New Cars - is Leasing going to become the new norm?

[daemon]

projectgt said:

The thing is, most people don't 'think' about it, they just do it.

Don't get me wrong, lease deals make a lot more sense these days, infact there are some genuinely good deals to be had even when someone weighs it up vs an outright purchase.

Buying new outright makes most sense when one plans to keep the car many years.

Again thats just projecting what you think other people think onto other people.

Buying a car is a big decision for most people, and its not generally something done on a whim.

I think people have a certain budget in mind that they're happy paying monthly and they buy accordingly. They dont think "st i really want a new 320d buy i cant afford to buy it outright so how can i get one?"

[Justin Case]

Ooops, I should have stated leasing new or buying secondhand as that is the choice that many people (including myself ) will be faced with. Obviously there is the point that if no-one leases new there will be very few secondhand cars on the market, but I suppose there will always be enough to want a shiny new executive car and find leasing the best way to keep some sort of equilibrium.

[Granfondo]

daemon said:

projectgt said:

The thing is, most people don't 'think' about it, they just do it.

Don't get me wrong, lease deals make a lot more sense these days, infact there are some genuinely good deals to be had even when someone weighs it up vs an outright purchase.

Buying new outright makes most sense when one plans to keep the car many years.

Again thats just projecting what you think other people think onto other people.

Buying a car is a big decision for most people, and its not generally something done on a whim.

I think people have a certain budget in mind that they're happy paying monthly and they buy accordingly. They dont think "st i really want a new 320d buy i cant afford to buy it outright so how can i get one?"

I think that's exactly the way some people think!

[daemon]

Granfondo said:

I think that's exactly the way some people think!

Sorry that you live in that sort of neighbourhood / have those sort of friends Rob.

Edited by daemon on Monday 29th June 22:29

[Granfondo]

daemon said:

Granfondo said:

I think that's exactly the way some people think!

Sorry that you live in that sort of neighbourhood / have those sort of friends.

[gizlaroc]

Justin Case said:

On the other hand a decent secondhand E class can be had for £15k, a saving of £25k on new, and that has to be covered by the original owner or leasing company one way or another.

I bought my E320cdi estate for £17k, a nice £23k saving on list price.
I sold it 2 years later for £10500. So it cost me £270 a month in depreciation.
However, I also took out a warranty at £46 a month on it, and used only once for a claim that cost £690, so you could argue it was a bit of a waste, £400 too much paid on the warranty.

The other thing was, because it was 4 years old with 70k miles on it I had to replace front wishbones and two springs snapped, that cost me another£500 odd, or £20 a month, so we are up to £320 a month.

In hindsight the new car, even at £400 a month all in, with its 40mpg rather than 33mpg on mine would have been a better ownership experience.

You have to get down the the 8 year old £10k cars and hope they are not problematic to make it work financially these days with the silly lease deals.

[DUMBO100]

I've got a Golf R on lease. I went for the 3 payments upfront so more interest but less to lose if written off. I've been saving for my wedding so couldn't overpay on my mortgage and my money is getting spunked on dresses, flowers and cakes etc anyway. At least I know my exact payment each month won't change so I can budget accordingly and it's only 20 months till I get my new car

[RYH64E]

wemorgan said:

CoolHands said:

but that is £416 a month! So what sounds reasonable is actually a lot (IMO) Is that really the best thing to do for most people? They could buy a decent car for 10 grand, sell it in 5 years for say 2 grand. Perhaps spend 2 grand in running costs which means its cost them 10 grand for 60 months = £166 quid a month, leaving them £250 a month to put into their pension.

Far to sensible for the thousands of people who will bemoan their woeful state pension when they're older.

Never mind the monthly cost, it's the total amount that's important, and in that respect it's been clearly stated.

Yes, we all know running a £10k second-hand car is cheaper than leasing a £40k car.

And why this notion that people who lease are lacking in pension provision?

Indeed, we're not discussing the merits of buying new or secondhand, rather, having already decided that you want an expensive new car, whether it's cheaper to buy outright or lease. Of the three new cars on my drive, the numbers favoured outright purchase for two of them and leasing for the third, had the numbers suggested otherwise that's what I would have done.

[Chris Hinds]

At the end of the day it's about deferred gratification to some extent. Do you save £300 a month for 36 months and buy a new car for cash in 2018 or do you pay £300 a month and lease it now. In those intervening 3 years one doesn't have 0. Motoring costs, in fact the maintenance costs (that are rolled into most leases) would exceed the costs of the lease so once you add up saving and maintenance you are at least equal if not slightly better off.

Ultimately, who cares how people buy a car, care how you buy a car but not others...

The other thing is can we please stop talking about depreciation. With the exception of houses, and even some of those lose value too most material goods lose value over time, until they become collectors items at which point value begins to rise again. Much like classic cars really. Yes, some will lose more value than others in the same period but all will lose value and even at say 40p a mile depreciation, that's about 30% of what it would cost you to get a taxi everywhere!

[eliot]

One reason I wont consider a lease at the moment is the fact you are commited to the term. If there was a way of terminating in case your circumstances unexpectedly change, then I go for it.

[daemon]

Chris Hinds said:

Do you save £300 a month for 36 months and buy a new car for cash in 2018 or do you pay £300 a month and lease it now.

Your £300 a month saving for three years totals £10,800. Enough to buy you a KA, or a FIAT 500 new.

£300 a month leasing can get you some quite heavy duty machinery.

[otolith]

daemon said:

Chris Hinds said:

Do you save £300 a month for 36 months and buy a new car for cash in 2018 or do you pay £300 a month and lease it now.

Your £300 a month saving for three years totals £10,800. Enough to buy you a KA, or a FIAT 500 new.

£300 a month leasing can get you some quite heavy duty machinery.

The comparable cost isn't £10,800, though, it's (£10,800 - what you sell it for + whatever you spend maintaining it). Buying new, and putting in 10k every three years, I reckon you'd be able to run something like a Golf 1.6 TDI - though you'd need to put more like 20k in to begin with.

[JackReacher]

We have a Seat Leon on PCP at about £280 a month, costs a relatively small percentage of our net income but it's a commuting tool and everyday car, and very good at that.

What makes it look expensive however is comparing this against our repayment mortgage, of which the interest element is about £500 a month on a decent sized mortgage.

£500 a month to "rent" a 3 bed house (hopefully appreciating asset)in the south east verses £280 to rent a Seat Leon... strange comparison I know (you can't live in a house and you can't drive a house) but leasing a car looks dreadful value compared to a mortgage.

[otolith]

It's not the interest, it's the depreciation.

[RYH64E]

JackReacher said:

We have a Seat Leon on PCP at about £280 a month, costs a relatively small percentage of our net income but it's a commuting tool and everyday car, and very good at that.

What makes it look expensive however is comparing this against our repayment mortgage, of which the interest element is about £500 a month on a decent sized mortgage.

£500 a month to "rent" a 3 bed house (hopefully appreciating asset)in the south east verses £280 to rent a Seat Leon... strange comparison I know (you can't live in a house and you can't drive a house) but leasing a car looks dreadful value compared to a mortgage.

£280 per month sounds a lot for a Seat Leon, but regardless, rather than comparing with the cost of your mortgage you need to compare with the cost of alternative ways of funding the use of a new car, ie outright purchase vs PCP vs leasing. There's no one best answer, some cars are best bought and some better leased.

[JackReacher]

RYH64E said:

£280 per month sounds a lot for a Seat Leon, but regardless, rather than comparing with the cost of your mortgage you need to compare with the cost of alternative ways of funding the use of a new car, ie outright purchase vs PCP vs leasing. There's no one best answer, some cars are best bought and some better leased.

It's 15k miles pa and very low deposit, but PCP so higher than a lease would be, may or may not mean a little equity at the end. House comparison is not a serious comparison, just an indicator of value.
I pay £360 a month for my train season ticket, that makes the car look cheap.

[ATG]

r11co said:

ATG said:

And what about the impact on the economy? Leasing increases economic activity in the short term at the expense of carrying more debt. Growth versus risk.

Yeah, and look how well that's going in certain economies!

That's the point. Debt is not good or bad. Too much debt is bad, too little debt is also bad. You need enough debt to oil the economic wheels without people being scared that the debt level is unsustainable.

In effect debt is the promise to do something useful between now and some point in the future ... something useful because you need someone to be prepared to pay you for doing it. In effect when we borrow we're promising to be productive. That's a good thing. Everyone thinks everyone else is going to get of their arse and do something useful for the forseeable future. The wheels fall of when the promises start to sound hugely extravagant and undeliverable.

[Mikeyjae]

You are paying the cars depreciation over a lease term just like pcp it is as simple as that. Company predicts it will sell the car in 3 years at 30k miles for 15k. Car costs 30k new so over 3 years they expect to spend x to maintain it and receive around 18k in rent from the driver. They make money, manufacturers make money and the car then goes onto the used market to make more money in spares once out of warrenty.

My friend leases a IX35 and swears buy it but I also found out another work friend used pcp to buy a Mazda 2 which he brought at the end of pcp and has owned since for several years.

Company cars will be big ie Focus to 5 series size of cars, it keeps the used market going for the size of car. PCP who own after term will be fiesta size below. Leasing gives the people who want a new big sized private car, the chance to own one.

[RYH64E]

Mikeyjae said:

You are paying the cars depreciation over a lease term just like pcp it is as simple as that.

I considered the likely cost of depreciation before deciding on a lease, looking at similar specification 2 year old cars I guessed that the likely depreciation would be up to £20k (E350 Premium Plus, £46k list price, the most expensive 2013 plate on Autotrader is currently up for £26k), plus the hassle of selling and cost of tying up a big chunk of money. The total cost of leasing was £10k...

The economics of leasing aren't anywhere near as straightforward as you might assume.

[wemorgan]

Mikeyjae said:

You are paying the cars depreciation over a lease term

I've not read any evidence to suggest that is always the case. AKAIK it's much more complex than that. OEM want to control the new market as well as the s/h hand market. They also need to manufacture x cars over the product cycle to see the necessary return on investment. Lease/PCP/private sales all make up the complex business model that satisfies the business.

Edited by wemorgan on Tuesday 30th June 20:22

Edited by wemorgan on Tuesday 30th June 21:12