Why are Lease Deals Frowned Up Particularly on Prestige Cars
Discussion
p1stonhead said:
Some people think others are not worthy of having them because they cant afford them outright.
Totally this.There's a perception (particularly on PH) that unless you've turned up to a dealer and handed over a large suitcase filled with twenties, you cannot afford the car that you drive.
Which is just ridiculous.
Cpb1702 said:
Most people have a mortgage so what's the difference? Your choice mortgage a house or live in a cardboard box? Your choice!
Particularly around prestige cars- make it easy to find out what the best lease is I might actually buy one!
There is an element of truth in it. Whilst you may afford the monthlies, a lot of people take their P&J to Halfords or put on ditchfinders or cheap brakes.Particularly around prestige cars- make it easy to find out what the best lease is I might actually buy one!
Limpet said:
Frowned upon? I can't believe anyone would actually care how someone not immediately related to them funds their car. Wow.
Your surprise clearly indicates that you are not a regularly reader of the forums on PH.I've seen people e-lynched on here for daring to admit they use finance.
Exhibit A - Mr C Harris.....
You can't really compare a car with a house.
If you take a 25 year mortgage on a £200,000 house, after 25 years you will own a house that COULD be worth treble or more.
If you lease (rent) the same house, your monthly repayments might be around the same, but after 25 years you would be left with.....now't.
(Obviously assuming you never moved).....(unlikely)
With a car, unless it's a classic, as fast as you are paying off the monthly repayments it is probably depreciating by the same amount or worse.
Example.
You buy a car for £10k putting down 1k, borrowing nine.
Soon as you drive your shiny new car out of the showroom, you have lost the dealer's profit, plus some of the VAT element.
Therefore after one week your car might be worth 8k, but you would owe maybe 11, (with interest added).
However, at the end of the car will be yours to either keep or sell.
Lease the same car for three years, hand it back, leaving you without transport.
But it depends on personal circumstances, if you move around a lot with your job, renting makes more sense.
If you take a 25 year mortgage on a £200,000 house, after 25 years you will own a house that COULD be worth treble or more.
If you lease (rent) the same house, your monthly repayments might be around the same, but after 25 years you would be left with.....now't.
(Obviously assuming you never moved).....(unlikely)
With a car, unless it's a classic, as fast as you are paying off the monthly repayments it is probably depreciating by the same amount or worse.
Example.
You buy a car for £10k putting down 1k, borrowing nine.
Soon as you drive your shiny new car out of the showroom, you have lost the dealer's profit, plus some of the VAT element.
Therefore after one week your car might be worth 8k, but you would owe maybe 11, (with interest added).
However, at the end of the car will be yours to either keep or sell.
Lease the same car for three years, hand it back, leaving you without transport.
But it depends on personal circumstances, if you move around a lot with your job, renting makes more sense.
Wacky Racer said:
You can't really compare a car with a house.
As a financially sensible asset, you're absolutely right.What's odd are the people who spout that if you haven't paid cash for your car "you can't afford it" yet happily sit in their house with a mortgage.
For some people, leasing/finance is a sensible, prudent option. For some, it isn't. For some, it's unavoidable.
I get irritated by those who refuse to recognise the former and latter.
Muzzer79 said:
Limpet said:
Frowned upon? I can't believe anyone would actually care how someone not immediately related to them funds their car. Wow.
Your surprise clearly indicates that you are not a regularly reader of the forums on PH.I've seen people e-lynched on here for daring to admit they use finance.
Exhibit A - Mr C Harris.....
You may be surprised to hear that most people do not have a mortgage. A quick google and in a Guardian article from 2013 :-
"The ONS figures reveal 9.2 million UK households had property debt in 2008/10 – that's 37.3% of the total."
I suspect numbers haven't changed significantly in the mean time.
"The ONS figures reveal 9.2 million UK households had property debt in 2008/10 – that's 37.3% of the total."
I suspect numbers haven't changed significantly in the mean time.
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.
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.
I lease my cars because I want to experience as many cars as possible. I change them every 24 months because the deals are affordable. I don't want to move house every 24 months as that would be a pain in the arse. Leasing,for me, allows me to enjoy the cars instead of worrying about depreciation
swerni said:
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.
I would just add that the argument of ' I can get a better yield elsewhere' is one to laugh at as it can't actually be done. The premium on retail borrow rates means the yield needed has to adopt a far higher risk profile. 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.
Or more simply put, if someone could generate yield at a consistent rate above retail debt then they wouldn't be needing debt but would be busy playing golf with Bill Gates.
Separately, debt to procure non yielding, depreciating assets will always be seen as a silly act. As will trying to contrast debt secured on such an asset class against one from a totally different asset class. For example, a house.
Excess personal debt is very bad for a society, as we have seen first hand with the asset bubbles it has created in the UK. What we also know is that most humans cannot control their personal debt levels.
An interesting report that was commissioned a while back and which passed over my desk showed a strong correlation between high levels of personal debt financing and low levels of pension investment. We are very much a country living beyond personal means.
The specific issue with using debt to buy cars isn't actually the debt. If someone wants to pay a little more for a car then that is their free right. The actual issue is that people don't typically buy the car that is appropriate but use the debt to gear up to more expensive versions. That's when it doesn't make sense.
In short it's excessive debt that's the issue not debt itself which can be very useful.
Edited by DonkeyApple on Friday 3rd July 19:29
Gassing Station | General Gassing | Top of Page | What's New | My Stuff