Why are Lease Deals Frowned Up Particularly on Prestige Cars

Why are Lease Deals Frowned Up Particularly on Prestige Cars

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Pistom

4,914 posts

158 months

Friday 3rd July 2015
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Same old st but I still love these threads.

I keep hoping someone will put forward an convincing argument for me not to put wads of cash into the cars I buy but it never happens.

Leasing/PCPs/loans however you want to wrap the idea of financing a car is irrelevant. If it suits you go for it.

Jasandjules

69,825 posts

228 months

Friday 3rd July 2015
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I like people who lease, as in three years I get a car much cheaper biggrin

0llie

3,006 posts

195 months

Friday 3rd July 2015
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I've financed a car, and purchased others outright. Both worked perfectly for me at the time, though I do sometimes wonder if some people understand what finance/lease method will actually work for them given the bewildering number of options these days (I speak on behalf of the generic buyer rather than perhaps a PHer smile)

It's also a great gateway towards owning something that could would otherwise be unattainable, and if that's your thing, well good luck to you smile

DonkeyApple

54,920 posts

168 months

Friday 3rd July 2015
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swerni said:
How ever the asset is funded it's depreciating, buying


All fascinating suff, really
However I'm sure it said lease in the heading not buy or procure.

The repayment on the car was less than the depreciation over 3 years.
The money say in my offset nets 2.25%
Overall, was far cheaper to rent ( not buy or procure) than to pay cash.
Indeed. The actual risk is that debt easily leads to over leverage and that is the downside.

In simple terms what is insidious about debt is the 'break it down to easily affordable installments' aspect as we humans wouldn't rush to spend £2k more than is necessary yet we'll have no issue paying any extra £10/month.

If you're using debt to buy what you would be buying otherwise then it boils down to whether you gain a benefit from locking in costs, or whether a specific deal is actually cheaper or whether the capital will be generating a return in excess of the higher cost etc. But once it starts to be used to leverage into something you wouldn't otherwise be buying that is when it is clear to see the folly in terms of long term lifestyle costs of this type of over spending.

lee_fr200

5,475 posts

189 months

Friday 3rd July 2015
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Forgive me for this as I don't want shooting down my parents have always told me BUY appreciating assets

lease/rent those that depreciate

I currently own my car outright but the next will be a business lease not that I can't afford more that I want a nice car with low deposit and low rates every few yrs I don't have to worry about it in negative equity I just hand it back and get another car

drainbrain

5,637 posts

110 months

Friday 3rd July 2015
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I think the cash buyers and the buyers-with-finance etc think about things in quite different ways. Personally I'm in the latter camp. A simplified version of how I think about cars is that I'll spend a certain %age of net income financing them. Works well for me and I doubt it'll ever change. I'd never consider either saving up for a car or spending a lump sum buying one. Explaining the reasoning isn't easy, but, imagine spending the money you would have spent buying the car on something which produces enough money to pay for the finance of that car. At the end of the finance period you've still got the 'something'. So in drainbrain logic the car hasn't really cost you anything at all (apart from the so-called 'opportunity cost' which the cash buyer always loses anyway).

wemorgan

3,578 posts

177 months

Friday 3rd July 2015
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DonkeyApple said:
Indeed. The actual risk is that debt easily leads to over leverage and that is the downside.

In simple terms what is insidious about debt is the 'break it down to easily affordable installments' aspect as we humans wouldn't rush to spend £2k more than is necessary yet we'll have no issue paying any extra £10/month.

If you're using debt to buy what you would be buying otherwise then it boils down to whether you gain a benefit from locking in costs, or whether a specific deal is actually cheaper or whether the capital will be generating a return in excess of the higher cost etc. But once it starts to be used to leverage into something you wouldn't otherwise be buying that is when it is clear to see the folly in terms of long term lifestyle costs of this type of over spending.
Why is it folly? Life is not about always spending the least amount. Spending money for pleasure is human nature. Spending money on cars is just the same.

kambites

67,460 posts

220 months

Friday 3rd July 2015
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I can see both sides of the argument. On the one hand, the idea that you have to be able to afford to buy something outright to "deserve" it is clearly nonsensical; how many of us would actually own houses if we hadn't been able to borrow? On the other, how much has our economy and as such our society been hurt by our enormous reliance on poorly secured debt?

lord trumpton

7,320 posts

125 months

Friday 3rd July 2015
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Tractor lad said:
Leasers claim cash buyers are idiots.
Cash buyers claim leasers can't really afford their car.
Lots of calculations are made to prove each point.
Leasers get tetchy.
Cash buyers get bored.

There, that saves many pages of going nowhere.
Get you eh - You've only been on the forum for 5 minutes and you are an expert already blabla

laugh

Edited by lord trumpton on Friday 3rd July 21:21

DonkeyApple

54,920 posts

168 months

Friday 3rd July 2015
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wemorgan said:
Why is it folly? Life is not about always spending the least amount. Spending money for pleasure is human nature. Spending money on cars is just the same.
Indeed. Although I made no mention of spending the least amount. In fact, the opposite as I was referencing excess. However, life isn't short. So it's beat not to be spending too much of unearned income on the persuit of pleasure. All things in moderation etc. The key is to balance spending with saving. All UK data points to the majority of people being heavily out of balance with no credible savings and little chance of maintaining any form of acceptable lifestyle post work. Balance is the key.

lord trumpton

7,320 posts

125 months

Friday 3rd July 2015
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swerni said:
lord trumpton said:
Tractor lad said:
Leasers/PCPers also have a habit of near lynching cash buyers.

Here's an idea; just talk about/enjoy/hate the cars we are currently custodians of, however they were acquired?
Get you eh - You've only been on the forum for 5 minutes and you are an expert already blabla

laugh
money on a regular who got bored or bared wink
beer

Mr2Mike

20,143 posts

254 months

Friday 3rd July 2015
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ging84 said:
Victorian attitude to debt
You think getting into significant debt is somehow a great idea in the modern age?

Tractor lad

150 posts

105 months

Friday 3rd July 2015
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swerni said:
money on a regular who got bored or bared wink
You could be right... ;-)

Basil Hume

1,259 posts

251 months

Friday 3rd July 2015
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Radio 4 / David Graeber's "Promises, Promises: A History of Debt" A good listen.

I've bought cars with cash, bank loans and PCP before at a wide variety of prices; but not (yet?) through a lease. It just depends on what you want - I think I'd be mad not to at least consider a lease if I wanted a brand-new car in the future.

Having tried all the other routes though, I'm pretty firmly of the view that a car bought in cash or where you have equity in the car (e.g. a quickly-paid bank loan or HP) is a far more relaxing and usually cheaper experience for the sort of cars I want.

vikingaero

10,256 posts

168 months

Friday 3rd July 2015
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lee_fr200 said:
Forgive me for this as I don't want shooting down my parents have always told me BUY appreciating assets

lease/rent those that depreciate

I currently own my car outright but the next will be a business lease not that I can't afford more that I want a nice car with low deposit and low rates every few yrs I don't have to worry about it in negative equity I just hand it back and get another car
I can and can't agree on your statements. Work and home lifestyle plays a big part.

I lease a 520d for work financed by my car allowance. It's great for my current situation - steady job, unlikely to change.

On the other hand my own vehicles are purchased outright or with a percentage of finance because I tend to keep them a long time and eventually pass them on to my extended family. Oldest steed is a 100k 2002 Zafira. For long termers/keepers it's always cash. I guess that stems from my volatile days when I was freelance or contract and interspersed with travelling/dossing as it enabled me to stay mobile and help to quit jobs because I loved the money more than the job.

Justin Case

2,195 posts

133 months

Friday 3rd July 2015
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Going back to the original statement, it appears from the replies to this and countless other similar threads that folk who buy their cars for cash are more self-righteous than those who lease or PCP them. The more expensive and prestigious the car, the more self-righteous the outbursts. It probably boils down more to psychology than economics at the end of the day frown

gregs656

10,816 posts

180 months

Friday 3rd July 2015
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I don't think lease deals or debt that is frowned upon, and I am not sure if frowned upon is the right word at all. I think the issue is that the temptation with lease deals is to stretch your finances beyond the point which you might otherwise if you were paying in a lump sum. That's not a new problem, nor one exclusive to cars.

DonkeyApple

54,920 posts

168 months

Friday 3rd July 2015
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gregs656 said:
I don't think lease deals or debt that is frowned upon, and I am not sure if frowned upon is the right word at all. I think the issue is that the temptation with lease deals is to stretch your finances beyond the point which you might otherwise if you were paying in a lump sum. That's not a new problem, nor one exclusive to cars.
Agree completely. Misuse of debt rather than the use of it. trouble is, what history does teach is and the reason why all societies have always developed a taboo around usury is that few individuals can self regulate.

h0b0

7,557 posts

195 months

Saturday 4th July 2015
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As I said on another thread, it's not about affordability, it's about the most efficient use of money. In the example below leading to buy is cheaper than just buying.

h0b0 said:
I know leasing is generally frowned upon on PH. But, here are some numbers and why it makes sense......... sometimes

In the US you pay tax either on the new car or the depreciated price of the end of term value. In my case the Tiguan is a car that was $24,517 new and has depreciated to $15425 in 3 years and 5k miles. I paid finance charges of $116 total and am now paying 7% tax on $15k and not $24k. This saves $500 on the total cost of purchase even when you include the finance charges.

My intention was always to buy the car but by leasing I saved money and had less risk. Also, I leased at the time of closing on my house when cash was tied up. Leasing gave me the flexibility of purchasing a car that I can afford but did not have liquid cash for at the time. Currently, VW are doing 0% finance on all their range so If I need another car I will probably take advantage of that so leasing today may not be the best option.

T1berious

2,242 posts

154 months

Saturday 4th July 2015
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I'm just going throw in my tuppence. It's interesting hearing the views on property compared to the view on cars. I've got a mate who is doing alright and he's a great bloke. He and his wife currently rent a place but are viewing to buy in the non too distant future. He currently drives a shed. But is now looking at leasing a merc. Now as he was going through the sums he mentioned that the lease deal monthly payments were the same as the loan costs for his shed when he first bought it. He also mentioned the up front was almost 10k.

That's fair enough and everyone has different needs and a different view but there's no escaping that a car, for the most part is a depreciating asset and correct me if I'm wrong (I've never leased so don't know the ins and outs) but after you've paid the initial cost plus your 36 payments, you have the choice to pay the balloon payment or give it back right? Do you then have to stump up another deposit? I'm guessing yes. You're kind of on the merry go round of getting a nice car every 3 years but it's a lot of dead cash.

A bit like renting a house. I mentioned to him that surely you would be better off just getting an interim motor for 6k and carry on saving for the house deposit. The pull of something new and shiny was just too strong. Not saying it's wrong just think that it's dead cash. Then again you could argue unless you're driving an appreciating classic we're all driving dead cash no matter how you finance it.