Sense check: Cost of lease Vs. Cost of ownership?

[EGBM87]

I'm trying to justify getting a second lease car and have been trying to work out the difference in averaged/amortised monthly cost for Leasing a car vs. purchasing a second hand one with a loan. I was hoping some people could have a look at my assumptions for yearly costs and say if they are too high or low, and then comment on the different monthly costs.

FYI I'm working this out over 4 years because that equates to a £12k loan at £265 a month with 2.9% apr., and £12k will buy a nicer car than £6k (same over 2 years).

Option 1 Lease: Skoda Octavia Estate DSG, c. £205 a month on a 1+23 10kpa miles, £295 fee. Amortised monthly cost: £213


Option 2 Purchase second hand, say 2015 Octavia estate DSG for £12k with around 40k miles on the clock (just a random pick from autotrader).

Add to the 12k:
4 x MOT at £30 (Halfords) = £120
4 x Road tax at £130 ish = £520
4 x Annual maintenance/servicing at £500 per year = £2000 (this is where I am most unsure - is this too much/little?)
Interest on loan = £750

Total costs = £15,390

Less Residual Value of car estimated at 62% from a website I checked, let's say you only get 90% of this (again - is this realistic?) = £6700 ish (is that a realistic value for a, by this time, 7 year old Octavia?)

So total costs less the residual value is around = £8.6k, which averages out to £181 a month.

So from this example it would cost £32 more per month to get a brand new car (twice, since would get new lease after two years) vs. owning a 3 year old one for 4 years (and having to drive around a 4,5,6,7 year old car).

Please discuss/feedback on assumptions, because for me personally I think £32 extra per month is not a bad price to pay to avoid having to do all the MOTs, uncertainty around purchasing/selling and no risk of crazy repair bills.

I separately considered if you got a plug-in hybrid of some sort you might save £30-£60 a month in petrol making a lease even more attractive over a 3-4 year old car.

[codenamecueball]

More things likely to go wrong with a 40k car than a new one, it'll have some previous owners farts in the drivers seats and you'll get the fun of the new car smell for a bit. Sounds decent for £32! Don't forget to factor in the cost of GAP insurance as well as having a £10,000 unsecured loan against your credit might complicate things if you need a credit card or do some borrowing in the near future.

[EGBM87]

codenamecueball said:

More things likely to go wrong with a 40k car than a new one, it'll have some previous owners farts in the drivers seats and you'll get the fun of the new car smell for a bit. Sounds decent for £32! Don't forget to factor in the cost of GAP insurance as well as having a £10,000 unsecured loan against your credit might complicate things if you need a credit card or do some borrowing in the near future.

Thanks, I hadn't even considered having the loan sat on there...

The "things going wrong" part is where I'm most in the dark! I've never owned a car that new/old before so not sure how much to expect to pay on average, one website said only £110 a year on maintenance and servicing - that seems optimistic to me! I didn't know if £500 was too much.

[Nickp82]

I am not recommending either option fully (though I would probably go with the lease) but a couple of things to consider;

- Damage to the lease car - maybe worth budgeting a couple of hundred quid for any scuffs etc which are outside guidelines just in case.

- Cost to end lease early - will you definitely want the car for the full two years as the fees to exit early can be/are costly.

- Lease car will probably need a first service during the two years?

[Justinas]

To lease a car = to rent a car = to lose your money

Simple maths:
£300 (monthly payments) x 24 months = £7200

In this instance you'd throw +£7K away. Does a brand new car worth it? You do not own it, just hire it. This amount of money does buy a decent second hand car.

[Tomo1971]

Justinas said:

To lease a car = to rent a car = to lose your money

Simple maths:
£300 (monthly payments) x 24 months = £7200

In this instance you'd throw +£7K away. Does a brand new car worth it? You do not own it, just hire it. This amount of money does buy a decent second hand car.

The OP appears to be fully aware of that - some people like the opportunity to have new cars over 3 to 4 yr used cars. Boring world if everyone did the same thing. This isnt the Money Saving Expert site BTW :-)

[Buzypea]

Leasing all the way....

I’ve just ordered my 4th lease car, this one costs just over £5000 over the 2 year term (12.5k miles per year) and has 200bhp. Car list price is £24k

I never have to buy tyres, brakes, exhausts, get MOTs, buy tax or pay interest on a loan. There are no unexpected bills and break down cover is included free for the 1st year. I have my old car collected and new one delivered on the same day, so no haggling with dealers or having to deal with time wasters and scammers if selling private.

I created a detailed spreadsheet years ago and worked out it costs me around £50 a month extra to lease a brand new car than potter around in 5 year old motors that I used to.

£50 a month for hassle free motoring in a brand new car.....definitely worth it in my opinion.

Obviously you’ve got to find a good lease deal in the first place and not be too picky about what you drive.

[Smiljan]

Justinas said:

To lease a car = to rent a car = to lose your money

Simple maths:
£300 (monthly payments) x 24 months = £7200

In this instance you'd throw +£7K away. Does a brand new car worth it? You do not own it, just hire it. This amount of money does buy a decent second hand car.

Captain Obvious is in the house again

Bit more to it than your "simple" maths as the OP has clearly stated, hence the thread.

The only thing I can add is the need to factor in the possibility of additional mileage fees. It really easy to choose too low a mileage quota and quickly go over that limit.

[DanL]

EGBM87 said:

codenamecueball said:

More things likely to go wrong with a 40k car than a new one, it'll have some previous owners farts in the drivers seats and you'll get the fun of the new car smell for a bit. Sounds decent for £32! Don't forget to factor in the cost of GAP insurance as well as having a £10,000 unsecured loan against your credit might complicate things if you need a credit card or do some borrowing in the near future.

Thanks, I hadn't even considered having the loan sat on there...

The "things going wrong" part is where I'm most in the dark! I've never owned a car that new/old before so not sure how much to expect to pay on average, one website said only £110 a year on maintenance and servicing - that seems optimistic to me! I didn't know if £500 was too much.

The ongoing liability of lease payments would also factor if thinking about mortgages, I assume...

[ED209]

Buzypea said:

Leasing all the way....

I’ve just ordered my 4th lease car, this one costs just over £5000 over the 2 year term (12.5k miles per year) and has 200bhp. Car list price is £24k

I never have to buy tyres, brakes, exhausts, get MOTs, buy tax or pay interest on a loan. There are no unexpected bills and break down cover is included free for the 1st year. I have my old car collected and new one delivered on the same day, so no haggling with dealers or having to deal with time wasters and scammers if selling private.

I created a detailed spreadsheet years ago and worked out it costs me around £50 a month extra to lease a brand new car than potter around in 5 year old motors that I used to.

£50 a month for hassle free motoring in a brand new car.....definitely worth it in my opinion.

Obviously you’ve got to find a good lease deal in the first place and not be too picky about what you drive.

Sounds good, what car is this?

[Buzypea]

ED209 said:

Buzypea said:

Leasing all the way....

I’ve just ordered my 4th lease car, this one costs just over £5000 over the 2 year term (12.5k miles per year) and has 200bhp. Car list price is £24k

I never have to buy tyres, brakes, exhausts, get MOTs, buy tax or pay interest on a loan. There are no unexpected bills and break down cover is included free for the 1st year. I have my old car collected and new one delivered on the same day, so no haggling with dealers or having to deal with time wasters and scammers if selling private.

I created a detailed spreadsheet years ago and worked out it costs me around £50 a month extra to lease a brand new car than potter around in 5 year old motors that I used to.

£50 a month for hassle free motoring in a brand new car.....definitely worth it in my opinion.

Obviously you’ve got to find a good lease deal in the first place and not be too picky about what you drive.

Sounds good, what car is this?

Astra Elite Nav 1.6T 200

https://www.nationwidevehiclecontracts.co.uk/car-l...

[Rewe]

I think your logic is pretty sound. If you have to borrow money to fund a new car (nearly all of us I suspect) AND you will regularly replace your cars then leasing is almost as cheap as borrowing and you get to drive a better car.

Leasing makes less sense if your job is not secure however...

[ED209]

Buzypea said:

Astra Elite Nav 1.6T 200

https://www.nationwidevehiclecontracts.co.uk/car-l...

Cheers, good value but I drive one at work and don't think I could have one as a daily driver..

[Buzypea]

ED209 said:

Buzypea said:

Astra Elite Nav 1.6T 200

https://www.nationwidevehiclecontracts.co.uk/car-l...

Cheers, good value but I drive one at work and don't think I could have one as a daily driver..

The 200bhp version makes it quite entertaining, but horses for course I guess. For me it currently ticks all the boxes.

[Shominy]

Buzypea said:

Astra Elite Nav 1.6T 200

https://www.nationwidevehiclecontracts.co.uk/car-l...

When stuff like that is around it does make buying seem slightly less attractive. If you're not fussed about exactly what you drive then leasing can be excellent. I'd drive that Astra, especially at that price.

[ED209]

Buzypea said:

ED209 said:

Buzypea said:

Astra Elite Nav 1.6T 200

https://www.nationwidevehiclecontracts.co.uk/car-l...

Cheers, good value but I drive one at work and don't think I could have one as a daily driver..

The 200bhp version makes it quite entertaining, but horses for course I guess. For me it currently ticks all the boxes.

i drive an estate with the 136 hp (i think) diesel and its actually quite nippy.

[codenamecueball]

DanL said:

he ongoing liability of lease payments would also factor if thinking about mortgages, I assume...

Yep, my thought is that as it's shorter term + less overall capital and secured against an asset the algorithms will favour that "kind" of debt.