Why are Lease Deals Frowned Up Particularly on Prestige Cars

[daemon]

wemorgan said:

Tractor lad said:

Hindsight is a wonderful thing. Assume you also bought a mk1 Escort 20 years ago, a Sierra Cosworth, an E30 M3 ten years ago, etc?

You're missing the point, there's nothing special about investing to a FTSE All-share tracker - it's the default choice for those not wanting to spend time researching and actively managing their investments. There's no rational comparison to buying a future classic car. Like it or not you have given money to the banks which have failed to give an average return. Time to get off your high horse and accept you've made duff choices like most of use here. You win some, you lose some.

You seem happy with your financial choices which is all that matters. But don't deny other people's which may be better or worse for their own circumstances.

+1

[Wollcage]

Ok, here's a question.

I have just inherited some money. The vast majority has gone into a deposit for our first house, but I have budgeted £15,000 for a nice little car.

Would you buy something for £15,000 or put say, £5,000, into a PCP (less for a lease) and keep some cash in the bank? Part of me wants to Hire Purchase as I 'think' I'll have something to show for it at the end of the term.

[wemorgan]

Do what ever you want to do, as this and other lease threads have shown there's a whole range of 'correct' things to do.

Me: I'd use as much as possible to reduce the mortgage as the effects of compound interest show making early repayments to be very financially beneficial. When the equity in your home is higher start 'wasting' money on cars.

Edited by wemorgan on Sunday 5th July 10:11

[Zoobeef]

Wollcage said:

Ok, here's a question.

I have just inherited some money. The vast majority has gone into a deposit for our first house, but I have budgeted £15,000 for a nice little car.

Would you buy something for £15,000 or put say, £5,000, into a PCP (less for a lease) and keep some cash in the bank? Part of me wants to Hire Purchase as I 'think' I'll have something to show for it at the end of the term.

This is where we differ. You are writing that money off as you have to spend it all to own a car. Pcp or lease that £15k will be gone in 3 years and you'll have nothing.

I would buy something like a vx220 for £15k. In 3 years it'll be worth £15k. Sell it and you still have your money.

[daemon]

Tractor lad said:

Oh thanks for the sage advice. We also wouldn't have been able to jump on numerous opportunities, we also wouldn't have the business we have today, we wouldn't have the rather amazing lifestyle.

Everyone makes life choices and everyone in their own way, has an "amazing" lifestyle.

Renting isnt necessarily an enabler - it may have been for you, but it does not necessarily follow suit that it has been / would be for others.

Tractor lad said:

We'd be stuck in Bristol with a rubbish house. Rather than in a 5 bed house overlooking the sea that we might well buy one day.

You've already told us that you're hoping for a rather severe market crash or for a relative to die so you can afford to do that. Not sure thats how i'd like to be living - relying on the misfortune of others.

For the record, we too live in a 5 bed house, only ours is in the countryside and we built it ourselves. I guess the difference being that every monthly payment we make it goes towards it paying it off, rather than lining someone elses pockets. Currently mortgage is about 1/3 of the house's value and dropping.

We could sell up and use the equity to buy a nice four bed detached somewhere on a smaller site if we so desired, and still have a lump sum to put into savings.

Tractor lad said:

I've heard the housing rubbish time and time again; we KNOW about the market, we have chosen another route.

Yes, and good for you - though your plan seems to have deep flaws, in that you cant afford to buy where you're living currently unless through the misfortune of others.

Tractor lad said:

It upsets people that we could have bought a house but have instead decided to keep a house in the bank waiting either for the right place to come up or to emigrate with a chunk of money (or maybe something else?); it's just not been for us and I Iove the way people get so indignant.

Genuinely - why do you think you renting would upset people? Why would they care? By your own admission it seems to be a flawed plan.

Tractor lad said:

I pay nothing to the banks. I pay no interest. I have no debts (many forget that a mortgage is a huge loan).

Yes, mortgages are a loan, but they're a secured loan against property. The real problem is unsecured debt, where you've debt thats not against an asset.

Tractor lad said:

We don't obey "the system" Sorry if we haven't crawled up some ladder of debt and DIY but hey ho, most of Europe seems fine with it. So are we. We also have a big safety net if needed.

But you dont own your own home. The bulk of people - myself included - could sell their houses, have a big amount in the bank and rent. It wouldnt be much of an acheivement. Was talking to a taxi driver in slough the other day and his house is worth £500,000 and hes a mortgage he took out 5 years ago for £200,000 on it. He could sell up in the morning, and put £300,000 in the bank and rent but what good would it do him if he couldnt buy a house that he wants to live in with that £300,000 anyway?

Tractor lad said:

Most home "owners" live on a precarious cliff edge.

No they dont. The vast majority of people with mortgages will / are / have a positive outcome and go on to own their own homes in their later years.

Tractor lad said:

Of course we'd love to own the right house outright but that hasn't come up yet and we refuse to get a massive mortgage to maintain the same lifestyle except with non stop maintenance costs.

So you're saying that currently even with your current savings you'd still have to have a massive mortgage to maintain your current lifestyle? Wow, thats really bad. Still, theres always a market crash or a family death to look forward to.

Out of curiosity, renting a house you couldnt afford to buy sounds an awful lot like what people who lease / PCP nice cars get accused of, does it not?

Tractor lad said:

It's not the norm but it works for us; why attack it?

I dont think anyone is attacking it, just surprised you think your way is the "best" way. It "might" be for you, doesnt mean it is for others.

It also bemuses me that you clearly have a superiority complex over people who rent cars, when you buy yours with cash, but are happy to rent a house you coudlnt otherwise afford to buy?

I also asked you for a direct example of this "near lynching" of cash buyers you talked about, and i'm still waiting to see that?

Leasing "can" work out cheaper. Sometimes. For some cars. Sometimes its more expensive.

For the record, i dont lease, and the show stopper for me would be the fact that you pretty much are tied in for the duration, which doesnt allow for change in circumstance or getting bored.

However as per my original post, i do think that leasing is becoming the new norm for new car buying - replacing PCP and finance deals, as (a) it allows more control for the finance company (no handing the car back after 50% has been paid) and (b) can be cheaper for the customer.

Edited by daemon on Sunday 5th July 12:56

[daemon]

wemorgan said:

Do what ever you want to do, as this and other lease threads have shown there's a whole range of 'correct' things to do.

Me: I'd use as much as possible to reduce the mortgage as the effects of compound interest show making early repayments to be very financially beneficial. When the equity in your home is higher start 'wasting' money on cars.

Edited by wemorgan on Sunday 5th July 10:11

+1

I'd probably buy a car for £5K cash and put the other £10K in to the deposit.

[daemon]

M5Fan said:

daemon said:

Typing in a smart phone with one finger. Would need to be on a laptop. Home tomorrow pm so will have a look then

Good stuff, be interested to see - I'm of the 'you don't get something for nothing' school of thought...or as an analogy energy can neither be created or destroyed only transformed if you see what I mean i.e. someone in the chain is paying for it and taking the hit.

Maybe it's like Canon selling cheap printers and then re-couping it by charging a fortune every time you have to buy ink ....e.g. discount Golf R's to leasing companies so that in 3 years time there are loads of them in the system that need servicing..maybe they're playing the long game

Ok, back home

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.

[plasticpig]

Zoobeef said:

This is where we differ. You are writing that money off as you have to spend it all to own a car. Pcp or lease that £15k will be gone in 3 years and you'll have nothing.

I would buy something like a vx220 for £15k. In 3 years it'll be worth £15k. Sell it and you still have your money.

But then you are buying a car which could need some big money spending on it. A 3 year lease of a new car and you have a known position. Some people are risk adverse and some positively enjoy taking financial risks.

[Zoobeef]

There's no big money to spend on one. It's a vauxhall.

[plasticpig]

Zoobeef said:

There's no big money to spend on one. It's a vauxhall.

How much is an engine rebuild? For that matter it's fiberglass so can suffer from osmosis. I don't need to know about the costs of fixing that properly as I already have plenty of experience.

[Tractor lad]

Daemon; some good points there. It just seems that our slightly (in fact very) unusual way of doing things gets attacked so harshly, it's as if we're committing a crime. We hate paying interest, we hate debt; those are the two main drivers of our decisions.
We may build a place too; some nice big plots are coming up for locals only; the ones that aren't millionaires but also don't want to live in a crappy social housing box. That could work out but there are other possibly options.

It's a tricky one and I don't expect the market to crash (it will eventually but it could be many years away); in the meantime, the rent is very manageable, the kids go to a great school and go to the beach most days, we are surrounded with good friends and are happy with where we currently are. We like cars, we find DIY and housing boring hence the decisions.

Our UK obsession with home "owning" is baffling and completely falsely propped up; if it carries on too long we'll sod off to Europe where they have their priorities more sorted.

Our business makes money. Our rented home is just somewhere to live.

it must be pointed out that most people arguing against me are actually doing it to boast about how clever they think they've been.
Plenty get burnt by property; they just have a quieter voice.

Edited by Tractor lad on Sunday 5th July 16:45

[daemon]

Tractor lad said:

Daemon; some good points there. It just seems that our slightly (in fact very) unusual way of doing things gets attacked so harshly, it's as if we're committing a crime. We hate paying interest, we hate debt; those are the two main drivers of our decisions.
We may build a place too; some nice big plots are coming up for locals only; the ones that aren't millionaires but also don't want to live in a crappy social housing box. That could work out but there are other possibly options.

Noone is attacking you - however you had described a scenario which you believe has worked for you, yet is flawed by your own admission. No-ones financial history is perfect but we all are where we all are. Doesnt make us any more right than each other.

Tractor lad said:

It's a tricky one and I don't expect the market to crash (it will eventually but it could be many years away); in the meantime, the rent is very manageable, the kids go to a great school and go to the beach most days, we are surrounded with good friends and are happy with where we currently are. We like cars, we find DIY and housing boring hence the decisions.

All sounds good - we're not into DIY either. Any work we need done i just get someone in. The house is around 5 years old now so could do with a lick of paint throughout, but i'll just find a few painters to give us a quote. Father in law does the gardening for us, but if he didnt i'd get someone in to cut the lawns etc.

Tractor lad said:

Our UK obsession with home "owning" is baffling and completely falsely propped up; if it carries on too long we'll sod off to Europe where they have their priorities more sorted.

Yes. Totally agree. Some people seem to believe it is one of their basic rights to own their own home which its not.

Tractor lad said:

Our business makes money. Our rented home is just somewhere to live.

I'm / we're not that business / work obsessed. We like to come home and forget about it.

Tractor lad said:

it must be pointed out that most people arguing against me are actually doing it to boast about how clever they think they've been.

Nobody is arguing against you - just i guess pointing out the flaws in your current situation, which you pointed out yourself. And again, as i've said i find it very odd that you buy a depreciating asset with cash but take a moral high ground over people who "rent" their cars, when you yourself rent what is usually an appreciating asset.

Tractor lad said:

Plenty get burnt by property; they just have a quieter voice.

Yes. Usually those who jumped on the landlord bandwagon too late, or bought at the peak of the market only to watch property values drop and now be trapped in negative equity.

Fortunately neither us, nor our friends and family ended up in that position.

Edited by daemon on Sunday 5th July 17:06

[Mandalore]

swerni said:

CarAbuser said:

Surely if you have to borrow money to buy something then it's because you can't afford it?

I don't care either way but the reason most will mortgage a house is because they can't afford to buy it. If someone making you aware of that fact offends you then you are a bit delicate

I have no issue with leasing as it usually costs the person more. The issue comes when certain cars are given away on lease deals which make them cheaper than the depreciation on the cash buyers equivalent. Seems completely backwards but it's becoming standard practice for Merc and VAG.

Were you not taught to, never assume?

If you do maths and work out that all you're ever doing is funding the depreciation.
If you sink the cash in a car you have to look at what return you could get be using the money somewhere else.

Factor in the deals that Merc and VAG do and it can be more cost effective to rent the car than to buy.

So, if I had £30k cash to put into a car I would expect 30% depreciation in the first year and 10% the year after. That's £11,100 compound calc.

If I put the £30k against my mortgage I might save 4% PA (best case) £2400, or as little as 0.5% in a bank account £300.

So in total I could be losing upto £13500 in depreciation and loss of interest IF I wanted a NEW car. (Second hand is not new).


If I took the same £13500 and spunked it on a lease, I could a £560 a month car, which would be in the £40-50k new car bracket, or two cars, say an SLK and C Class 250 Merc £(250 & £300).



All the above, does suppose that you have £30k of cash lying around for a new car. And not a 30k bank loan.

[Dr Jekyll]

Tractor lad said:

Daemon; some good points there. It just seems that our slightly (in fact very) unusual way of doing things gets attacked so harshly, it's as if we're committing a crime. We hate paying interest, we hate debt; those are the two main drivers of our decisions.
We may build a place too; some nice big plots are coming up for locals only; the ones that aren't millionaires but also don't want to live in a crappy social housing box. That could work out but there are other possibly options.

It's a tricky one and I don't expect the market to crash (it will eventually but it could be many years away); in the meantime, the rent is very manageable, the kids go to a great school and go to the beach most days, we are surrounded with good friends and are happy with where we currently are. We like cars, we find DIY and housing boring hence the decisions.

Our UK obsession with home "owning" is baffling and completely falsely propped up; if it carries on too long we'll sod off to Europe where they have their priorities more sorted.

Our business makes money. Our rented home is just somewhere to live.

it must be pointed out that most people arguing against me are actually doing it to boast about how clever they think they've been.
Plenty get burnt by property; they just have a quieter voice.

Edited by Tractor lad on Sunday 5th July 16:45

But you also said that your rent is less than the interest payment would be on a mortgage, in other words your landlord is renting to you at a loss. Hardly an option for everyone and this is the problem with renting, either it costs more than owning, or the landlord is making a loss.

[daemon]

Dr Jekyll said:

But you also said that your rent is less than the interest payment would be on a mortgage, in other words your landlord is renting to you at a loss. Hardly an option for everyone and this is the problem with renting, either it costs more than owning, or the landlord is making a loss.

In TLs defence i think in an earlier thread he said the landlord didnt have a mortgage on the house.

Its certainly hard to rent out bigger houses and get the right rental rates. People tend to want town houses / apartments / semis to rent. Whilst a bigger house may cost several times as much to buy, it wont attract several times as much rent.

Edited by daemon on Sunday 5th July 17:21

[Zoobeef]

plasticpig said:

How much is an engine rebuild? For that matter it's fiberglass so can suffer from osmosis. I don't need to know about the costs of fixing that properly as I already have plenty of experience.

So better to spend £15k and then worry about nothing than maybe at worst spend a couple of £k? Also depends how good you are with spanners. Replacement engines are cheap. Help from the forum is often beer money.

[J4CKO]

I thought this forum was to talk about cars this same scenario plays out time after time.

Whatever works for you, you don't need to justify or even tell anyone what your financial choices and arrangements are, apart from your wife and yourself.

There are no absolute rights or wrongs and it is certainly not worth the usual degeneration into a slanging match.

[Dr Jekyll]

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.

[plasticpig]

Zoobeef said:

So better to spend £15k and then worry about nothing than maybe at worst spend a couple of £k? Also depends how good you are with spanners. Replacement engines are cheap. Help from the forum is often beer money.

£4k upwards for a respray. Done properly to get rid of the paint bubbles caused by osmosis you have to grind out the gel coat in affected areas; steam clean and then relay the gel coat. If there is a rash of blisters then stripping the whole gel coat off and re-gelling may be required. That gets very expensive.

[Zoobeef]

I've had vx220s for over 7 years so know all about it. Bearing in mind the last one was built over 10 years ago new cases are becoming extremely rare. I've not known anyone for a while have to get a respray through osmosis. They crash them quicker.

Also, new clams aren't sourced through vauxhall anymore (although they still can be) and they are much better and cheaper.