Why are Lease Deals Frowned Up Particularly on Prestige Cars

Why are Lease Deals Frowned Up Particularly on Prestige Cars

Author
Discussion

Tractor lad

150 posts

105 months

Sunday 5th July 2015
quotequote all
Dr Jekyll said:
I know, but the landlord is still renting an asset at less than the interest would be on the cash. Therefore a loss.
It's a very odd market here with mostly holiday rentals; but that doesn't work for some landlords including this one. He (and the last landlord) built the house in the 70s; our rent is simply a small income for them. Same with the last landlord (property value was about £700k, similar here; we pay £1200pcm and have done for almost three years. We paid £1000 at the last house). But whack it up to say £2000pcm and there'd be no long term locals that could really afford it.
We've sublet this place (with permission) for double what we pay; we could easily get quadruple in the Summer but we aren't going away for five weeks this year as we've done for the last two; too much work on.

TBH, the situation is bloody marvellous really. But yes, if we were paying a mortgage off for someone and had no choice, we'd probably buy. For now we are very happy here with no plans to move. We also spent £2k of our own money tarting the place up a bit; madness huh (it was a bit grim though)?!

So yes, for a lot of people, maybe buying is best. But not us. We just keep saving.



daemon

35,724 posts

196 months

Sunday 5th July 2015
quotequote all
Dr Jekyll said:
daemon said:
In TLs defence i think in an earlier thread he said the landlord didnt have a mortgage on the house.
I know, but the landlord is still renting an asset at less than the interest would be on the cash. Therefore a loss.
True, though that doesnt take into account the appreciation in the asset value.

M5Fan

100 posts

172 months

Sunday 5th July 2015
quotequote all
daemon said:
Ok, back home smile

5 minutes on the internet and i found a deal here for a new M5

http://www.contracthireandleasing.com/personal/car...

6 months down, 10K pa, 35 months @ £670.80 inc VAT. Personal Car lease. Total = £27502 for 3 years driving.

Broadspeed are offering £9,026 off list price, beating your 5% and meaning the car comes in at £64,944.

https://broadspeed.com/new_cars/BMW/M5/Choose_Numb...

Three year old cars are around £38,000 at a main dealers

http://www.autotrader.co.uk/classified/advert/2015...
http://usedcars.bmw.co.uk/M/4.4-M5/Belfast/3492589...

So, theres probably a £5K markup in there. So you're 3 year old car, is probably going to be worth around £33K-£35K on a trade in.

£64,944 - £34,000 = £30,944 in depreciation.

Therefore in this back of a fag packet calc, you'd be approx £4,000 better off by leasing.
Ta smile interesting figures. I wonder how many Bob's there are out there.

I know an M5 is an extreme example and I can see how the man maths kicks in when you look at it as £670 per month - what I can't get past though is the total 3 year lease cost of £27.5keek

So who on PH has got a lease that can top this - you deserve a guest spot on PH TV if you can biggrin

daemon

35,724 posts

196 months

Sunday 5th July 2015
quotequote all
M5Fan said:
Ta smile interesting figures. I wonder how many Bob's there are out there.

I know an M5 is an extreme example and I can see how the man maths kicks in when you look at it as £670 per month - what I can't get past though is the total 3 year lease cost of £27.5keek

So who on PH has got a lease that can top this - you deserve a guest spot on PH TV if you can biggrin
I would say most are on business leases to Powerfully Built Company Directors.


theboss

6,878 posts

218 months

Sunday 5th July 2015
quotequote all
daemon said:
M5Fan said:
Ta smile interesting figures. I wonder how many Bob's there are out there.

I know an M5 is an extreme example and I can see how the man maths kicks in when you look at it as £670 per month - what I can't get past though is the total 3 year lease cost of £27.5keek

So who on PH has got a lease that can top this - you deserve a guest spot on PH TV if you can biggrin
I would say most are on business leases to Powerfully Built Company Directors.
A director running that lease through his business would also be paying tax and NI on the deemed £27k BIK per annum so for a 40% rate payer £27.5k would become an astonishing £73k when combined with tax/NI costs, which is the list price of the car itself!

wemorgan

3,578 posts

177 months

Sunday 5th July 2015
quotequote all
You're better off taking income through dividends and paying for the car through your personal bank a/c. The Ltd co is just useful to be eligible for the deal in the first instance.

LordHaveMurci

12,034 posts

168 months

Sunday 5th July 2015
quotequote all
swerni said:
CarAbuser said:
Surely if you have to borrow money to buy something then it's because you can't afford it?
Not neccasarily, I (just) have enough money to clear my mortgage, at .65% over base rate I'd rather keep the mortgage thanks smile

daemon

35,724 posts

196 months

Sunday 5th July 2015
quotequote all
theboss said:
daemon said:
M5Fan said:
Ta smile interesting figures. I wonder how many Bob's there are out there.

I know an M5 is an extreme example and I can see how the man maths kicks in when you look at it as £670 per month - what I can't get past though is the total 3 year lease cost of £27.5keek

So who on PH has got a lease that can top this - you deserve a guest spot on PH TV if you can biggrin
I would say most are on business leases to Powerfully Built Company Directors.
A director running that lease through his business would also be paying tax and NI on the deemed £27k BIK per annum so for a 40% rate payer £27.5k would become an astonishing £73k when combined with tax/NI costs, which is the list price of the car itself!
It was a bit of a tongue in cheek reference...

http://www.pistonheads.com/gassing/topic.asp?t=111...

dvs_dave

8,581 posts

224 months

Monday 6th July 2015
quotequote all
The haters for some bizarre reason seem to compare the cost of leasing vs what that money would get you on the used market. So in short the old ridiculous new compared to used argument just wrapped up differently.

Although in most cases people actually have better things to do with a lump sum than dumping it into some ste car. You can't beat the banks investing it, but you could offset the loan cost if you were so inclined. However for most the security of having 30k in the bank is much more useful if only as a rainy day or unexpected expense fund than a fixed 350 quid a month "nice to have" that can be walked away from ever will be.

Tractor lad

150 posts

105 months

Monday 6th July 2015
quotequote all
Well I got £6k off list on this car, £7.5k off the previous car/van.
But won't sell it after three years; this ones a keeper.

Tractor lad

150 posts

105 months

Monday 6th July 2015
quotequote all
Well I got £6k off list on this car, £7.5k off the previous car/van.
But won't sell it after three years; this ones a keeper.

DonkeyApple

54,923 posts

168 months

Monday 6th July 2015
quotequote all
ORD said:
EB89 said:
All very well and good for "Bob" but the diference between leasing, buying with cash, pcp, buying an older car with cash etc vary greatly depending on indivdual circumstances.
I would say that a lot of leasing deals arent that good and therfore cost effective, however if there is a good deal on (Or maybe your arent too fussed or set ona particular make/model) then I think leasing can be fairly efficient. Though like me (See my above post) you may have to accept that you will pay a small premium for leasing in exchange for the emotional/financial incentives, ie fixed cost motoring, no large downpayments (if you do the right deal) no hassle of selling a car once you are in the lease cycle, luxury of a brand new car with the latest safety, no MOT's, latest toys and frankly desireability.
A very sensible post.

It's a seriously expensive lifestyle choice, but there are real upsides for lots of people and they are prepared to pay the high cost.
Yup but it's only an 'expensive lifestyle cost' of you gear up. If you're just buying the same vehicle that you would be doing otherwise but paying a little extra for some fringe benefits as mentioned above it would be a sensible route for a lot of people especially those who have very fixed incomes.

chris watton

22,477 posts

259 months

Monday 6th July 2015
quotequote all
swerni said:
LordHaveMurci said:
swerni said:
CarAbuser said:
Surely if you have to borrow money to buy something then it's because you can't afford it?
Not neccasarily, I (just) have enough money to clear my mortgage, at .65% over base rate I'd rather keep the mortgage thanks smile
I'm sure I don't
I had a £9k loan out at the beginning of the year, not for a car, but for an engine upgrade for my current one to increase longevity. I could have afforded it no problem, but as we have no mortgage and no CC debts/other loans, I wanted to keep the money in the bank and also keep my credit rating profile.

So, you can still borrow money and afford it. smile

DonkeyApple

54,923 posts

168 months

Monday 6th July 2015
quotequote all
drainbrain said:
DonkeyApple said:
Dr Jekyll said:
Tractor lad said:
I always find the "I can invest elsewhere" argument amusing.
Can the financial geniuses suggest place to invest our healthy pot currently mostly in ISAs earning sweet FA? Many thanks.
+1

If that argument is correct, why bother with the car at all? Why not just borrow to invest?
Exactly. as I said earlier, that's a farcical justification as anyone who can obtain those types of yield would never need debt.
Maybe I'm not understanding something, but isn't that exactly what we who borrow for business purposes do? (borrow to invest).
Yes it is. That's the correct use of debt. However, debt markets work by lending at a rate above which people can generate yield for the same risk. That's how debt markets work. So the argument contrary to that couldn't be correct. And in the very few cases where it is then there ceases to be a need for debt for rather obvious reasons.

turbobloke

103,742 posts

259 months

Monday 6th July 2015
quotequote all
DonkeyApple said:
drainbrain said:
DonkeyApple said:
Dr Jekyll said:
Tractor lad said:
I always find the "I can invest elsewhere" argument amusing.
Can the financial geniuses suggest place to invest our healthy pot currently mostly in ISAs earning sweet FA? Many thanks.
+1

If that argument is correct, why bother with the car at all? Why not just borrow to invest?
Exactly. as I said earlier, that's a farcical justification as anyone who can obtain those types of yield would never need debt.
Maybe I'm not understanding something, but isn't that exactly what we who borrow for business purposes do? (borrow to invest).
Yes it is. That's the correct use of debt. However, debt markets work by lending at a rate above which people can generate yield for the same risk. That's how debt markets work. So the argument contrary to that couldn't be correct. And in the very few cases where it is then there ceases to be a need for debt for rather obvious reasons.
I may have got the wrong end of the stick after reading that reply, with drainbrain mentioning business use. Take a fledgling small business, a sole trader. The owner takes out £1000 cash on a card and immediately transfers the balance to an offer on another card. That £1000 is used as working capital to market (say) three events running on a 3 month cycle that the business will operate at a profit. The £1000 marketing and sundry planning costs will generate around £2000 profit per event although on the odd occasion one of the three events won't run. That's down to the judgemnent of the sole trader and doesn't happen often, but it happens. Most likely there will be ~£6000 in the business account after three months, occasionally £4000.

This can then extend to multiple locations say north, midlands and south at first. For £3000 in working capital there's ~£18,000 in the business account three months later. At times £2k less per event that doesn't run but this isn't a frequent occurrence. Before very long there's no need to use credit card cash advances and balance transfers followed by three month clearance of any remaining balance(s) as there's cash at bank. Then look at marekting NE NW E W SE SW.

Good use of debt or bad use of debt? The thing that makes me unsure which end of the stick I've got is the phrase 'yield for the same risk'.

Hol

8,359 posts

199 months

Monday 6th July 2015
quotequote all
Surely this whole argument comes down to the amount of disposable income that the person concerned is willing to commit.

Everyone in a street of identical houses and working in the same factory floor, will have individual lifestyle elements that will affect their income/expenditure.

Some will smoke and drink a lot, some will have expensive hobbies like sailing, gliding & foreign golf trips. Others will be car-nuts and will spend cash on classic/sports or new cars.

As long as the household books balance at the period end, then its up to them if they spend spare cash on a car, a 75in television, Algarve golf trips, or an extension to their home to house their lifetime collection of beer mats.



ORD

18,086 posts

126 months

Monday 6th July 2015
quotequote all
I think the telling question is this - without leasing, how many people would be happy bearing the cost of a new car every 3 years? It's repeatedly paying that brutal early depreciation that is so expensive, and I just don't think people on middle incomes would ever consider buying a new car that often; yet the same people will lease (which is usually a bit more expensive).

Like all credit, it disguises true costs, and I expect most people don't even think about the 3 year cost for very long.

DonkeyApple

54,923 posts

168 months

Monday 6th July 2015
quotequote all
turbobloke said:
DonkeyApple said:
drainbrain said:
DonkeyApple said:
Dr Jekyll said:
Tractor lad said:
I always find the "I can invest elsewhere" argument amusing.
Can the financial geniuses suggest place to invest our healthy pot currently mostly in ISAs earning sweet FA? Many thanks.
+1

If that argument is correct, why bother with the car at all? Why not just borrow to invest?
Exactly. as I said earlier, that's a farcical justification as anyone who can obtain those types of yield would never need debt.
Maybe I'm not understanding something, but isn't that exactly what we who borrow for business purposes do? (borrow to invest).
Yes it is. That's the correct use of debt. However, debt markets work by lending at a rate above which people can generate yield for the same risk. That's how debt markets work. So the argument contrary to that couldn't be correct. And in the very few cases where it is then there ceases to be a need for debt for rather obvious reasons.
I may have got the wrong end of the stick after reading that reply, with drainbrain mentioning business use. Take a fledgling small business, a sole trader. The owner takes out £1000 cash on a card and immediately transfers the balance to an offer on another card. That £1000 is used as working capital to market (say) three events running on a 3 month cycle that the business will operate at a profit. The £1000 marketing and sundry planning costs will generate around £2000 profit per event although on the odd occasion one of the three events won't run. That's down to the judgemnent of the sole trader and doesn't happen often, but it happens. Most likely there will be ~£6000 in the business account after three months, occasionally £4000.

This can then extend to multiple locations say north, midlands and south at first. For £3000 in working capital there's ~£18,000 in the business account three months later. At times £2k less per event that doesn't run but this isn't a frequent occurrence. Before very long there's no need to use credit card cash advances and balance transfers followed by three month clearance of any remaining balance(s) as there's cash at bank. Then look at marekting NE NW E W SE SW.

Good use of debt or bad use of debt? The thing that makes me unsure which end of the stick I've got is the phrase 'yield for the same risk'.
Where would that fit in with over leverage on a depreciating asset and what relevance is that asset to this business?

wemorgan

3,578 posts

177 months

Monday 6th July 2015
quotequote all
ORD said:
I think the telling question is this - without leasing, how many people would be happy bearing the cost of a new car every 3 years? It's repeatedly paying that brutal early depreciation that is so expensive, and I just don't think people on middle incomes would ever consider buying a new car that often; yet the same people will lease (which is usually a bit more expensive).

Like all credit, it disguises true costs, and I expect most people don't even think about the 3 year cost for very long.
It's been repeatedly shown that leasing does not have to be as expensive as depreciation on a cash purchase. Also I believe leasing can be the same if not cheaper still on running a car from 2 to 5 years old. Premium cars are still £15-20k from the main dealer, depreciation will be significant, servicing is not cheap for those years and repairs outside of warranty an unknown.

turbobloke

103,742 posts

259 months

Monday 6th July 2015
quotequote all
DonkeyApple said:
turbobloke said:
DonkeyApple said:
drainbrain said:
DonkeyApple said:
Dr Jekyll said:
Tractor lad said:
I always find the "I can invest elsewhere" argument amusing.
Can the financial geniuses suggest place to invest our healthy pot currently mostly in ISAs earning sweet FA? Many thanks.
+1

If that argument is correct, why bother with the car at all? Why not just borrow to invest?
Exactly. as I said earlier, that's a farcical justification as anyone who can obtain those types of yield would never need debt.
Maybe I'm not understanding something, but isn't that exactly what we who borrow for business purposes do? (borrow to invest).
Yes it is. That's the correct use of debt. However, debt markets work by lending at a rate above which people can generate yield for the same risk. That's how debt markets work. So the argument contrary to that couldn't be correct. And in the very few cases where it is then there ceases to be a need for debt for rather obvious reasons.
I may have got the wrong end of the stick after reading that reply, with drainbrain mentioning business use. Take a fledgling small business, a sole trader. The owner takes out £1000 cash on a card and immediately transfers the balance to an offer on another card. That £1000 is used as working capital to market (say) three events running on a 3 month cycle that the business will operate at a profit. The £1000 marketing and sundry planning costs will generate around £2000 profit per event although on the odd occasion one of the three events won't run. That's down to the judgemnent of the sole trader and doesn't happen often, but it happens. Most likely there will be ~£6000 in the business account after three months, occasionally £4000.

This can then extend to multiple locations say north, midlands and south at first. For £3000 in working capital there's ~£18,000 in the business account three months later. At times £2k less per event that doesn't run but this isn't a frequent occurrence. Before very long there's no need to use credit card cash advances and balance transfers followed by three month clearance of any remaining balance(s) as there's cash at bank. Then look at marekting NE NW E W SE SW.

Good use of debt or bad use of debt? The thing that makes me unsure which end of the stick I've got is the phrase 'yield for the same risk'.
Where would that fit in with over leverage on a depreciating asset and what relevance is that asset to this business?
We are where we are smile you replied to this point:

Maybe I'm not understanding something, but isn't that exactly what we who borrow for business purposes do? (borrow to invest).

And then I replied to that reply. That's all smile