Every time a thread starts on leasing I get ready to put this question but the thread gets closed before I get a chance.
I normally buy a car new or ex-demonstrator, keep it for 3 years and trade it in. Partly because thats the usual warranty expiry and partly due to me getting bored with cars.
My last Scenic was on a PCP and at the end of 3 years, I paid the final payment and traded it in for my Altea and I think I got, in effect, £1k for it. Current Altea is on 5 year loan, my theory being this was the car I was going to keep as it would last through the "ferrying the kids about stage".
I have looked at how much cars cost me over the years and know that I would be quite well off if I hadn't constantly changed cars. But its a cost I can afford and choose to do. I long to be one of these drivers who keeps their car for 10 years, runs it into the ground until it owes them nothing. But I think I would get bored too quickly!
Having said all that, I have looked at various leasing sites and see that I could pay roughly what I am currently paying just now and get a comparable car. But the car will never be mine. I know that is probably no different to always having a loan on it that is roughly the same as the value of the car! But to me its a huge pyschological barrier!
Maybe I have this theory that everytime I sell a car I would have a couple of grand in equity on it, and over time I would eventually be able to be loan free on a decent car. But thats not happened in 20 odd years of buying cars. Yes I know it could very easily be if I just kept my cars for a longer time, or went for much cheaper cars.
If I am resigning myself always to be paying a monthly car loan, then leasing is probably the way to go. But at some stage in my life, I will want a car thats mine and don't want to be starting from scratch with it. Is this where your pension lump sum comes in :)
So my question really is, of private buyers who have went down the leasing road, what was your thought process? Do you just treat it as another monthly cost , like utilities, community charge etc? Did you cost it versus loans / depreciation etc?
But can I stress, please no mention of companies, websites, suppliers names as I don't want this thread closed!! :)
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I think PCP is the best bet for your needs. It is what I intend to do if I get a brand new are. If it ends up being a little scruffy at the end of the term you can just pay the final payment and keep it without penalty.
I think leasing is more attractive to VAT registered businesses due to tax reasons than it is for private buyers.
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Rattle, PCP is expensive..
The 'final payment' is basically a chunk of cash that is not being repaid and you need to pay interest on for the entire period of the agreement, as opposed to HP where the capital amount reduces through the length of the loan.
It's basically a way of paying more interest to afford a car that you can't get on HP.
The main upside is the ability to walk away at the end of the agreement - in which cas you may as well have leased it.
Best to calculate cost both ways over the agreement period - remember, you can often buy your lease car if you really like it after the agreement ends.
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Because the car is so cheap in the first place (£5k) its not too bad but I agree it is an expensive way of doing it. If it was a Mondeo sized cars the sums would be pretty stupid and leasing may be better.
The deal I worked out was £120 a month over three years and then a final payment of £2400 so the total cost would be £6720 for a brand new car, althouh in three years time it may only be worth £3000. I intend to keep the car a long time though in one form or another (even if I end up selling it to my dad)
The problem is each time somebody applies for a loan it is recorded on the credit history and I think that applies for leasing too.
By far the easiest way of financing a car is to get a personal unsecured loan as the car is then yours from day one and you can trade it when ever, but the APR on this option tends to be quite high. A friend of mine stupidly agreed to buy a friends car off her (turned out to be a cracking car and she still has it) but nobody would give her a loan and she ended up paying 97% APR. In the end she got a cheaper loan at 22% APR and paid that one off.
I just don't like the idea of leasing as I will be too scared of damaging the car. Somebody who I can't mention the name off actually told me she would never let me lease a car off her mainly because of my reputation with cars!
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Leasing is like renting a house.
Hire Purchase/PCP is like mortgaging one.
At first glance outright purchase looks like the best idea, BUT....
purchase = potential albatross round your neck if you want to change at some point.
Many will look at leasing and say "That's dead money, you pay and pay and get nothing at the end" as they do with renting property.
The problem with this is much of the money you pay on HP/PCP is interest and is just as dead, while the money you pay to actually pay the cost of the car is going towards an increasingly worthless item.
They are really just 2 ways to pay the depreciation cost of a vehicle - it is probably best to lease a car where you intend to change every 2-3 years as you are not being exposed to market variations, especially if you can be flexible with colour/exact model to take advantage of particularly good deals.
If you intend to keep a car for 10yrs then it is best to buy it and pay as little interest as possible.
I have personally never leased a vehicle, but I have friends who have and it works for them - it's simply another monthly bill for the use of a car. There is often a possibility if you like a leased car that much that you can buy it at the end of the lease as this saves the leasing company having to dispose of it.
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Agree completely, Lygonos. But flexibility to allow for changing circumstances is important. So may I add two caveats?
If you lease, look for an agreement whereby you can opt out of the lease at no, or minimum cost.
If you buy-to-keep, choose a car that will still have some resale value if you need to change. Picking random examples, a Kia Magentis might cost less than a Vauxhaul Vectra new, but you're more likely to sell the Vectra at 5 years old. Likewise, a ten year old Vectra saloon isn't going to be in much demand, but you're more likely to get a buyer for its equivalent estate. Going back to Kia, by the same logic a diesel Rio bought at the same price as a petrol one is the better bet for potential resale.
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So my question really is of private buyers who have went down the leasing road what was your thought process? Do you just treat it as another monthly cost like utilities community charge etc? Did you cost it versus loans / depreciation etc?
We leased a car for my wife.
As we are in a foreign country I wanted something reliable and, due to low depreciation, the difference between a used car of up to three years old and brand, spanking new is negligable.
It's easy in my wifes case because her mileage is fairly constant, guessing a mileage over time is easy.
What puts me off in the UK is the high monthly costs due mainly to the high depreciation but you have that whichever option you go for.
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NB: I've used the dollar sign as the pound sign caused weirdness... but all prices in pounds.
I?m probably a good example of someone who has run value used cars most of my life but have now seen how contract hire is a real alternative for the private person. Rather than go from a $1500 9yr old car to a $6000+ 3yr old car I went to a $23000 new car on contract.
At whatever price level we?d have bought it would have been with savings not finance.
The more we thought about it the more we liked the idea of keeping savings in the bank however a new car appealed because?.
I?m aware of the changing face of running cars these days. Modest cars are quite complex and even previously reliable makes can throw up the odd (or several) $1000+ shocks now and again so running a car constantly under warranty appealed. It?s also a factor that the most average cars come on expensive tyres and the thought of starting off with a fresh set appealed. But anything new we liked was $15K+.
Taking the contract way on the ($23K retail) car I ended up with my first months deposit payment was $870 (a 3 + 35 payment contract)... which after selling my old car & paying the deposit left me enough for the first years comp insurance plus the second months payment. The 35 payments are $290/mth totalling $10,150. I pay for my servicing but the VED is included and car is under warranty the whole time.
The Hire Purchase comparison to keep the monthly payments within an acceptable range plus not put down a huge deposit would need it to be over 60mths.
This would involve a $4000 deposit so for a start after selling my own car I'd need to chip in almost $3000 from savings on day one to include insurance. Payments would be $323/mth so I'd be down another $1188 over the first three years compared with my contract. And I'd have to pay my own VED so add a further $360 over 3yrs.
So after the three years the hire purchase car would already have cost me $4678 more. For that I would have the dubious pleasure of owning a complex car out of warranty still with 24 payments to go at a further $7752! Decided I'd rather save the $4678 over 3yr contract period and have the freedom to go off and do whatever I fancied next.
The daft thing is my car is currently losing $10K from retail in the first 12/18mths depreciation. That is about the same as the total of three years payments so for me it was a no-brainer? as they say.
You need to watch the contract hire websites very carefully and pounce when you see a good deal. Some show different deals from different suppliers and these can change daily. The monthly cost of my car has risen 10%+ (over and above the vat rate rise) from when I signed the agreement in Dec?09 to now so I?m pretty happy I got a good deal.
As a matter of comparison my cousin does the complete opposite and uses savings to buy a new car and keep it ten years. They buy sensible mid range cars and have little repair expenditure so overall theirs works out cheaper?. but at the expense of risking that big bill and of course running a well used older model for 50% of the time.
It is my impression that on smaller slower depreciating cars the savings are not so great but the fuss free aspect still appeals. A new Panda for $450 down and $146 a month seems cheap motoring to me.
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I think its fair to see that that logic applies more for more expensive cars like yours as the cost of finance is far higher which ever way you look at it.
Normaly I would never dream of buying a brand new car but I can easily afford the Panda on PCP and it just makes sense.
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Why does the £ sign on my keyboard not display properly in this forum when other have no issues?
Edit: Ahh I can it's just in preview it looks weird but OK on the post.
Edited by M.M on 17/02/2010 at 15:35
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Edit: Ahh I can it's just in preview it looks weird but OK on the post.
Yes I've noticed that - I assumed because I use linux. Do you?
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No just normal Vista/IE.
Rattel I can see the prices you give for finance on a Panda are very close to contact hire.... and I guess most small cars these days will be an easy sale at 3yrs old if you want to move them on so the comparison is far far closer than with my main car example I gave.
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I will say that apart from one of the most sensible arguments I have seen, from MM and others, it depends what you are doing with your life, too.
Many (majority) lease customers I see are very high credit scoring individuals with good net worth, owned (detached) house, savings, self-employed or senior level job and often (while wanting a nice quality new car) treat it as a consumer good.
The car is not the be all and end all of their life, they are focussed on other goals.
Whereas, - without over generalising or being offensive - many lower-demographic individuals seem to have the car as a far higher priority in life.
A car to many people is simply a tool, like any other that does a job. It is not all price (although everyone wants a good deal), much of this revolves around reliability, worry-free, warranty, convenience, easy choice and seamless replacement with no haggling/part exchanging or ownership paperwork hassles (eg retaxing).
If a completely hassle free car supply means you can be more efficient at your work, many people can generate far more from that than any quibbling over a few pounds here and there.
For instance, a bank chairman or senior RAF officer may not want to devote much time to organising, buying and selling and financing a car. They may need a car for an employee, nanny or simply transport for the kids. They still need a car, and may want a nice one, but choosing from a list and saying "I'll have one of those in 4 weeks at that fixed monthly price" and signing some documents and arranging someone at their work to take delivery is... about as difficult as arranging a Daily Telegraph subscription! Often, the most onerous decision some people want is to choose a colour.
Not everything boils down to the last penny based on your negotiating skills, the fluctuating market and the minute examination of a car's performance/feature benefit, and the assumption that you are a better negotiator than a motor trader.
L**g
Edited by Lingscars on 17/02/2010 at 15:57
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I think you are right. Although many of my very wealthy customers just drive in Volvos worth peanuts, it is why they are so rich!!
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I had a Saab on a PCP for three years which I sent back as the balloon was more than the car was worth at the end. I chose the wrong brand to avoid depreciation be fair, but I am fairly certain I would have been better off leasing this car and then there is the opportunity cost of the deposit.
I replaced this with an Audi on a PCP but after 6 months we bought an i10 and we decided that two news cars in the family when one was sitting in the garage (as I train to work) was wasteful. It cost me the same as it would have leasing the car for 6 months.
I bought an old car outright to replace the Audi, but I have owned 16 cars in 19 years (most jalopies though) but next time I need a decent car it makes a lot of sense to lease one.
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It's interesting to hear people argue for the lease. It's a similar logic to why I stick with a company vehicle. Except mine is truly fixed cost apart from fuel and that's sort of fixed. I could take the cash and get my own.
I suppose I have the advantage if I did of using to buy an asset and depreciation is not an issue though.
Calculations will be done again for next year when I replace the car. Although and Audi A5 Sportback would be a nice car as a company vehicle.
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It's interesting to hear people argue for the lease.
Leasing only works for us as I said above because of my wifes fixed mileage motoring.
It never works for me as I would either end up massively over paying upfront or underpaying and ending up with a big final bill to hand back.
My annual mileage can be anything between a couple of thousand and fifty thousand.
You can't budget for that on lease as an individual.
Edited by gmac on 17/02/2010 at 18:01
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gmac another reason why I stick to the company car. One year (or a few years) I could be on a project close to home. Another I could be doing over 2000 business miles a month. A colleague went for a PCP and had to buy the car because the excess charge was very high. He probably still has it.
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I think I agree with everyone more or less (a first).
Look: with 1.8m new cars predicted to be sold in the UK for 2010, there is plenty of pie to share. Actually, there is now more than there was last year in my business area, as so many big and small firms have ceased trading. Like Jam Jar, etc.
Interesting thing, there are a range of sectors many do not consider - this forum is quite narrow really. I do tons of armed forces business (I sponsored the British Tommy Liberation Army, and I am well known to them, I love them despite they are often mentally flawed), loads of policemen - seem to have had a batch of chief constables - too. Did you know they can use false names, aliases, for credit apps? Interesting.
People's circumstances are constantly changing, so really, it does not matter what any of us (including me) think. With such a massive market, the law of averages will win, surely. Unless there is a massive taxation/culture change.
L**g
Edited by rtj70 on 17/02/2010 at 18:51
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Thanks for all the constructive thoughts and replies . Lygonos, I liked your comparisons but the difference to a mortgage is that we hope that our house will increase in value.
I suppose the lease, as mentioned by Rob, is very like company car except we need to foot the servicing bills.
If I was starting from scratch with no trade in, I think it would be something I would seriously consider. The mileage is a big issue, many quotes are based on 10k per annum which I believe is too low for many owners. In fact , in my paper at the weekend there was a garage advertising a finance deal on a BMW, looked like a PCP, but it was based on 5k miles per annum!!
When I took out my PCP on the Scenic, I did it with the thought that after 3 years, if I didn't want it I could hand back and take out a loan for another car. If I did want to keep it, then I take out a loan for it and keep it. As it turned out, I got rid and that is where I probably failed as the depreciation would have been levelling out at that point and I would now be sitting with a car , loan free, worth about £3k or so.
When I got the Altea, it was brand new and for the same money I could have got a 1 year old CRV diesel with 10k miles. Looking at the prices now, I think they are both worth about the same when you see used examples advertised. So both would in effect have cost the same to own, it may be argued that CRV residuals over the next year or two may be stronger than the Altea.
I think what I am saying is that on a personal loan, which mine is, what I am paying in monthly costs is probably just covering the depreciation and the loan element. Car is roughly worth what is outstanding so after 3 years I am in no better position than in a lease.
Lots of things to consider and ponder on......
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Lots of things to consider and ponder on......
There's always money laundering, i hear you can get a Rolls Royce if you launder for the right gang in Coatbridge :-P
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It is one way of thinking about that Panda it will cost £4320 in three years and then I have a £2400 baloon payment so it is a hell of a lot of money. However if I keep the car for ten years it is well worth it. I think you have to factor in the meaintance costs too and that is the only reason for going new as I do so low milleage anyway it should only cost me servicing in the first three years.
I could have a brand new car for very little more than what it is costing me to keep a ten year old one. If I did a lot higher milleage then a second hand Mondeo would be a much much better option.
As I said above for low milleage personal uses who only want a small cheap car leasing dosn't really make any sense but if you want a bigger car then it really does. It is what ever is easier for for the person too. The worst thing a person can do is get a loan for a £20k Kia Mengantis only to find after three years its not even worth £5k.
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Craig, don't answer with a name but do you know which garage that was in?. Yes or No
Edited by BobbyG on 17/02/2010 at 21:01
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No.
It's all just rumours & speculation i've heard.
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I (being an ex-Coatbridge lad) have also heard these rumours...
Nice to see Ling contribute btw. I like Ling! Ling, I like you!
tt
Edited by theterranaut on 17/02/2010 at 22:09
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BobbyG re the mileage on contract hire.
My lease co publishes prices for 10k/15k/20k mls on most cars. It all depends on the car but as an example a C5 HDi is currently just £5 a month more to up to 15K and just £11 more to double the mileage to 20k.... enough for most private folks and not a significant cost. (That's £11 more than the 10K price not £5 + £11)
Also for the life of the lease you have your own private secure area on the website where you can input your current mileage at any time to see a projection graph to the end of the lease.
Edited by M.M on 17/02/2010 at 23:09
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MM, thats interesting, so only about £400 extra over the 3 years for 20k miles, although I would guess with yours being diesel then that may be slightly cheaper than norm.
Not as bad as I thought it might be.
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It does seem to be a lot cheaper to up the mileage on certain models.... diesels and larger cars I guess. As a percentage of monthly cost small budget cars are more costly to take on a 15/20K agreement.
I think the contract hire pricing has a great deal to do with the price at which the car supplier/maker will sell to the contract hire finance company. Mine was supplied by a Citroen dealer 130mls away and is actually contracted through Citreon's own finance... and that is who the payments go to despite the deal being via a website contract hire broker.
Had I gone to my local Citroen dealer to arrange contract hire in person the monthly cost was huge.
Edited by M.M on 17/02/2010 at 23:33
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Bear in mind when you return a leased car there can be very significant end-of-lease charges for any damage, kerbed wheels etc - these often result in argument and upset.
A poster on here reported getting a bill for £1700 on a VW Polo he returned despite spending money on it beforehand to restore to A1 condition.
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It's a fair point to mention Bill Payer but the poster you refer to only visited here once to grumble about two VW related issues and never returned. It did also sound like his daughter had knocked the Polo about. Poster said it had only done 9000mls in 2 yrs yet it had dents in doors, scuffed bumpers, damaged wheeltrims and tyres at the legal limit. The poster said he paid £1500+ himself to get it in a decent condition to hand back to avoid the lease people charging £1700. That must have been one abused car or the validity of the story is in doubt.
My contract clearly states all the conditions expected for paint/body, interior, alloys, tyres, glass etc in such detail there can be little room for argument. They allow quite a degree of normal wear and tear... more than I'd expected. The 9yr old Mondeo I've just sold for £1500 would have passed their end of lease requirements!
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