New Cars - is Leasing going to become the new norm?
Discussion
I think people need to look at it this way.
You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
The problem with all these leasing vs buying threads is the claims of cheap lease deals are never to be found on a regular basis.
Fine if you want to check the lease deals for 10 minutes of every waking hour of every day, but most of us can't/won't do that.
So when I see a bog standard, garden spec Merc or BMW for rent at £350 a month that limits mileage and doesn't even cover essential maintenance it looks bloody expensive. Especially when that car post-lease will cost the next owner less than half of that to run and own.
Fine if you want to check the lease deals for 10 minutes of every waking hour of every day, but most of us can't/won't do that.
So when I see a bog standard, garden spec Merc or BMW for rent at £350 a month that limits mileage and doesn't even cover essential maintenance it looks bloody expensive. Especially when that car post-lease will cost the next owner less than half of that to run and own.
oyster said:
The problem with all these leasing vs buying threads is the claims of cheap lease deals are never to be found on a regular basis.
Fine if you want to check the lease deals for 10 minutes of every waking hour of every day, but most of us can't/won't do that.
It's true that the good deals are few and far between, and that you can't be too picky as to make/model etc, but there's no need to check the available deals every hour of every day. My car's on a 2 year lease with 18 months left to run, so in 12 month's time I'll start looking at what's around to buy or lease, until then I'll waste no time at all checking out deals. Even then I won't bother doing much legwork, all the good deals are posted in the other lease thread for anyone who's interested.Fine if you want to check the lease deals for 10 minutes of every waking hour of every day, but most of us can't/won't do that.
oyster said:
The problem with all these leasing vs buying threads is the claims of cheap lease deals are never to be found on a regular basis.
Fine if you want to check the lease deals for 10 minutes of every waking hour of every day, but most of us can't/won't do that.
So when I see a bog standard, garden spec Merc or BMW for rent at £350 a month that limits mileage and doesn't even cover essential maintenance it looks bloody expensive. Especially when that car post-lease will cost the next owner less than half of that to run and own.
Some fair points there, though I'd say that was common over a wide range of consumer goods where the best discounts are for limited periods only (DFS exempt)Fine if you want to check the lease deals for 10 minutes of every waking hour of every day, but most of us can't/won't do that.
So when I see a bog standard, garden spec Merc or BMW for rent at £350 a month that limits mileage and doesn't even cover essential maintenance it looks bloody expensive. Especially when that car post-lease will cost the next owner less than half of that to run and own.
ps. a 'garden' Merc C200 manul SE can be had for 6+23 £300 10k/yr all day long. That's £8700. Running the same car from 2 to 4 years old will cost only slightly less in depreciation alone.
gizlaroc said:
I think people need to look at it this way.
You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
BUT if you dislike the car, it's a lemon, situations change, etc before two years is up, you're stuck committed to that lease.You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
If we suddenly needed to get shot of either car, I'd just sell it. But we like them both a lot and are hoping to keep both, our mileages go up and down dramatically each year and we don't want a monthly payment going out so buying is better.
I've also heard many stories of huge waits (ours took 5 weeks from ordering to our exact spec to delivery), incorrect specs, wrong colours, etc on lease.
And these lease companies may appear to be the saving grace of the car enthusiast but they are there to make money on TOP of the manufacturer -they aren't charities. I've paid (with a huge discount) BMW/the BMW dealer and that's it - no interest, no penalty charges, etc. I've had an ex lease car before and it was utterly thrashed - I'd never buy another. The disposable society we live in gives access to "luxuries" that may have not been available before but it's not really a good thing IMO - we'll keep a good car for 4/5/6 years. We'll get rid of a dog in under a year - our needs don't run in 2 or three years cycles. Besides, my mildly obsessive car cleaning nerdery would be wasted on rented cars.
And having money in the bank - there's a good chunk in there and it earns naff all interest so it's boring keeping it all there.
gizlaroc said:
I think people need to look at it this way.
You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
But what if you have £350k in the bank?You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
gizlaroc said:
I think people need to look at it this way.
You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
I can see what you are saying, but do all the hairdressers and junior sales guys driving white A3 diesels really have £35k in the bank to make this decision though?You have £35k in the bank ready to buy a new car, you know it will be worth £18k in 3 years time and you know that you will want to be in something else in 3 years time.
If the sales guy says to you "give me £35k now and I will buy it back in 3 years for £18k or keep your money in the bank and lease it from me for the 3 years for £12k"
Which would you do?
If you lost your job after 24 months which position would you rather be in...
Have to sell a car that you own to release your equity? (and you may have to take a hit to sell it quickly, it will probably be down to £23k anyway)
Live off the £23k you have not tied up in metal and still have your car to get you around?
Just saying there are different ways of looking at things.
Problem with these threads is that "leasing vs buying" gets confused with "should you be spending so much on a car".
Leasing provides the ability for a much larger proportion of the population to spend loads of money on a car which is why it gets a bad rep.
Reading the arguments, I wonder if I would have been better off leasing a new Merc ML rather than buying one at 4 years old.
Not much has gone wrong with it so I am not convinced.
I only paid £15k for it as there are so many Mercedes 3-4 years old available off lease (I assume the same for all German cars).
If I keep it 3 years and flog it for £5k (realistic?) means depreciation = £277.
Looking at the Merc website, it looks like I would need to pay a deposit of £7,500 and then £539 (3 years) to have a nice new one = £747.3/month.
So I guess it is £747.3 vs £277 = c.£475 per month premium.
£5,700 per year covers a lot of maintenance.
Edited by jdw1234 on Wednesday 1st July 13:32
Which? magazine compared the various methods of buying new recently. They found cash is the cheapest.
http://www.which.co.uk/cars/choosing-a-car/buying-...
From cash to contract hire, there’s more than one way to buy a new car. But which option is right for you? We examine the pros and cons.
Figures from the Finance and Leasing Association show that more than 75% of new car sales bought on finance through dealerships in 2014.
Most new cars are now bought on finance through dealerships, such as PCPs
But rather than traditional hire purchase (HP), where you pay for the car in instalments until you own it outright, most sales have been via personal contract purchase (PCP) deals.
PCPs offer lower monthly fees, with a large ‘balloon’ payment at the end of a fixed (typically three-year) term to buy the car. However, few people make the final payment – they simply hand the car back or trade it in for a new one.
Already widespread in the US, leasing, or personal contract hire, has also taken off. Effectively long-term car hire, with no option to own the vehicle, it gives flexibility and fixed costs, as maintenance is often included.
According to Rupert Pontin, head of valuations at Glass’s Guide to Car Values, attitudes are changing. ‘Consumers have become accustomed to buying high-priced products and services on a pay-monthly basis,’ he explains. ‘Owning a car will very likely become a thing of the past for most people.’
But while the idea of a new car every few years is undoubtedly appealing, it’s important to consider the total cost. Those low monthly payments can disguise a much greater outlay overall.
Five ways to pay for your car
Pay cash
PROS The cheapest way to buy in the long term. No monthly repayments. Less paperwork to fill in.
CONS You must pay the full cost upfront. It could mean spending savings and losing interest. Cars depreciate – investing in an appreciating asset (such as your home) may be wiser if you can also afford to pay for a car on a monthly plan.
VERDICT The simplest and cheapest way of buying a new or used car, if you can afford it.
Bank loan
PROS Spreads the cost over time. You can shop around for the best loan. Often cheaper than dealer finance. You can still push for a ‘cash discount’.
CONS Cost of credit varies widely. Difficult with a poor credit rating. As with cash, you bear the brunt of any depreciation.
VERDICT A sensible option if you don’t have the means to buy a car in one go. Be sure to shop around, though.
Hire purchase (HP)
PROS You buy the car outright, in instalments. Easy to arrange via car dealer. You can return the car part way through the repayment plan.
CONS Can prove a lot more expensive than a bank loan. Servicing may cost extra – check the T&Cs. You don’t own the car until the final payment is made – the car can be repossessed if you don’t pay.
VERDICT A loan could save you £1,000s vs HP.
Personal contract purchase (PCP)
PROS Low monthly payments – you’re hiring the car for most of the deal, with the option to buy at the end. You can get a new car whenever it suits you – even every year. Competitive deals.
CONS Servicing unlikely to be included. Mileage limits will apply. ‘Balloon’ payment at the end.
VERDICT A tempting way to drive a new car every few years, but don’t forget the ‘balloon’.
Leasing
PROS Monthly payments are low. Servicing is often included. It’s easy to change cars, with no need to buy or sell.
CONS You don’t own the car, no matter how long the lease. A large upfront deposit is usually required. There may be a mileage limit – with penalties if you exceed it.
VERDICT The most convenient way to drive a new car, but unlikely to be the cheapest.
http://www.which.co.uk/cars/choosing-a-car/buying-...
From cash to contract hire, there’s more than one way to buy a new car. But which option is right for you? We examine the pros and cons.
Figures from the Finance and Leasing Association show that more than 75% of new car sales bought on finance through dealerships in 2014.
Most new cars are now bought on finance through dealerships, such as PCPs
But rather than traditional hire purchase (HP), where you pay for the car in instalments until you own it outright, most sales have been via personal contract purchase (PCP) deals.
PCPs offer lower monthly fees, with a large ‘balloon’ payment at the end of a fixed (typically three-year) term to buy the car. However, few people make the final payment – they simply hand the car back or trade it in for a new one.
Already widespread in the US, leasing, or personal contract hire, has also taken off. Effectively long-term car hire, with no option to own the vehicle, it gives flexibility and fixed costs, as maintenance is often included.
According to Rupert Pontin, head of valuations at Glass’s Guide to Car Values, attitudes are changing. ‘Consumers have become accustomed to buying high-priced products and services on a pay-monthly basis,’ he explains. ‘Owning a car will very likely become a thing of the past for most people.’
But while the idea of a new car every few years is undoubtedly appealing, it’s important to consider the total cost. Those low monthly payments can disguise a much greater outlay overall.
Five ways to pay for your car
Pay cash
PROS The cheapest way to buy in the long term. No monthly repayments. Less paperwork to fill in.
CONS You must pay the full cost upfront. It could mean spending savings and losing interest. Cars depreciate – investing in an appreciating asset (such as your home) may be wiser if you can also afford to pay for a car on a monthly plan.
VERDICT The simplest and cheapest way of buying a new or used car, if you can afford it.
Bank loan
PROS Spreads the cost over time. You can shop around for the best loan. Often cheaper than dealer finance. You can still push for a ‘cash discount’.
CONS Cost of credit varies widely. Difficult with a poor credit rating. As with cash, you bear the brunt of any depreciation.
VERDICT A sensible option if you don’t have the means to buy a car in one go. Be sure to shop around, though.
Hire purchase (HP)
PROS You buy the car outright, in instalments. Easy to arrange via car dealer. You can return the car part way through the repayment plan.
CONS Can prove a lot more expensive than a bank loan. Servicing may cost extra – check the T&Cs. You don’t own the car until the final payment is made – the car can be repossessed if you don’t pay.
VERDICT A loan could save you £1,000s vs HP.
Personal contract purchase (PCP)
PROS Low monthly payments – you’re hiring the car for most of the deal, with the option to buy at the end. You can get a new car whenever it suits you – even every year. Competitive deals.
CONS Servicing unlikely to be included. Mileage limits will apply. ‘Balloon’ payment at the end.
VERDICT A tempting way to drive a new car every few years, but don’t forget the ‘balloon’.
Leasing
PROS Monthly payments are low. Servicing is often included. It’s easy to change cars, with no need to buy or sell.
CONS You don’t own the car, no matter how long the lease. A large upfront deposit is usually required. There may be a mileage limit – with penalties if you exceed it.
VERDICT The most convenient way to drive a new car, but unlikely to be the cheapest.
Tractor lad said:
BUT if you dislike the car, it's a lemon, situations change, etc before two years is up, you're stuck committed to that lease.
If we suddenly needed to get shot of either car, I'd just sell it. But we like them both a lot and are hoping to keep both, our mileages go up and down dramatically each year and we don't want a monthly payment going out so buying is better.
I've also heard many stories of huge waits (ours took 5 weeks from ordering to our exact spec to delivery), incorrect specs, wrong colours, etc on lease.
And these lease companies may appear to be the saving grace of the car enthusiast but they are there to make money on TOP of the manufacturer -they aren't charities. I've paid (with a huge discount) BMW/the BMW dealer and that's it - no interest, no penalty charges, etc. I've had an ex lease car before and it was utterly thrashed - I'd never buy another. The disposable society we live in gives access to "luxuries" that may have not been available before but it's not really a good thing IMO - we'll keep a good car for 4/5/6 years. We'll get rid of a dog in under a year - our needs don't run in 2 or three years cycles. Besides, my mildly obsessive car cleaning nerdery would be wasted on rented cars.
And having money in the bank - there's a good chunk in there and it earns naff all interest so it's boring keeping it all there.
I think we've established that leasing a car isn't for you, which is of course fair enough we are all different. Not sure why it wrankles people that Leasing is for some people though.If we suddenly needed to get shot of either car, I'd just sell it. But we like them both a lot and are hoping to keep both, our mileages go up and down dramatically each year and we don't want a monthly payment going out so buying is better.
I've also heard many stories of huge waits (ours took 5 weeks from ordering to our exact spec to delivery), incorrect specs, wrong colours, etc on lease.
And these lease companies may appear to be the saving grace of the car enthusiast but they are there to make money on TOP of the manufacturer -they aren't charities. I've paid (with a huge discount) BMW/the BMW dealer and that's it - no interest, no penalty charges, etc. I've had an ex lease car before and it was utterly thrashed - I'd never buy another. The disposable society we live in gives access to "luxuries" that may have not been available before but it's not really a good thing IMO - we'll keep a good car for 4/5/6 years. We'll get rid of a dog in under a year - our needs don't run in 2 or three years cycles. Besides, my mildly obsessive car cleaning nerdery would be wasted on rented cars.
And having money in the bank - there's a good chunk in there and it earns naff all interest so it's boring keeping it all there.
LeoSayer said:
Pay cash
PROS The cheapest way to buy in the long term. No monthly repayments. Less paperwork to fill in.
CONS You must pay the full cost upfront. It could mean spending savings and losing interest. Cars depreciate – investing in an appreciating asset (such as your home) may be wiser if you can also afford to pay for a car on a monthly plan.
VERDICT The simplest and cheapest way of buying a new or used car, if you can afford it.
Leasing
PROS Monthly payments are low. Servicing is often included. It’s easy to change cars, with no need to buy or sell.
CONS You don’t own the car, no matter how long the lease. A large upfront deposit is usually required. There may be a mileage limit – with penalties if you exceed it.
VERDICT The most convenient way to drive a new car, but unlikely to be the cheapest.
Cash: they don't define what the 'long' term is. If 5-10 years, then naturally buying the car is cheaper, but then you can not compare to a 2 year lease. Apples vs Oranges.PROS The cheapest way to buy in the long term. No monthly repayments. Less paperwork to fill in.
CONS You must pay the full cost upfront. It could mean spending savings and losing interest. Cars depreciate – investing in an appreciating asset (such as your home) may be wiser if you can also afford to pay for a car on a monthly plan.
VERDICT The simplest and cheapest way of buying a new or used car, if you can afford it.
Leasing
PROS Monthly payments are low. Servicing is often included. It’s easy to change cars, with no need to buy or sell.
CONS You don’t own the car, no matter how long the lease. A large upfront deposit is usually required. There may be a mileage limit – with penalties if you exceed it.
VERDICT The most convenient way to drive a new car, but unlikely to be the cheapest.
Leasing Con: mileage allowance. this same 'con' is valid for HP and PCP I believe. The same con manifests itself with cash buyers as the car will depreciate more if driven more mileage. ie. It's not a con for any option
As ever, it's not as straight forward as the article suggests and is why these type of threads run on and on.
Edited by wemorgan on Wednesday 1st July 15:33
Although this is coming from someone who would probably never lease a car, I think part of the problem among the 'cash buying' crowd is the inability to fully account for the monthly cost of a non-leased car. All those little things like MOTs, services, repairs/fixes/tyres that add up to a significant over the course of 2-3 years are often ignored in the comparison.
If I wasn't interested in exactly speccing a car, having my name on the logbook and generally treating it like any other white good, I can see the appeal in leasing.
If I wasn't interested in exactly speccing a car, having my name on the logbook and generally treating it like any other white good, I can see the appeal in leasing.
wemorgan said:
Cash: they don't define what the 'long' term is. If 5-10 years, then naturally buying the car is cheaper, but then you can not compare to a 2 year lease. Apples vs Oranges.
Leasing Con: mileage allowance. this same 'con' is valid for HP and PCP I believe. The same con manifests itself with cash buyers as the car will depreciate more if driven more mileage. ie. It's not a con for any option
As every, it's not as straight forward as the article suggests and is why this type of threads run on and on.
What it also doesn't account for is that every so often some outrageous bargains turn up in the leasing market, if you're not commited to a particular make or model then you can save a lot of money when one of the manufacturers has a particular;y good campaign running.Leasing Con: mileage allowance. this same 'con' is valid for HP and PCP I believe. The same con manifests itself with cash buyers as the car will depreciate more if driven more mileage. ie. It's not a con for any option
As every, it's not as straight forward as the article suggests and is why this type of threads run on and on.
It's not as easy as saying cash purchase good, leasing bad, the truth is it depends. In the last 6 months I've bought two cars for cash and leased one, the circumstances of each deal favoured different purchase mechanisms.
clarki said:
I've been PCP'ing my everyday car for years (currently an Evoque). Think i'll lease next time (fancy a 5 series next). I don't want to own it, just want a nice, modern, reliable, comfy car that gets changed every 3 years and costs what it says on the tin. Never going to get attached to the thing.
My weekend car I buy. It tends to be a bit older, something I can tinker with, something I want to own and I do tend to get attached to.
Horses for courses I guess.
One of the most sensible posts on the thread.My weekend car I buy. It tends to be a bit older, something I can tinker with, something I want to own and I do tend to get attached to.
Horses for courses I guess.
Justin Case said:
Comparing like for like there is probably very little in it and it just comes down to your individual preference. Unfortunately most people here aren't comparing like for like, mainly to prove their point.
But the OP asks "is it going to be the norm?". After much debate, the answer is probably "no" because it doesn't suit everybody.I get a company needs vehicle, basically a van. I pay nothing and get a fuel card because I cant use it for personal use. My bosses I know for a fact get over £500 a month for a car allowence. If I had £500 a month car allowance then I would absolutly lease. One of my bosses had the £500 allowance and unfortuantly due to medical reasons lost her license. She brought a brand new car and lost 5k in an instance. Luckily the company continued to pay her a car allowance.
Probably, if everyone wants the current plate every 2 or 3 years!
And it seems to be the new norm to have to have something before you can pay for it! But if you buy this way and change jobs that change your annual mileage you can be seriously screwed by additional mileage charges, or paying for mileage you don't do. Just read a copy of Car Dealer magazine and it seems clocking is mostly done now to avoid the excess mileage charges!
Back in 2008 I bought a pre-reg 123d when I had a car allowance plus interest free loan
(albeit taxed as benefit in kind if over £5,000) as the company car scheme would have only got me a TDi Golf/A3 and I wanted RWD, but 6+ years later I sold it for £16,000 less than I paid for it!
Got the hang of it last year and bought a Z4 Coupe (loved the look of them since I first saw one) which is a far better car in every way for much less than I lost on the 123d, and I own it so I will never feature on "Can't pay, we'll take it away" on TV!
Have also paid off the mortgage now, and although it's only a smallish house being debt-free is just such a happy place to be!
What is that saying, "neither a borrower nor a lender be"?
And it seems to be the new norm to have to have something before you can pay for it! But if you buy this way and change jobs that change your annual mileage you can be seriously screwed by additional mileage charges, or paying for mileage you don't do. Just read a copy of Car Dealer magazine and it seems clocking is mostly done now to avoid the excess mileage charges!
Back in 2008 I bought a pre-reg 123d when I had a car allowance plus interest free loan
(albeit taxed as benefit in kind if over £5,000) as the company car scheme would have only got me a TDi Golf/A3 and I wanted RWD, but 6+ years later I sold it for £16,000 less than I paid for it!
Got the hang of it last year and bought a Z4 Coupe (loved the look of them since I first saw one) which is a far better car in every way for much less than I lost on the 123d, and I own it so I will never feature on "Can't pay, we'll take it away" on TV!
Have also paid off the mortgage now, and although it's only a smallish house being debt-free is just such a happy place to be!
What is that saying, "neither a borrower nor a lender be"?
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