Leasing Advice/Questions/Tips

[TheBroker]

I get asked all sorts of questions about leasing pros and cons plus what to do if....
So, to be helpful I thought I would start a thread where you can ask specific questions for me to answer and also where I can post helpful tips.

The first of which is this....

What if your lease car is about to go back, you're on a non-maintained contract, and your tyres are too low on tread?
Don't put new tyres on, go to your local part worn tyre provider and get them to put branded tyres on with 4mm tread left (most won't supply less than 4mm), or buy online and get local garage to fit. You just saved at least £40/tyre.

[TheBroker]

If your thinking about getting a lease with maintenance check if they offer it without tyres, this can be more cost effective, especially if you are more conservative in your driving style.

[TheBroker]

If you are dealing with a broker, ensure they are FCA authorised so you know you are dealing with a bona fide broker.

Also look out for done of the sharp practices they use which include:

Telling you you have been declined funding, then calling you back 10 mins later another funder has accepted you but the rate is more. Be especially wary if you think your credit is fine.

If you get as deal that is too good to be true, be careful just before delivery you don't get told the price has gone up so you are ransomed to a higher price as you can't get a car elsewhere. I've seen this a handful of times times when we have been beaten on price then Cust comes back saying the price has changed, thankfully we have the contacts to save the day and sort cars quickly, usually cheaper than the newly inflated price!

[TheBroker]

I'm sure anyone coming here will benefit from free impartial useful advice!
I'm not mentioning the business I run, rather by stating I'm a broker qualifying I know what I'm talking about so people know I'm not spouting unsubstantiated rubbish

[TheBroker]

Indeed which is why it's being re-written and will be up end march with new branding etc

[TheBroker]

Technically you can get away with 2mm but most reputable part worn suppliers won't provide anything less than 4mm

[TheBroker]

Who said the lease min was 4mm, I've merely said most reputable part worn suppliers won't sell anything under 4mm.

You can hand back with 2mm without penalty

[TheBroker]

Bvrla fair wear and tear guidelines state legal limit so 1.6mm
I state 2mm as .4mm is a nominal difference and 2mm is easier to measure

[TheBroker]

timetex said:

So here's a series of questions...

I get a monthly 'car allowance' from my employer, and am also paid 45ppm / 20ppm, but don't actually (at the moment) do a lot of business miles per annum.

I currently own my car outright, so if it were sold it would free up more than enough to put down the deposit on a lease or PCP deal, plus some extra readies as well (despite age and mileage!)

I probably do about 10-12k miles per year (previously a lot more, current car is 4 years old with 87k on it!)

I am hankering after changing my car at some point, but only for a deal that makes sense.

New car would probably be another premium fast estate (E / C Class Merc, Audi RS etc.)

So the questions are:

- given the above (mileage paid, car allowance paid) can I opt for the 'business' leases (not bothered about saving VAT - just taking advantage of the lower rates)
- any strong deals on at the moment?

I don't know if my car will depreciate at such a rapid rate (in fact it strengthened by well over 10% according to WBAC between Jan and Feb (!) so don't know when the best time to get shot of it is.

Decisions decisions!

Ok so, do you have a choice of company car or car allowance?
If you have a choice then you need to consider the BIK for one of the super estates and they will be quite heavy on personal tax.
However, most employers don't pay enough in car allowance (typically around £400/month) to cover a super estate either, so something like an RS is not likely unless you are willing to pay extra.

There are some strong deals on things like the E-Class, but not the super fast ones. However, if you would consider an E350 Diesel then you may be able to meet your need for speed whilst keeping costs down a bit, the Audi 3.0BiTDI is also pretty quick. Also consider the XF Sportbrake.

If you do get a company car, on the mileage you are doing, don't take with personal miles included as you will end up worse off.
With regards to your car, as the weather improves people feel happier and start looking to buy cars which is why you will see a slight appreciation in price. This is far more evident in convertibles. Sell in early summer, buy in darkest winter.

If you want any pricing drop me a pm.

[TheBroker]

V8forweekends said:

I would like to know more about the "business lease" requirements - I understand the VAT thing, but why do providers want a car allowance and/or business mileage? I don't get why these are qualifiers (it they really are).

The qualifiers are put in place by the funders not the brokers. The reasons behind it are the underwriters want greater security of their funds so if you can prove you are a business user you are likely to be a safer bet (lower risk profile)

But you can get a personal lease with certain business focussed funders if you can prove you are a business user (cc allowance/claim mileage/co director)

If you can prove you are a business user, different interpretations exist amongst funders, you can get the better rates

Edited by TheBroker on Monday 2nd March 19:21

Edited by TheBroker on Monday 2nd March 19:22

[TheBroker]

IanCress said:

If a car needs servicing every 12 months, and my lease is for 24 months, do I need to get that 2nd service done before I hand it back?

In short, yes.

If it's a maintained contract then it's no cost to you
If it's non maintained then you must pay. If you have a new car on order to arrive in time you could consider handing your old one back a little earlier to avoid a service, unless the service indicator is on. Also have a quick read of your contract to see if there is a clause to prevent this

[TheBroker]

timetex said:

No there's no choice for a car - just the allowance. I just wondered if being in receipt of an allowance, plus being paid per mile for businesss travel, I could opt for a business lease.

I know an M5 (although there's no Touring model), E63 or RS6 is going to be above my allowance but that's OK.

I wouldn't take an uber barge as a 'company car' anyway - always the allowance would be better.

I do want to stay in something like an AMG, M or RS (currently in an RS6 Avant) - I wouldn't want to change for a fast diesel.

Do I qualify for a 'business lease'?

You don't qualify for a business lease as you are not a business, but certain funders will offer business lease'esque pricing for personal customers in receipt of a car allowance or are a director or can claim mileage from employer

[TheBroker]

ED209 said:

Are these personal leases really personal or do you need some kind of business mileage allowance to be able to get them?

I can claim business miles but hardly ever do, probably less than 100 miles a year, would i qualify for a personal lease?

They are personal, but some require business usage to qualify (see earlier post).

Less than 100 miles a year is nominal but if your employer will write a letter saying you can claim
Business mileage then you should get through.

Most of our funders don't have such stipulations but a couple do.

[TheBroker]

gingerbeard said:

Excuse me if these are stupid questions but I know nothing little about financing a car. I have always just paid cash or taken out a personal loan.

1. How much do the deals differ on financing new/used cars? Is the same APR etc available.

2. Is there a general rule of thumb for finance vs personal loan with regards to total cost of car and depreciation? By this I mean: If I were to borrow 15k on a personal loan at £300/mnth over 5 years I could then buy a car for 15k and own it at the end. At what price point would it be reasonable to say but a car worth £30k financing part of it over several years and then having a balloon payment at the end for roughly the same monthly cost? ie £300/mnth but then owe about 15k again at the end? This obviously has the downfall that you do not own the car for years but the upside is you can have a newer/more expensive car. (figures just made up for illustration)

3. If a car is generally seen as an appreciating asset (eg M3 CSL etc), is this taken into account by the broker and so the GFV of the car will be much higher and thus the monthlies lower or is it more of a case that you still pay high monthlies as no-one has a crystal ball and so would set the GFV much lower than it is likely to be and you just end up with a car that is worth more at the end of the term?

4. If you are in a deal PCH/PCP etc, how easy is it to swap to a different car during that time? I would assume this is easier if you are buying from the manufacturer and want to swap to another car of the same brand?

Thanks for taking the time to look at this, I think this thread is a good idea BTW but could keep you very busy with replies!

GB

gingerbeard said:

Excuse me if these are stupid questions but I know nothing little about financing a car. I have always just paid cash or taken out a personal loan.

1. How much do the deals differ on financing new/used cars? Is the same APR etc available.

2. Is there a general rule of thumb for finance vs personal loan with regards to total cost of car and depreciation? By this I mean: If I were to borrow 15k on a personal loan at £300/mnth over 5 years I could then buy a car for 15k and own it at the end. At what price point would it be reasonable to say but a car worth £30k financing part of it over several years and then having a balloon payment at the end for roughly the same monthly cost? ie £300/mnth but then owe about 15k again at the end? This obviously has the downfall that you do not own the car for years but the upside is you can have a newer/more expensive car. (figures just made up for illustration)

3. If a car is generally seen as an appreciating asset (eg M3 CSL etc), is this taken into account by the broker and so the GFV of the car will be much higher and thus the monthlies lower or is it more of a case that you still pay high monthlies as no-one has a crystal ball and so would set the GFV much lower than it is likely to be and you just end up with a car that is worth more at the end of the term?

4. If you are in a deal PCH/PCP etc, how easy is it to swap to a different car during that time? I would assume this is easier if you are buying from the manufacturer and want to swap to another car of the same brand?

Thanks for taking the time to look at this, I think this thread is a good idea BTW but could keep you very busy with replies!

GB

Hi,

In answer to your first question, the difference can be substantially in favour of new over used (if you're comparing with up to 18 months old). The reason for this is the manufacturers offer additional financial support to the lenders to promote CH deals to shift new cars as its all about selling new cars not used. Also the APR rates can be 1/2 on a new vehicle PCP against a used vehicle PCP. I am working on a deal at the moment where it is touch and go as to whether my customer will take a used RS7 for £70k on finance against a brand new one as the cost of borrowing is so close. So no the used/new APR's are not the same.

With regards to a rule of thumb, generally there is not as there are so many contributing factors, you are also talking about entirely different financial solutions. The way CH works is that you take a car worth for example £30k, and will be handing it back in 3 years, the market/funder will assign a Residual Value (RV) to that vehicle of say £15k after 3 years. You are then taking a loan out for the depreciation (£15k) plus interest. BUT, as funders receive additional support from manufacturers, the car worth £30k new may be acquired by the funder for only £25k, so you are now only funding £10k plus interest (although naturally the funder will keep some of the discount as profit for themselves (they are not charities after all).
Comparing this with taking a personal loan out for £15k to buy a car for £15k, and paying back maybe 18k. For 18k your vehicle after 3 years may be worth X for example so you could have that equity left. Now you can work out your cost of borrowing and compare it to getting a new car worth twice as much for perhaps the same amount (but you hand it back). It can be complicated hence me not being able to give a straight answer.

In response to your 3rd question. A funder will never treat a vehicle as an appreciating asset otherwise they would end up paying you money. Unfortunately the broker has no say in RV whatsoever. But the GFV will reflect an improved %RV against a standard 3 Series for example. Ultimately you will still pay more than on a standard 3 Series but not proportionately so. A good example has been the silly deals last year on the C63AMG.

I get asked your 4th question a lot, and many don't like the answer. With PCH there is no route to change your vehicle whatsoever. It would be considered early termination which can result in not only you handing the vehicle back but also paying up to 97% of the outstanding rentals. So its not worth it in the slightest. There are sometimes exceptions for early termination (substantiated medical issues for example), which are entirely at the funders discretion, but this is the 99% rule.
With regards to PCP there is more flexibility. Once a year is up you are likely to be in a position where the vehicles value and the outstanding finance is roughly the same (deposit dependant of course). Under the 1/2s and 2/3s rule, once you have paid 1/2 your overall finance (typically 2/3 way though the contract) you can simply hand the keys back and walk away. Whilst this won't affect your credit file, the funders don't generally like it and may be less inclined to offer you finance in the future. If you wanted to you could leave a PCP a month after you take it out but you will lose money.
If you were to stay on brand/with same funder you may be treated a little more nicely (especially if you are trading up.

I hope this helps

[TheBroker]

The funders sell the vehicles on at full retail price as they have to put a full warranty on it to protect themselves (CSR). In most cases you can buy an equivalent vehicle to yours for less than the funder want for it, or same prie but with less miles/superior spec.