in the slightest. There are sometimes exceptions for early termination (substantiated medical issues for example), which are entirely at the funders discretion, but this is the 99% rule.
With regards to PCP there is more flexibility. Once a year is up you are likely to be in a position where the vehicles value and the outstanding finance is roughly the same (deposit dependant of course). Under the 1/2s and 2/3s rule, once you have paid 1/2 your overall finance (typically 2/3 way though the contract) you can simply hand the keys back and walk away. Whilst this won't affect your credit file, the funders don't generally like it and may be less inclined to offer you finance in the future. If you wanted to you could leave a PCP a month after you take it out but you will lose money.
If you were to stay on brand/with same funder you may be treated a little more nicely (especially if you are trading up.

I hope this helps

[Broccers]

Ive just handed back a Ds3 airdream 115.

List is 17000, cost to us over 24 months circa 4500 + 1 tyre (130) and 1 service (220).

I was offered to buy it for 11,000 and more realistic figure is 10. Buying it would have been worse plus hassle of selling.

Good car, but over priced.

[TheBroker]

The funders sell the vehicles on at full retail price as they have to put a full warranty on it to protect themselves (CSR). In most cases you can buy an equivalent vehicle to yours for less than the funder want for it, or same prie but with less miles/superior spec.

[gingerbeard]

Thats great, thanks for the info, most appreciated

[qualitystreet]

Hi - Hopefully a simple one.

I have enough in cash to buy the car I want outright.

Are there any circumstances where it would make sense to lease rather than buy?

[Vaud]

qualitystreet said:

Hi - Hopefully a simple one.

I have enough in cash to buy the car I want outright.

Are there any circumstances where it would make sense to lease rather than buy?

Too many variables to answer.

If you have 100k then I would buy property and rent it out.
If it's 20k than maybe, depends, possibly.

[qualitystreet]

Well, £15k that I *could* spend. I don't have to spend it all, and I might not.

Just trying to work out if any of these lease deals stack up vs just buying the damn thing and selling it 1/2/3 years later (assuming I get a good deal on the purchase).

[Vaud]

How many miles do you do? What size of car?

[qualitystreet]

~ 15k/ year, mostly non-urban.

Size/ make of car is a funny one. I'm looking at small-medium estates at the moment, but will consider pretty much anything as long as it's got a decent sized boot and is 'a good deal'.