Leasing a car - What's the advantage?
Discussion
What are the advantages of leasing a car? Am I right in thinking that you won't own the car once the deal is up?
I've always thought that if you were to borrow money to buy a car, at least at the end you will have an asset of some kind, so how in what situation is leasing a car better than a loan / big bag of non-sequential £20 notes?
I've always thought that if you were to borrow money to buy a car, at least at the end you will have an asset of some kind, so how in what situation is leasing a car better than a loan / big bag of non-sequential £20 notes?
Ownership depends on the type of lease.
Big advantage is that under contract hire or contract purchase schemes you're not stuck with the residual value risk if the market goes down the pan. Also, leasing companies get good discounts from manufacturers which are passed on to the customers. Also financing rates are often quite competitive compared to unsecured loan rates.
If you want a new car every three to four years then leasing is the way to go. It is very prevalent in the States for personal car ownership and I think it will increase in the UK in the near future.
Big advantage is that under contract hire or contract purchase schemes you're not stuck with the residual value risk if the market goes down the pan. Also, leasing companies get good discounts from manufacturers which are passed on to the customers. Also financing rates are often quite competitive compared to unsecured loan rates.
If you want a new car every three to four years then leasing is the way to go. It is very prevalent in the States for personal car ownership and I think it will increase in the UK in the near future.
Makes a lot of sense if you change every 2/3 years as your effectively paying off the depreciation monthly.
There a few variants though:
Hire Purchase - You agree a payment term (e.g. 5 years) and at the end of it you own the car
Contract Hire - Straight forward leasing, you pay monthly for the car and give it back at the end
PCP - Similar to contract hire, except you have the option to buy the car at the end.
New cars have got very expensive, so the majority of people driving them are paying for them under one of the above finance methods.
There a few variants though:
Hire Purchase - You agree a payment term (e.g. 5 years) and at the end of it you own the car
Contract Hire - Straight forward leasing, you pay monthly for the car and give it back at the end
PCP - Similar to contract hire, except you have the option to buy the car at the end.
New cars have got very expensive, so the majority of people driving them are paying for them under one of the above finance methods.
kambites said:
va1o said:
New cars have got very expensive, so the majority of people driving them are paying for them under one of the above finance methods.
New cars are cheaper than they've ever been, aren't they? People are just living further beyond their means. kambites said:
New cars are cheaper than they've ever been, aren't they? People are just living further beyond their means. Edit - Just saw your post, fair enough. Thought you were just posting the usual PH mantra
As far as I can work out leasing is good if you want fixed costs, and aren't too fussy about wanting the perfect car, but would like something that looks respectable, and has a warranty and the reliability of a newer car.
I tend to balk at the cost of nicer stuff but cheaper cars or ones that are being ran out seem tempting.
I tend to balk at the cost of nicer stuff but cheaper cars or ones that are being ran out seem tempting.
Laner said:
If it appreciates buy it if it depreciates lease it..
That only makes sense if the cost of the lease is less than the depreciation (and whatever else the lease covers) and thats only likely if you know the used car markets better than whoever is giving the finance which certainly isn't true for the huge majority of people. I'd argue "if it appreciates, buy it; if it depreciates, wait for it to depreciate and then buy it".
Edited by kambites on Monday 7th February 20:03
If you like to have a new car on your drive every few years with minimal hassle, the leasing is a decent enough way to do it cost effectively.
A lot of the leasing companies will get favorable voluime rates from manufacturers, which can then be passed on to the end user.
For example at £30k retail car may only cost the leasing company £25k, and the residual value of said car after 3 years and 36k miles may be £15K, so the leasing company only needs to cover the £10k difference, plus their margin. So in effect you get a new £30k car on your drive for maybe £350 per month, in 3 years time hand it back and do the same again.
Some contracts offer maintenance and tyre options, but generally it is cheaper to source these yourself than add them onto the monthly fee.
As above though, some people like the idea of owning an asset at the end of the 3 years.
A lot of the leasing companies will get favorable voluime rates from manufacturers, which can then be passed on to the end user.
For example at £30k retail car may only cost the leasing company £25k, and the residual value of said car after 3 years and 36k miles may be £15K, so the leasing company only needs to cover the £10k difference, plus their margin. So in effect you get a new £30k car on your drive for maybe £350 per month, in 3 years time hand it back and do the same again.
Some contracts offer maintenance and tyre options, but generally it is cheaper to source these yourself than add them onto the monthly fee.
As above though, some people like the idea of owning an asset at the end of the 3 years.
kambites said:
My comment wasn't anti-lease, it was refuting the idea that cars have got more expensive.
I'm not sure about that. I had a quick glance around at prices recently as I felt like a change of car, and I seriously couldn't believe the sort of prices that very typical cars (think mid-range diesel family hatch i.e Golf, Focus, etc.) go for brand new. We're talking the best part of £20k. Even my mother-in-law recently bought a very unspectacular 1.4l automatic Fiesta for £15k. About 5 years ago my mate dropped £29k on a fully loaded Mk5 R32 and I thought he was mad because it seemed completely excessive - now it seems as though any vaguely specced-up Golf type thing can cost >£30k and they don't even have >4 cylinders.In my mind new cars have gone up in price substantially over the last 3 years.
What did I buy? A mint 4-year old 730d fully loaded with 30k on the clock, for 'diesel astra' money.
theboss said:
I'm not sure about that. I had a quick glance around at prices recently as I felt like a change of car, and I seriously couldn't believe the sort of prices that very typical cars (think mid-range diesel family hatch i.e Golf, Focus, etc.) go for brand new. We're talking the best part of £20k. Even my mother-in-law recently bought a very unspectacular 1.4l automatic Fiesta for £15k. About 5 years ago my mate dropped £29k on a fully loaded Mk5 R32 and I thought he was mad because it seemed completely excessive - now it seems as though any vaguely specced-up Golf type thing can cost >£30k and they don't even have >4 cylinders.
In my mind new cars have gone up in price substantially over the last 3 years.
Yes, that is what I was getting at. The list prices of mainstream cars have rocketed over the last few years.In my mind new cars have gone up in price substantially over the last 3 years.
theboss said:
I'm not sure about that. I had a quick glance around at prices recently as I felt like a change of car, and I seriously couldn't believe the sort of prices that very typical cars (think mid-range diesel family hatch i.e Golf, Focus, etc.) go for brand new. We're talking the best part of £20k. Even my mother-in-law recently bought a very unspectacular 1.4l automatic Fiesta for £15k. About 5 years ago my mate dropped £29k on a fully loaded Mk5 R32 and I thought he was mad because it seemed completely excessive - now it seems as though any vaguely specced-up Golf type thing can cost >£30k and they don't even have >4 cylinders.
In my mind new cars have gone up in price substantially over the last 3 years.
What did I buy? A mint 4-year old 730d fully loaded with 30k on the clock, for 'diesel astra' money.
That's what I'm finding at the moment. The cost of new cars is stunning! I've not bought a 'car' car since I bought a 54 (I think) plate Clio 182 and that set me back in the region of £14k, that doesn't go too far in the Clio range now!In my mind new cars have gone up in price substantially over the last 3 years.
What did I buy? A mint 4-year old 730d fully loaded with 30k on the clock, for 'diesel astra' money.
The reason I'm asking about lease deals is that I'm getting a car allowance with a new job and trying to work out what I should do. Keep the 2 cars (Mondeo and Boxster) on the road with the payments and pocket the difference, or treat myself to something new. Looks like new is out of the question, as the payment after tax doesn't cover anything that floats my boat, however used cars look much much better value. A sensible monthly payment and 3rd party warranty can cover lots of nice cars.
The good thing is that as it's a new company, that I will be running I will set very friendly rules about what sort of car I'm allowed to use the allowance on
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