New Cars - is Leasing going to become the new norm?
Discussion
chrispmartha said:
nicanary said:
I get your point. I'm dubious whether someone who's been driving something classy for the last umpteen years will be happy buying a shed for the rest of his life.
I don't get knocked by depreciation - I buy a 1-year old car with lowish mileage and known provenance, keep it 3 years, and then trade in for another. No cash added. At retirement I will either keep it and run it into the ground, or trade in for a small city-car. I've never owned a car more than 4 years old, and I don't feel any sort of need to buy a new one anyway. The cars I buy are still under warranty.
Fair enough, I'd like to know how you buy a 1 year old car, keep it for 3 years then trade it in for another 1 year old car without adding any cash though?I don't get knocked by depreciation - I buy a 1-year old car with lowish mileage and known provenance, keep it 3 years, and then trade in for another. No cash added. At retirement I will either keep it and run it into the ground, or trade in for a small city-car. I've never owned a car more than 4 years old, and I don't feel any sort of need to buy a new one anyway. The cars I buy are still under warranty.
"New Cars - is Leasing going to become the new norm"
6 pages in and it seems as if the answer is, no leasing wont become the new norm for all the reasons that have been discussed.
Leasing is just another choice that consumers have been given that wasn't previously available. it clearly wont suit all.
6 pages in and it seems as if the answer is, no leasing wont become the new norm for all the reasons that have been discussed.
Leasing is just another choice that consumers have been given that wasn't previously available. it clearly wont suit all.
wemorgan said:
"New Cars - is Leasing going to become the new norm"
6 pages in and it seems as if the answer is, no leasing wont become the new norm for all the reasons that have been discussed.
Leasing is just another choice that consumers have been given that wasn't previously available. it clearly wont suit all.
This.6 pages in and it seems as if the answer is, no leasing wont become the new norm for all the reasons that have been discussed.
Leasing is just another choice that consumers have been given that wasn't previously available. it clearly wont suit all.
Having said that, as I understand it, more cars are sold now on PCP schemes than on finance. So some things do change from time to time.
otolith said:
It comes down to whether you pay your depreciation in known amounts out of income or in unknown amounts out of savings. I'm not sure that gambling your savings on a depreciation forecast is any more financially responsible than budgeting a fixed amount monthly.
It is less responsible because leasing allows Mr Joe average to expose him self to a far higher level of depreciation (disguised in a monthly payment) than if his only option was to pay cash.I.e. if he couldn't lease, he would be buying a £5-10k second hand car in cash and would be spending a much lower proportion of his/her salary on a car.
jdw1234 said:
It is less responsible because leasing allows Mr Joe average to expose him self to a far higher level of depreciation (disguised in a monthly payment) than if his only option was to pay cash.
I.e. if he couldn't lease, he would be buying a £5-10k second hand car in cash and would be spending a much lower proportion of his/her salary on a car.
"Disguised" as in "the amount that goes out of his account every month". That's not a very convincing disguise.I.e. if he couldn't lease, he would be buying a £5-10k second hand car in cash and would be spending a much lower proportion of his/her salary on a car.
If you think that putting that level of disposable income into motoring is insane, presumably you would also think it insane to use exactly the same amount of cash funding the depreciation and upkeep of a new used car every three years.
otolith said:
jdw1234 said:
It is less responsible because leasing allows Mr Joe average to expose him self to a far higher level of depreciation (disguised in a monthly payment) than if his only option was to pay cash.
I.e. if he couldn't lease, he would be buying a £5-10k second hand car in cash and would be spending a much lower proportion of his/her salary on a car.
"Disguised" as in "the amount that goes out of his account every month". That's not a very convincing disguise.I.e. if he couldn't lease, he would be buying a £5-10k second hand car in cash and would be spending a much lower proportion of his/her salary on a car.
If you think that putting that level of disposable income into motoring is insane, presumably you would also think it insane to use exactly the same amount of cash funding the depreciation and upkeep of a new used car every three years.
If you can slap down your debit card and spend £40k in cash on a new car without it impacting you then I agree, leasing has its benefits vs using cash.
However, I suspect the majority of people wouldnt be exposing themselves to £5-10k per annum depreciation if leasing wasn't available.
Leasing is simply just another way to have a brand new car every few years with just a deposit and monthly payments to worry about. It's nothing new and been around for years. The only reason you're hearing about it so much recently is because of the cheap lease deals on expensive cars (Golf R, M135i) which, whatever way you look at it, is stunning value.
I know a good few sub 20 year olds with 300 bhp hatchbacks for 2/3 years as their second car. But i just think what cars will they be in next? These cheap leases are not commonplace, although with the success of them they may become alot more. Spoiling yourself at such a young age isn't the best thing to do. One day you're gonna have to temporarily put yourself in a s
t heap to save up for a mortgage. I suppose that's one bad thing about leasing in itself.
I know a good few sub 20 year olds with 300 bhp hatchbacks for 2/3 years as their second car. But i just think what cars will they be in next? These cheap leases are not commonplace, although with the success of them they may become alot more. Spoiling yourself at such a young age isn't the best thing to do. One day you're gonna have to temporarily put yourself in a s
t heap to save up for a mortgage. I suppose that's one bad thing about leasing in itself.PK0001 said:
I agree
I have always paid cash, then saved for 3 years, traded in and added savings to just to be able to renew again.
Now I have a £40,000 BMW 520D M Sport Touring Auto for 2 years at £296 per month inc VAT, servicing, tyres etc.
It is worry free motoring and having had it for only 3 weeks I am already less stressed about parking spaces, leaving it at the station car park etc.
Also means I have total control of my motoring costs.
It is also a very impressive car.
I am converted to leasing but there is a caveat.
I keep my weekend toy.
Where did you find this deal as I am have not been able to anything near that price?I have always paid cash, then saved for 3 years, traded in and added savings to just to be able to renew again.
Now I have a £40,000 BMW 520D M Sport Touring Auto for 2 years at £296 per month inc VAT, servicing, tyres etc.
It is worry free motoring and having had it for only 3 weeks I am already less stressed about parking spaces, leaving it at the station car park etc.
Also means I have total control of my motoring costs.
It is also a very impressive car.
I am converted to leasing but there is a caveat.
I keep my weekend toy.
kambites said:
drainbrain said:
It's amazing the number of people who don't understand how it works with property. Basically, grandfondo and you buy identical houses. Him on repayment you on interest only. 10 years later you both sell them. He pockets more equity. The amount of 'more' is exactly the amount of capital he paid off. So he made an interest free investment of his own money which he got back with no profit. Plus he lost the opportunity use along the way of the money he used for capital repayment.
No it's not. The interest rate on a mortgage is a percentage of the current size of the loan. Every time you make a capital repayment against a mortgage (so every month on a typical repayment mortgage) you pay less interest the next month. A repayment mortgage is equivalent to investing at the rate of your mortgage (after tax). B buys a house for 100k with a 10 year repayment mortgage and sells it for £200 k. He is left with £100k profit after repaying the loan (over 10 years).
In terms of the property deal how has it profited B to repay the £100k? The extra £100k he has at the end is the £100k he repaid along the way. Am I wrong?
Graham said:
Someone much richer than me once said to me " if it flies, floats or f*cks" rent it, its cheaper and not tying your capital up... I think the same could be said to cover cars
But died months later from an STI...We've been buying ours cars outright for years, some new, some nearly new, some not so new.
I believe that's the way to afford cars and we never know our mileage, don't like the drip drip drip pain of monthly payments and hang onto cars we like but get shot of ones we don't.
Prefer the flexibility, the lack of ongoing costs and knowing it's all mine.
The sums on PCP and lease have never worked for us.
drainbrain said:
A buys a house for 100k with a 10 year interest only mortgage and sells it for 200k. He is left with £100k profit after repaying the loan
B buys a house for 100k with a 10 year repayment mortgage and sells it for £200 k. He is left with £100k profit after repaying the loan (over 10 years).
In terms of the property deal how has it profited B to repay the £100k? The extra £100k he has at the end is the £100k he repaid along the way. Am I wrong?
Only if buyer A has banked the difference in payments and not touched them, and to save 100k over 10 years they'd need to be saving £833 per month. Is that really the difference in a £100k mortgage over 10 years?B buys a house for 100k with a 10 year repayment mortgage and sells it for £200 k. He is left with £100k profit after repaying the loan (over 10 years).
In terms of the property deal how has it profited B to repay the £100k? The extra £100k he has at the end is the £100k he repaid along the way. Am I wrong?
My mate leases a IX35 for less then £300 a month and swears its the way to go. I buy second hand cars with money I have (No Loan) just money I have saved and tend to buy the top of a range model for the car I want. Granted it is older 6-7 years and I have to pay for repairs and servicing. My mate only pays for insurance, fuel and wear and tear ie tyres. I dont like the idea of paying a fixed monthly fee for something I wont ever own but I cant say im not intrigued in the offers and perhaps if the sums add up I may convert.
Work however is launching a lease scheme and it really is just add fuel from what I have seen. They have only released a few examples to see what interest would be. A BMW 320 eco is roughly £500 a month, A Quasqui £379 a month. Fiesta Zetec is around £279. This is all with no deposit, no insurance and all consumables covered including tyres. Its is offered with a salary sacrifice commitment and you really do only need to add fuel. Now this I am intrigued by. Any body else leasing through work?
If I work out I am to replace my car every 3 years for around 6k thats £166 a month.
Insurance £400 a year.
Servicing £250.
Tax £290
MOT £45
plus lets say about £300 a year in maintenance including Tyres, Brakes, suspension parts etc over 3 years.
That is roughly 3k (with saving for the next car) a year to keep a second hand car running, if you look after it. The Quasqui example is £4.5k a year, and I wouldnt have one. So the offers from work need have some interesting cars around the £350 a month mark to even tempt me.
Granted I could need a gear box or engine replacement which will cost thousands in a 2nd hand car but thats just soads law.
Work however is launching a lease scheme and it really is just add fuel from what I have seen. They have only released a few examples to see what interest would be. A BMW 320 eco is roughly £500 a month, A Quasqui £379 a month. Fiesta Zetec is around £279. This is all with no deposit, no insurance and all consumables covered including tyres. Its is offered with a salary sacrifice commitment and you really do only need to add fuel. Now this I am intrigued by. Any body else leasing through work?
If I work out I am to replace my car every 3 years for around 6k thats £166 a month.
Insurance £400 a year.
Servicing £250.
Tax £290
MOT £45
plus lets say about £300 a year in maintenance including Tyres, Brakes, suspension parts etc over 3 years.
That is roughly 3k (with saving for the next car) a year to keep a second hand car running, if you look after it. The Quasqui example is £4.5k a year, and I wouldnt have one. So the offers from work need have some interesting cars around the £350 a month mark to even tempt me.
Granted I could need a gear box or engine replacement which will cost thousands in a 2nd hand car but thats just soads law.
My mate pays around £300 a month on a season ticket for his train to work.
When you boil a car down to a form of transport, leasing makes sense. It's a "cost of getting around" - similar to that bloke at the start of the thread that was used to "software as a service" type plans.
Buying on credit doesn't mean you can't afford it.
That said, the initial payment on most of these deals is dead cash.
When you boil a car down to a form of transport, leasing makes sense. It's a "cost of getting around" - similar to that bloke at the start of the thread that was used to "software as a service" type plans.
Buying on credit doesn't mean you can't afford it.
That said, the initial payment on most of these deals is dead cash.
drainbrain said:
kambites said:
drainbrain said:
It's amazing the number of people who don't understand how it works with property. Basically, grandfondo and you buy identical houses. Him on repayment you on interest only. 10 years later you both sell them. He pockets more equity. The amount of 'more' is exactly the amount of capital he paid off. So he made an interest free investment of his own money which he got back with no profit. Plus he lost the opportunity use along the way of the money he used for capital repayment.
No it's not. The interest rate on a mortgage is a percentage of the current size of the loan. Every time you make a capital repayment against a mortgage (so every month on a typical repayment mortgage) you pay less interest the next month. A repayment mortgage is equivalent to investing at the rate of your mortgage (after tax). B buys a house for 100k with a 10 year repayment mortgage and sells it for £200 k. He is left with £100k profit after repaying the loan (over 10 years).
In terms of the property deal how has it profited B to repay the £100k? The extra £100k he has at the end is the £100k he repaid along the way. Am I wrong?
If we assume 3% interest per year, buyer-A has paid 30k in interest in that time so he's actually made 70k profit. If buyer B has finished paying off the mortgage after 10 years, he'll have paid roughly 120k into the mortgage, 100k in repayments and 20k in interest because the capital will have been diminishing, so he's made about 80k profit.
Maybe some people could have made that 10k from the liquidity freed up by having an interest only mortgage, but the vast majority couldn't.
Edited by kambites on Monday 29th June 19:04
grimmac said:
Incorrect.
Interest only mortgage, each and every month you will pay interest on the full amount borrowed.
Repayment mortgage, each month you pay interest on the amount you owe at that particular time. Your repayments reduce the overall debt, which means the interest payable reduces.
So its not an interest free investment with no profit, the profit is the difference between the interest on the mortgage and the return available if the repayment amounts had been invested elsewhere.
However, is my property going up fast than the interest rate, I am currently paying .25% above base. Interest only mortgage, each and every month you will pay interest on the full amount borrowed.
Repayment mortgage, each month you pay interest on the amount you owe at that particular time. Your repayments reduce the overall debt, which means the interest payable reduces.
So its not an interest free investment with no profit, the profit is the difference between the interest on the mortgage and the return available if the repayment amounts had been invested elsewhere.
My mate has always been of the thought interest only and get into a much bigger house than he could otherwise afford.
Get into the market that isn't affected as much by what else is going on in the country.
His is 41 and just sold his place in London for £1.4m, his 4th move up the ladder in 19 years*. First place was a studio for £159k.
He has paid off the £480k interest only mortgage and has bought a rather nice place in Wiltshire mortgage free and has £100k in the bank, which he is using as a deposit on a terrace in Bath to rent out, again interest only.
Most mortgages are around 2.5% currently, as a rough average, are house prices climbing at more than 2.5% in your area? If not then repayment may make sense, if yes, then interest only makes sense.
My old man is the same, always said interest only, he has just sold his barn and bought a lovely bungalow and completely done it as they want it, and put £300,000 back in the pension pot as well.
Problem is when people get to 70 or whatever and don't want to move.
You need to get your head round downsizing.
But like he says, a £500k house may only double in value the same as a £200k house does, but double £500k and you have a lot more to play with.
I must admit, I used to be more like that, but now I am just a lazy bugger that wants and easy life and it is much easier to just pay off your mortgage and not take so much of a gamble. But I don't berate others that have a bit more get up and go and a different way of thinking.
You seem to be confusing someone who doesn't have a back up plan with an interest only mortgage with someone is not a complete nob.
That is a very different matter.
- Should just add that with self cert mortgages now pretty much gone he admits it may not be possible to do now.
kambites said:
Yes, you're wrong. You can't say how much either buyer has made in profit without knowing how much they've paid into their mortgage. Buyer A certainly hasn't made 100k profit unless he has a 0% interest rate and hence hasn't been making any mortgage repayments; he might even have made a loss. Buyer B's situation is even more unbounded. If the two mortgages have the same interest rate, buyer A will have paid more in interest because his average loan size over the 10 years is higher.
If we assume 3% interest per year, buyer-A has paid 30k in interest in that time so he's actually made 70k profit. If buyer B has finished paying off the mortgage after 10 years, he'll have paid roughly 120k into the mortgage, 100k in repayments and 20k in interest because the capital will have been diminishing, so he's made about 80k profit.
Maybe some people could have made that 10k from the liquidity freed up by having an interest only mortgage, but the vast majority couldn't.
You seriously believe that the vast majority can't use £100k to make £10k over 10 years? Balderdash! It could even be done with a pretty crappy interest earning bank account. There's no advantage whatsoever to owning a burden free property especially nowadays when mortgage money's so cheap. If we assume 3% interest per year, buyer-A has paid 30k in interest in that time so he's actually made 70k profit. If buyer B has finished paying off the mortgage after 10 years, he'll have paid roughly 120k into the mortgage, 100k in repayments and 20k in interest because the capital will have been diminishing, so he's made about 80k profit.
Maybe some people could have made that 10k from the liquidity freed up by having an interest only mortgage, but the vast majority couldn't.
Edited by kambites on Monday 29th June 19:04
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