Much of the profit comes from hugely discounted trade prices compared to PCP prices a customer can get from a dealer.
Leasing reduces the risk of depreciation being higher than expected, but likewise allows no benefit of depreciation is lower than expected.
Sometimes the 'best deals' can be found through leasing companies who take on cars that otherwise sit in the showroom rusting (eg. Dodge Nitro and other yank brands).
About a year ago the Nitro was being leased in a few places for well under £200/mth.
Of course there's a reason it doesn't sell.... :-)
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I have carried out some initial research on private leasing which may be of interest to those who may be considering this method of acquiring a car.
My particular choice of car with a list price of £40,888 via leasing would have incurred a total cost of £30,128 over a 3 years period whereafter I would be left with no vehicle. To buy the same car at discount from a broker would cost me £37,775 but for the additional outlay of £7647 the vehicle would remain my property with a market value of about £20,000. If I was then minded to part ex the car for another new one of the same marque and spec, the cost to change would be about £17,000 whereas to renew the leasing contract would cost circa £30,000+.
Needless to say, I will not be obtaining my next car on a leasing contract.
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Those figures are odd.
You reckon it would cost £837/mth to lease, yet if purchased would still be worth 50% of its original list (not discounted) price at 3 yrs? If the lease cost is right then I suggest the residual is waaaay out.
Have you had a PCP quote? That gives you the combination of lease / buying; the monthly cost should be in the same sort of ball-park as the lease cost, and you can buy at the GFV, or walk away of the car is worth less. If nothing else, the GFV quote will give you a fairly realistic idea of the car's value at 3yrs.
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Yes those were my thoughts.
The cost to lease is way too high if the car will be worth 50% of list price at three years old.
I have seen £40,000 cars on lease at £500pcm.
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The figures may appear 'odd' but they are correct. In fact since rechecking the relevant leasing company's website, their charges have INCREASED. The website is the only one that I could access whereby you can configure your chosen car with all of the extras that you require which considerably bumps up the overall leasing charge. You have to read very closely into the 'small print' to ascertain the true final cost
The overall charge for the 3 years leasing has risen from £30,128 to £30.458.91. A break down of the final figure consists of an initial rental charge (deposit) of £2404.66 followed by 35 monthly payments of £801.55.
The vehicle in which I am interested in my chosen spec has a list price of £40,888 but can be obtained for £37,775 from a broker. The leasing company do not provide a discount! As the car in queston has only been in production for less than 2 years I have had to estimate the depreciation after 3 years as being in the region of 50% which is on a par with similar prestige marques.
My calculations leave me in doubt that 'cash is still king' and private leasing is a very expensive way of running a moto car.
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I'm sure you are correct. I cannot make the figures look reasonable either, despite several friends going this route. I recently looked at it right at the very cheap end of the market and even then it was averaging around £150 a month over 3 years, with either nothing at the end of it or a "final payment". Far cheaper to go and buy nearly new in my opinion. Leasing appears to lock you into the period of maximum depreciation in the vehicle's life cycle, as far as I can see.
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Geordie1, all makes sense though the lease could be fully maintained, servicing, tyres etc included.
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The prices quoted in the leasing company to which I referred do NOT include any form of maintenance, servicing or replacement tyres or brake pads etc.
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Typo in my 2nd last line...should of course read 'no doubt'
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Typo in penultimate line of my post...should of course read 'no doubt'. (duplicate entry)
Edited by Geordie1 on 15/11/2009 at 11:22
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The website is the only one that I could access whereby you can configure your chosen car with all of the extras that you require which considerably bumps up the overall leasing charge.
Talk to them - or a dealer for the relevant manufacturer - to get a true price. Leasing deals are often heavily subsidised by manufacturers.
Loading it with options will massively bump up the cost as they tend to write the value off over the lease term. There's a good reason for that!
As the car in question has only been in production for less than 2 years I have had to estimate the depreciation after 3 years as being in the region of 50% which is on a par with similar prestige marques.
If the car's already available with £3K discount then that doesn't bode well for good residuals. Plus, you'll tend to lose pretty well the full value of the options come trade-in time. Take a prestige car without leather seats to a dealer and he'll suck through his teeth. If it's got leather he'll say it's not worth anything more as it's expected that the car would have it.
Edited by Bill Payer on 15/11/2009 at 11:29
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Bill Payer...
Just for completeness...there was a typo in my post at 17.17 on 14th November whereby the list price should have read £42,888 therefore the broker discount is in fact £5113. I do not think that such a discount is unusual on a £40k+ car and do not consider it will have any significant impact upon residuals. Also, my choice of options at list price are worth £2,388 and these have also been significantly discounted in the OTR broker price of £37,775.
Overall, in my personal circumstances, leasing is not a cost effective option.
If the car's already available with £3K discount then that doesn't bode well for good residuals. Plus you'll tend to lose pretty well the full value of the options come trade-in time.
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Overall in my personal circumstances leasing is not a cost effective option.
You've based that on a web leasing price which is probably far too high. For example, Mercedes web site is offering E350CDi at under £500/mth and with half the initial payment. OK, you have to add options and VAT but it's still a long way away from almost £900/mth.
You've also assumed a residual which is also probably far too high. You might think/hope that the car will be worth 50% of list at 3yrs old but a big factor will be how you try to realise that value. In a straight sale of the car (which is what happens when the lease company disposes of it) its value could be horrible. If you p/x then the value is distorted by the margin in the car that you'd be buying.
I wouldn't lease or PCP either, but my circumstances are uncertain and I wouldn't want to be stuck in a deal that was expensive to get out of. But I'm probably deluding myself - a distress sale of a presitige car could bring an horrendous price.
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In my experience it's specifying optional extras which rapidly bumps up the lease costs. My company scheme is very flexible with 2, 3 or 4 year terms. However optional extras are amortised over the term of the lease with the possible exceptions of auto and metallic and maybe leather. i.e. they are attributed no residual value and you pay for them in full. I suspect this is 'normal' practice?
I tend to opt for a 24 month term because I feel like I'm taxed on a new car so I'll have one, however it means I have to be careful in specifying options - satnav and xenons on a BMW are out of the question for me 'cos I don't want to pay for them.
Being reckless with the option list can quickly add £200-£300 to a monthly lease, I guess that's where manufacturers such as Honda and Subaru win by making everything standard but model specific ? e.g. you can't have satnav / rain sensing wipers or whatever else you want without leather etc...
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I'd agree, though I did wonder how much of the £40k 'list' price was for optional equipment. A lot of leasing companies attribute little or no residual valaue to options, so if the OP has selected a lot of optional equipment the monthly cost will be much higher that you'd expect...
Peter
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Yes Peter that was my thought after reading the OP's second post.
Its reason why I do not lease. The extra's I would want would make the car unaffordable as a lease. If you specced a Ford S-Max to the same level as my Outback, the cost would be well over £32,000 for a 4-cyl diesel, not a nice creamy 6-cyl petrol.
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Usually you pay a penalty on lease if you want to end the contract early.
After lease finishes, they will inspect the car with a magnifying glass and you will be charged for each scratch found.
Read the termination clause carefully.
Lease only makes sense if you want to hire an expensive car for few months [which buying outright would be too expensive] and then able to cancel the lease without paying hefty early cancellation fee.
For most folks, owning is better option than leasing.
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what car are you looking at Geordie....not at all relevant to the discussion, other than the fact it will satisfy my nosiness
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what car are you looking at Geordie....not at all relevant to the discussion other than the fact it will satisfy my nosiness
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Your favourite marque Westpig...in XF 3.0D S Premium Luxury guise
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www.dsgauto.com/
£500/mth.
Do you really need the 'Premium' + options ;-)
Edited by Lygonos on 15/11/2009 at 22:11
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www.dsgauto.com/ £500/mth. Do you really need the 'Premium' + options ;-)
Need?...no. Want?...Yes
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Ouch...looking at the PCP quotes on that DSG link it seems as if the predicted residual value of these is someway short of the OPs expectation of 50%...and that's before options!
Peter
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Being India's top premium car brand I'm sure Jaguar's will hold their prices well.......
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Being India's top premium car brand I'm sure Jaguar's will hold their prices well.......
I like Jag XF and will look at it when I change my Merc during 2010, but I think the Tata/India thing is a serious issue. Any uncertainty about Jag's future could absolutely murder residual values. Of all marques it really is one where the protection offered by lease or PCP has some significant value.
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Ouch...looking at the PCP quotes on that DSG link it seems as if the predicted residual value of these is someway short of the OPs expectation of 50%...and that's before options!
Referring to my OP in which I was 'contemplating' changing my car after 3 years and querying whether private leasing was cost effective...my conclusion is that I will not be involving myself in any form of leasing and may well stick with my tried and tested methodology of retaining my car over a number of years and selling on privately as a sought after one owner low mileage vehicle. Therefore, the aspect of residual value is now inconsequential to me.
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I'd agree if you plan on keeping the car the depreciation is not relevant, and a well specced car will always sell quicker (if not for more money...) than a basic one. In the quote above though I think it's the interest rate that's the killer.
IMO leasing works well if the car you want can be bought by the leasing company cheaper than privately and / or has manufacturer supported finance fees/residuals, all with the proviso that you'd only have kept the car 3 years whether leased or not. That's why some of the 'premium' brand end-of-year offers can look attractive
Peter
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Buying gives you the choice of what you do after 3 years without significant capital outlay.
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