New Cars - is Leasing going to become the new norm?
Discussion
Granfondo said:
Interest only mortgages and leased cars are the way forward!
Just hope you like camping and walking when you retire!
P.S. Only joking the council will house you and if you fake a limp motability is your friend.
You say that, everyone I know who has done it properly have done very, very well from it. I wish I had a few years ago. Just hope you like camping and walking when you retire!
P.S. Only joking the council will house you and if you fake a limp motability is your friend.
The principle with leasing is that your monthly payments cover the cost to the lease operator of the vehicle's fall in value while you rent it, plus their profit. It will therefore always be more expensive to lease a car than to buy it outright in the longer term.
It's easy to see why manufacturers are interested in establishing a portfolio of leased vehicles. The concern for me is that even those buyers who wish to buy a car outright are being encouraged into entering long term agreements with manufacturers e.g. for some electrical vehicles, you have to lease the batteries etc.
It's easy to see why manufacturers are interested in establishing a portfolio of leased vehicles. The concern for me is that even those buyers who wish to buy a car outright are being encouraged into entering long term agreements with manufacturers e.g. for some electrical vehicles, you have to lease the batteries etc.
jdw1234 said:
The leading argument always compares to buying new for cash.
However, my problem is that leasing and schemes like it encourage people to spend far too much of their income on cars than they should.
I.e. Is buying a £40k white Audi really sensible if you are on £60k a year,, haven't paid your house off and you have low savings and pension provision.
If the only choice was to pay cash, much less people would fall into this trap.
Why assume the worse? If someone is capable of making a good financial decision to lease/PCP/cash or whatever why are they not capable of making the same for their savings and pensions?However, my problem is that leasing and schemes like it encourage people to spend far too much of their income on cars than they should.
I.e. Is buying a £40k white Audi really sensible if you are on £60k a year,, haven't paid your house off and you have low savings and pension provision.
If the only choice was to pay cash, much less people would fall into this trap.
ps. leasing a £40k car is not the same as buying. Also, spending 5-10% of your take-home on a car is not so unwise.
t4thomas said:
The principle with leasing is that your monthly payments cover the cost to the lease operator of the vehicle's fall in value while you rent it, plus their profit. It will therefore always be more expensive to lease a car than to buy it outright in the longer term.
In practice that's just not true. I like to buy outright and have bought myself a new Elise this year, but sometimes lease deals are cheaper than outright purchase. For instance my main car is an E350, £46k to buy or <£10k (inc VAT) for a 2 year lease. No risk, no money tied up, no trade in or selling hassle, and the car would have to depreciated by less than 21% over 2 years for buying to be cheaper.I've never been able to get a proper answer as to what VAT (if any) the leasing companies pay when they put the car on the road.
One of my leases totalled less than the VAT would have been on the list price, so they obviously don't pay it at that rate.
However they fiddle it they make a huge saving compared to a punter in the showroom looking to buy outright.
One of my leases totalled less than the VAT would have been on the list price, so they obviously don't pay it at that rate.
However they fiddle it they make a huge saving compared to a punter in the showroom looking to buy outright.
I just don't get why how you pay for your transport is so divisive.
The real issue with the trend to deferred ownership of cars though (most cars get bought eventually), is that the manufacturers/dealers have greater control of the price cars are released to market.
Nobody can force you to pay an asking price but if the asking price for a model of car is the same and you want that model, you pay the price.
If you feel you must have a new car then many of them are so heavily subsidised, you'd be crazy to buy one.
Whether people are spending too much is another matter but it's the job of the seller to get you to part with as much money as they can.
The real issue with the trend to deferred ownership of cars though (most cars get bought eventually), is that the manufacturers/dealers have greater control of the price cars are released to market.
Nobody can force you to pay an asking price but if the asking price for a model of car is the same and you want that model, you pay the price.
If you feel you must have a new car then many of them are so heavily subsidised, you'd be crazy to buy one.
Whether people are spending too much is another matter but it's the job of the seller to get you to part with as much money as they can.
clarki said:
The interest you pay on a car is nothing compared to your mortgage. Reduce that with extra cash/savings and not only will you be better off but also you'll be spending on an appreciating asset.
Not necessarily crazy and definitely not foolish!!
An appreciating asset? Do houses repair themselves? Do they give birth to new little baby houses? Not necessarily crazy and definitely not foolish!!
Truckosaurus said:
I've never been able to get a proper answer as to what VAT (if any) the leasing companies pay when they put the car on the road.
One of my leases totalled less than the VAT would have been on the list price, so they obviously don't pay it at that rate.
However they fiddle it they make a huge saving compared to a punter in the showroom looking to buy outright.
Typically the lease company are just the brokers, the cars are retailed by the OEM's own financial company.One of my leases totalled less than the VAT would have been on the list price, so they obviously don't pay it at that rate.
However they fiddle it they make a huge saving compared to a punter in the showroom looking to buy outright.
It's therefore reasonable to assume that they do not pay RRP for their own vehicles.
daemon said:
Gio G said:
A very big disadvantage of leasing is if your car is stolen or written off within the first few months of ownership.
My experience is that my hot Golf R deal ended up costing allot more than I hoped. Chances of it happening is low, however PCP with GAP negates that risk.. Those big upfront payments will never be insured, unless someone introduces new products to the market..
G
You can get GAP insurance or leasing.My experience is that my hot Golf R deal ended up costing allot more than I hoped. Chances of it happening is low, however PCP with GAP negates that risk.. Those big upfront payments will never be insured, unless someone introduces new products to the market..
G
Take out lease, pay down £2000 initial payment. Car delivered on the Monday, stolen on the Tuesday. Insurance settles with lease company to value of car but the initial 2k is lost to the ether, and you have no car.
Cost you 2k to drive the car for 24hrs.
Pistom said:
I just don't get why how you pay for your transport is so divisive.
Because for some reason here in that UK (some) people have a real problem with "undeserving" folk driving cars above their station. If the proles can drive around in 15-plate Mercs then how are we supposed to show our higher status??gizlaroc said:
Granfondo said:
Interest only mortgages and leased cars are the way forward!
Just hope you like camping and walking when you retire!
P.S. Only joking the council will house you and if you fake a limp motability is your friend.
You say that, everyone I know who has done it properly have done very, very well from it. I wish I had a few years ago. Just hope you like camping and walking when you retire!
P.S. Only joking the council will house you and if you fake a limp motability is your friend.
Incredible, innit?
Edited by drainbrain on Monday 29th June 08:09
Looks like an unstoppable trend to me.
It means people can drive a car they couldn't afford to purchase - obviously massively attractive to many people and not in any way a dig. Society has changed from one that saves to one that wants now (obvious generalisation).
However, from a manufacturer's point of view it gets someone into the habit of owning a new/nearly new car and mentally as well as financially locked into that level of ownership. Like many nice things in life, once we've had them, we don't like to give them up, so the manufacturers are playing a long game, even if the origins of the trend may not have been so strategic.
I can see myself leasing a shopping car but I'm not getting locked into an expensive new car lease. The shopping car would be tax efficient. I don't want a financial dependency with a big monthly lease. I'd rather buy the equivalent car (or better) but older outright. I find owning new cars a bit depressing as the moment you start using them they begin to deteriorate and life's too short to be fretting about every new mark.
It means people can drive a car they couldn't afford to purchase - obviously massively attractive to many people and not in any way a dig. Society has changed from one that saves to one that wants now (obvious generalisation).
However, from a manufacturer's point of view it gets someone into the habit of owning a new/nearly new car and mentally as well as financially locked into that level of ownership. Like many nice things in life, once we've had them, we don't like to give them up, so the manufacturers are playing a long game, even if the origins of the trend may not have been so strategic.
I can see myself leasing a shopping car but I'm not getting locked into an expensive new car lease. The shopping car would be tax efficient. I don't want a financial dependency with a big monthly lease. I'd rather buy the equivalent car (or better) but older outright. I find owning new cars a bit depressing as the moment you start using them they begin to deteriorate and life's too short to be fretting about every new mark.
Durzel said:
Pistom said:
I just don't get why how you pay for your transport is so divisive.
Because for some reason here in that UK (some) people have a real problem with "undeserving" folk driving cars above their station. If the proles can drive around in 15-plate Mercs then how are we supposed to show our higher status??Durzel said:
Pistom said:
I just don't get why how you pay for your transport is so divisive.
Because for some reason here in that UK (some) people have a real problem with "undeserving" folk driving cars above their station. If the proles can drive around in 15-plate Mercs then how are we supposed to show our higher status??
t house, I think it belongs to a visitor or it's leased. That's what I think. I can't say I care. I suppose you can fake a bit of status with a £299 monthly lease. It's a bit harder to do with a million pound house.Edited by 9mm on Monday 29th June 08:30
I'm neither here nor there with regards to leasing, I can see how it works for many people and can see why many are also against it in principle.
What is the rules on modifying a lease vehicle? What about track days? I expect its a no can do situation for both? Car must be handed back as you received it, I expect? If so that's where i struggle to fully accept leasing as viable for a car enthusiast.
Unless the lease is alongside an owned weekend car, of course.
What is the rules on modifying a lease vehicle? What about track days? I expect its a no can do situation for both? Car must be handed back as you received it, I expect? If so that's where i struggle to fully accept leasing as viable for a car enthusiast.
Unless the lease is alongside an owned weekend car, of course.
Edited by 16plates on Monday 29th June 10:09
Edited by 16plates on Monday 29th June 10:10
There's nothing wrong with leasing in principle. If you've got a variety of ways to achieve the same end result, so long as you can rationally compare their costs and risks, what's the problem?
Well the problem is the "rationality" bit. Firstly there are some technical problems. Comparing the costs is not that easy. How do you price the different risk options? What price do you put on certainty of one thing versus uncertainty in another? Are you comfortable valuing a lump sum payment versus a stream of deferred payments?
Secondly, and more importantly, these decisions are driven by emotion. People want a new shiny car and they therefore want to believe they can afford it. If they can meet the monthly payment, they are predisposed to think it represents good value. Express the same monthly payments as an equivalent lump sum, and they'll often baulk; economically identical, emotionally very different.
In theory leasing should be more expensive than buying because the leasing firm will be making a profit. However, this isn't always going to be the case because the "professionals" may have collectively stuffed up the risk calculations, there may be some net tax advantages, the sellers may prefer a deferred but relatively certain income stream.
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.
Well the problem is the "rationality" bit. Firstly there are some technical problems. Comparing the costs is not that easy. How do you price the different risk options? What price do you put on certainty of one thing versus uncertainty in another? Are you comfortable valuing a lump sum payment versus a stream of deferred payments?
Secondly, and more importantly, these decisions are driven by emotion. People want a new shiny car and they therefore want to believe they can afford it. If they can meet the monthly payment, they are predisposed to think it represents good value. Express the same monthly payments as an equivalent lump sum, and they'll often baulk; economically identical, emotionally very different.
In theory leasing should be more expensive than buying because the leasing firm will be making a profit. However, this isn't always going to be the case because the "professionals" may have collectively stuffed up the risk calculations, there may be some net tax advantages, the sellers may prefer a deferred but relatively certain income stream.
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.
The day I need safe and convenient A to B transport I'll go straight for finance. New cars do absolutely nothing for me, so I see little point in paying a premium for the privilege of owning rather than leasing.
That said, I'm normally very much of the anti-finance brigade. Not because of envy or snobbery but because it represents all that is wrong in today's hocus pocus economy. May seem like a contradiction but it's a bit like green tea - one cup a day is good, binging on the stuff will eventually poison you.
That said, I'm normally very much of the anti-finance brigade. Not because of envy or snobbery but because it represents all that is wrong in today's hocus pocus economy. May seem like a contradiction but it's a bit like green tea - one cup a day is good, binging on the stuff will eventually poison you.
drainbrain said:
gizlaroc said:
Granfondo said:
Interest only mortgages and leased cars are the way forward!
Just hope you like camping and walking when you retire!
P.S. Only joking the council will house you and if you fake a limp motability is your friend.
You say that, everyone I know who has done it properly have done very, very well from it. I wish I had a few years ago. Just hope you like camping and walking when you retire!
P.S. Only joking the council will house you and if you fake a limp motability is your friend.
Incredible, innit?
Edited by drainbrain on Monday 29th June 08:09
Yuv crakt it bruv, innit m8!
drainbrain said:
It's amazing the number of people who don't understand how it works with property. Basically, grandfondo and you buy identical houses. Him on repayment you on interest only. 10 years later you both sell them. He pockets more equity. The amount of 'more' is exactly the amount of capital he paid off. So he made an interest free investment of his own money which he got back with no profit. Plus he lost the opportunity use along the way of the money he used for capital repayment.
No it's not. The interest rate on a mortgage is a percentage of the current size of the loan. Every time you make a capital repayment against a mortgage (so every month on a typical repayment mortgage) you pay less interest the next month. A repayment mortgage is equivalent to investing at the rate of your mortgage (after tax). Gassing Station | General Gassing | Top of Page | What's New | My Stuff