Buying vs Leasing
Discussion
Does one method of car ownership win outright over the other these days?
With Buying you own the car outright and can sell it on and although you get a depreciation hit you still get some return on the sale (on typical cars).
With leasing you get the opportunity to run a car that might be outside your affordability to buy outright. You don't have a large upfront capital expenditure and you don't need to worry about depreciation or going through a trade-in/private sales at the end.
Is there a 'cross-over' point on car value vs depreciation that suddenly tips the scales as to when leasing is 'worth it' or not?
With Buying you own the car outright and can sell it on and although you get a depreciation hit you still get some return on the sale (on typical cars).
With leasing you get the opportunity to run a car that might be outside your affordability to buy outright. You don't have a large upfront capital expenditure and you don't need to worry about depreciation or going through a trade-in/private sales at the end.
Is there a 'cross-over' point on car value vs depreciation that suddenly tips the scales as to when leasing is 'worth it' or not?
AA999 said:
Does one method of car ownership win outright over the other these days?
No.AA999 said:
Is there a 'cross-over' point on car value vs depreciation that suddenly tips the scales as to when leasing is 'worth it' or not?
Yes: when the total lease + running costs are less than the total depreciation + running costs.Or, if it adds to worth to you: lease + running costs + no hassle of selling < depreciation + running costs + hassle of selling.
ETA: And then, any other positives/negatives of either method as required by an individual.
Edited by xRIEx on Tuesday 14th October 16:20
This has been done to death now, expect a lot of mixed responses.
To put into my context, I bought a car on hire purchase over 5 years. Im 2.5 years in now, and if i trade for another car to start another agreement on a 5 year HP deal, the car is worth £1200 more than what i owe on it, therefore the garage pay off the remaining finance and im left with a £1200 deposit for the next car. This depends on the vehicle where the crossover point will be of course.
Ive been looking into leasing lately, but the catch for me is when the lease is up, i give the car back and if i'd like another id have to find around 1k as a deposit for the new lease car. If i keep repeating the process of getting a car on Hire purchase i can use the trade in value vs price owed to finance as a deposit.
To put into my context, I bought a car on hire purchase over 5 years. Im 2.5 years in now, and if i trade for another car to start another agreement on a 5 year HP deal, the car is worth £1200 more than what i owe on it, therefore the garage pay off the remaining finance and im left with a £1200 deposit for the next car. This depends on the vehicle where the crossover point will be of course.
Ive been looking into leasing lately, but the catch for me is when the lease is up, i give the car back and if i'd like another id have to find around 1k as a deposit for the new lease car. If i keep repeating the process of getting a car on Hire purchase i can use the trade in value vs price owed to finance as a deposit.
AA999 said:
Does one method of car ownership win outright over the other these days?
Nope. Never has. Each car is different and depends on the discounts, APR rates, deposit contributions and residual values at the time. Ultimately, if you buy a new car at a good rate, run it for 10 years, and then sell it and do the same again, 99% of the time this will be cheaper than leasing over that period.
If completely depends on what you want (i.e a new car every few years, or the security of owning your own car etc.).
You will need to do the maths and compare each funding method for the car you want.
Unless your buying New in both situations then no - clearly if you buy 3 year old used to even think that can be cheaper than new is not going to happen so its all relative.
Given like for like you could find that in some situations leasing is cheaper while others more pricy - be it model time of year or model change times. Always double check then you will know if you have got the cheapest way to have a cars use for x years
Given like for like you could find that in some situations leasing is cheaper while others more pricy - be it model time of year or model change times. Always double check then you will know if you have got the cheapest way to have a cars use for x years
The OP also fell for an 'emperor's new clothes' mathematical cock up: http://www.pistonheads.com/gassing/topic.asp?h=0&a...
Not sure about 'you don't have to worry about depreciation,you are financing the depreciation surely,you don't have to worry about it in the sense you have allowed for it.
I just bought the wife a new car and looked at some finance as I usually buy cash ( I realize that this is unusual and I lucky I can afford to buy outright ).
Just to clarify when I say lease I mean a personal contract of some form in this case.
Car was 38k Balance after part ex was 28k ,and I looked at 2 options...a straight forward loan over 3 years for 20k and a lease.
The total cost of the loan meant the car would have cost me 39.5k ,to lease it was the part x plus 1k and 36 x 520 with a balloon of 17k
So total cost £46720 if I paid off the balloon at end which would be nearly 9k more than if I bought outright
I bought it outright in the end.
There are exceptions though,like when you see bmw m5s for £500/month. These are insanely good deals as obviously you would lose a lot more than that each month in depreciation if you bought outright .
So in essence it depends on the car and deal as to which is best ,and obviously ones personal circumstances.
I just bought the wife a new car and looked at some finance as I usually buy cash ( I realize that this is unusual and I lucky I can afford to buy outright ).
Just to clarify when I say lease I mean a personal contract of some form in this case.
Car was 38k Balance after part ex was 28k ,and I looked at 2 options...a straight forward loan over 3 years for 20k and a lease.
The total cost of the loan meant the car would have cost me 39.5k ,to lease it was the part x plus 1k and 36 x 520 with a balloon of 17k
So total cost £46720 if I paid off the balloon at end which would be nearly 9k more than if I bought outright
I bought it outright in the end.
There are exceptions though,like when you see bmw m5s for £500/month. These are insanely good deals as obviously you would lose a lot more than that each month in depreciation if you bought outright .
So in essence it depends on the car and deal as to which is best ,and obviously ones personal circumstances.
franki68 said:
Not sure about 'you don't have to worry about depreciation,you are financing the depreciation surely,you don't have to worry about it in the sense you have allowed for it.
I just bought the wife a new car and looked at some finance as I usually buy cash ( I realize that this is unusual and I lucky I can afford to buy outright ).
Just to clarify when I say lease I mean a personal contract of some form in this case.
Car was 38k Balance after part ex was 28k ,and I looked at 2 options...a straight forward loan over 3 years for 20k and a lease.
The total cost of the loan meant the car would have cost me 39.5k ,to lease it was the part x plus 1k and 36 x 520 with a balloon of 17k
So total cost £46720 if I paid off the balloon at end which would be nearly 9k more than if I bought outright
I bought it outright in the end.
There are exceptions though,like when you see bmw m5s for £500/month. These are insanely good deals as obviously you would lose a lot more than that each month in depreciation if you bought outright .
So in essence it depends on the car and deal as to which is best ,and obviously ones personal circumstances.
Your example is PCP, not lease.I just bought the wife a new car and looked at some finance as I usually buy cash ( I realize that this is unusual and I lucky I can afford to buy outright ).
Just to clarify when I say lease I mean a personal contract of some form in this case.
Car was 38k Balance after part ex was 28k ,and I looked at 2 options...a straight forward loan over 3 years for 20k and a lease.
The total cost of the loan meant the car would have cost me 39.5k ,to lease it was the part x plus 1k and 36 x 520 with a balloon of 17k
So total cost £46720 if I paid off the balloon at end which would be nearly 9k more than if I bought outright
I bought it outright in the end.
There are exceptions though,like when you see bmw m5s for £500/month. These are insanely good deals as obviously you would lose a lot more than that each month in depreciation if you bought outright .
So in essence it depends on the car and deal as to which is best ,and obviously ones personal circumstances.
When i looked at PCP it was 50% more expensive than leasing the same vehicle.
dapearson said:
Your example is PCP, not lease.
When i looked at PCP it was 50% more expensive than leasing the same vehicle.
Depends on the car and who is financing it,but Generally lease,pcp etc are significantly more expensive than buying outright ,there are exceptions like the m5 example I quoted where the cost of financing is lower than the depreciation you would expect.When i looked at PCP it was 50% more expensive than leasing the same vehicle.
Pcp deals are more expensive than a lease but usually by 10-20%,50% is a cracking deal.
Finance companies are charging you the depreciation and interest on the loan so with the odd exceptions it always has to be significantly more surely? I don't know many charitable finance companies.
[quote=franki68]Depends on the car and who is financing it,but Generally lease,pcp etc are significantly more expensive than buying outright ,there are exceptions like the m5 example I quoted where the cost of financing is lower than the depreciation you would expect.
Pcp deals are more expensive than a lease but usually by 10-20%,50% is a cracking deal.
/quote]
Just to help guide others (and not trying to be pedantic), but you're slightly wrong with everything here.
You bought the car with cash, and you were comparing it against a PCP. A PCP is a Personal Contract Purchase. There is no leasing here. Thus, unless a PCP has a deposit contribution which is more than what you are paying in interest which just doesn't happen, paying cash is always going to be cheaper.
Now a lease is completely different, as there's no balloon payments or anything like that. Those no APR rates also. A finance company buys the car, they own it, they can charge you however much they want to rent it off them. You don't have the option to buy it for a certain price. They can charge you what they like as they own the car, not you.
A lease can work out cheaper to use a car over a certain period because the amount you pay over the total lease could be less than actual depreciation on if you were to buy it. For example, a £40k car, it will loose £20k over 3 years so worth £20k, but the least will cost £6k a year. Leasing wins. If the car actually is worth £25k in 3 years, buying wins.
Fundamentally, PCP is form of HP (Hire Purchase). A purchase agreement involves financing and paying interest on the balance. A lease is a rental. Simples.
Pcp deals are more expensive than a lease but usually by 10-20%,50% is a cracking deal.
/quote]
Just to help guide others (and not trying to be pedantic), but you're slightly wrong with everything here.
You bought the car with cash, and you were comparing it against a PCP. A PCP is a Personal Contract Purchase. There is no leasing here. Thus, unless a PCP has a deposit contribution which is more than what you are paying in interest which just doesn't happen, paying cash is always going to be cheaper.
Now a lease is completely different, as there's no balloon payments or anything like that. Those no APR rates also. A finance company buys the car, they own it, they can charge you however much they want to rent it off them. You don't have the option to buy it for a certain price. They can charge you what they like as they own the car, not you.
A lease can work out cheaper to use a car over a certain period because the amount you pay over the total lease could be less than actual depreciation on if you were to buy it. For example, a £40k car, it will loose £20k over 3 years so worth £20k, but the least will cost £6k a year. Leasing wins. If the car actually is worth £25k in 3 years, buying wins.
Fundamentally, PCP is form of HP (Hire Purchase). A purchase agreement involves financing and paying interest on the balance. A lease is a rental. Simples.
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