Off Topic Leasing v Buying a car

[JakartaToon]

I'll have to have a look. Only briefly looked at it last night and ones I was looking at seemed like could do a 24 month contract, pay a 'deposit' first month of 3x normal monthly payment then followed by 23 monthly payments.

At the end of 2 years could either pay a fee to own it or just walk away and go get another contract...

I'll have to look at different options of there are different ways of doing it then

First time ive ever looked into it so not really up on all the differences Or ways it can work

That's exactly what we did. We are not in the UK all the time so were able to agree to a 12K annual mileage. You are essentially paying an initial payment, we then took the lease for 3 years so paid 36 payments, which accounted for depreciation over 3 years plus interest on the car value - (depreciated value + DP) and then had the option to pay a fixed sum (i.e. the depreciated value) at the end of the 3 years or walk away. We chose to walk away as we felt the depreciated value was a bit high. When we gave it back we repaired a few small chips from stones off the road but the guy who picked it up hardly looked at it. Great deal if you don't want to stick a lot of money into a car and as Tobes says why would you - its a functional thing not designed to appreciate in value.

 

[BobbyD]

Not just that, with a lease car don't though normally come with the road tax, no need to service and MOT as they are brand new cars and you are all forgetting the time value of money. you are paying 300 pounds per month (or whatever it is) including 300 pounds in the future. 300 pounds in the future is worth less than 300 pounds per day.

 

[InBiscanWeTrust]

Not just that, with a lease car don't though normally come with the road tax, no need to service and MOT as they are brand new cars and you are all forgetting the time value of money. you are paying 300 pounds per month (or whatever it is) including 300 pounds in the future. 300 pounds in the future is worth less than 300 pounds per day.

Yeah road tax comes with it and you can pay additional to include maintenance although that's optional. No MoT as its new and yeah I'm guessing it doesn't take inflation into account (even though aren't we technically in deflection atm?)

 

[johnsonsbaby]

Other than traditional HP where the car is yours after all payments have been made, there's 2 types of paying to lease a car PCP [personal contract purchase] and PCH [personal contract hire]. PCP gives you the option to buy the car at the end of the 3 year leasing deal, PCH doesn't. Unless you're looking to possibly own the car at the end of the lease deal, then PCH is probably the one for you to go for. With PCH you're just 'renting' the car with no option to buy.

I think leasing versus buying has become more of a personal thing than a money thing. Down to what type of car you want to drive rather than what you can afford to buy. With leasing it will never be your car and if you aren't bothered about what's essentially renting and minding a car versus owning it and knowing it's yours - then lease is the option for you.

I never felt comfortable in a leased car constantly worried it would get damaged [and both cars I did lease got keyed!] - the excess mileage worry and knowing after paying out about £12k both times - the cars went back and I had no car at the end of it [long stories .....]

Best advice I could give would be give it a go, especially if it means having a car you couldn't otherwise afford. You aren't even tied in for the 3 years, you can give the car back if you change your mind as long as you've paid 50% of the value.

 

[BobbyD]

Yeah road tax comes with it and you can pay additional to include maintenance although that's optional. No MoT as its new and yeah I'm guessing it doesn't take inflation into account (even though aren't we technically in deflection atm?)

Its not about the inflation, its about the fact you could do something else with your money. At the very least you could chuck it into an interest savings account for a pittance of 1.5% and you could be earning money on it rather than handing it over to the car company who will do the same

 

[moreinjuredthanowen]

this is all about not sinking capital into an asset really.

companies do this with everything.

anyway.... there's swings and roundabouts i everything so i'd say ask whats your top 3 priorities?

1. have a new car?

2. lowest tax?

3 best fuel economy?

etc etc

People are doing this with phones and alp tops and such now as well.

it really comes down to this i suppose. if you are no matter waht going to changing in 2/3 years why pay for depreciation.

 

[moreinjuredthanowen]

Its not about the inflation, its about the fact you could do something else with your money. At the very least you could chuck it into an interest savings account for a pittance of 1.5% and you could be earning money on it rather than handing it over to the car company who will do the same

its certainly a good point.... but over 3 years? for an individual inflation is still important but you'll only really notice when you are talking houses as an individual over last 10/20 years no?

opportunity cost o nthe other hand is a separate discussion no? you are saying if you inves tit in whatever way you choose to maximise return it makes sense

ergo if you lease the car and pay less now then invest what you would have to buy the thing outright you get a return... am i right?

 

[HugoEkitikeN01]

Not cars alone some companies also lease furniture and office equipment. Maintaining them is not their problem but that of suppliers...these can be classified as tax avoidance.

 

[Super G Ted'inho]

Better off buying a old banger that has as near to 12 months MOT as possible and running it into the ground. Cheapest option when you consider lease charges or depreciation costs.

 

[BobbyD]

its certainly a good point.... but over 3 years? for an individual inflation is still important but you'll only really notice when you are talking houses as an individual over last 10/20 years no?

opportunity cost o nthe other hand is a separate discussion no? you are saying if you inves tit in whatever way you choose to maximise return it makes sense

ergo if you lease the car and pay less now then invest what you would have to buy the thing outright you get a return... am i right?

Correctamundo.

Anyway its only a negligible effect. The biggest savings as mentioned is so that you could have a nice car and not worry about having to repair it ten years down the line. You also save on your MOT (100 quid a year?) and your Road Tax (100 odd quid a year?) for roughly 5 grand for the 2/3 years. over 8/12 years thats around 20 grand which is what you'll have to pay for a nice car anyway.

P.s. i haven't actually leased a car (i dont currently driving living in southern softy london land) but my brother keeps banging on about it and it does make sense

 

[Tobes]

its certainly a good point.... but over 3 years? for an individual inflation is still important but you'll only really notice when you are talking houses as an individual over last 10/20 years no?

opportunity cost o nthe other hand is a separate discussion no? you are saying if you inves tit in whatever way you choose to maximise return it makes sense

ergo if you lease the car and pay less now then invest what you would have to buy the thing outright you get a return... am i right?

Yes.

Using housing stock as an example, put the £25k down as a deposit on a buy to let, and you've got an asset that will appreciate in value at maybe 5% per annum.

 

[johnsonsbaby]

its certainly a good point.... but over 3 years? for an individual inflation is still important but you'll only really notice when you are talking houses as an individual over last 10/20 years no?

opportunity cost o nthe other hand is a separate discussion no? you are saying if you inves tit in whatever way you choose to maximise return it makes sense

ergo if you lease the car and pay less now then invest what you would have to buy the thing outright you get a return... am i right?

I think you said earlier it's swings and roundabouts. If you get on the lease roundabout you get used to always having a new car, monthly payments you can afford, otherwise why are you making them. The problem occurs if you get off the roundabout, like my experience, paying out essentially about £24k in lease payments which had to end [not getting into why] and now I have neither of those cars. Just imagine what kind of car I would still own having paid out that amount of money!

 

[InBiscanWeTrust]

Better off buying a old banger that has as near to 12 months MOT as possible and running it into the ground. Cheapest option when you consider lease charges or depreciation costs.

No chance I'd buy an old banger when I do 60 miles a day

 

[johnsonsbaby]

Correctamundo.

Anyway its only a negligible effect. The biggest savings as mentioned is so that you could have a nice car and not worry about having to repair it ten years down the line. You also save on your MOT (100 quid a year?) and your Road Tax (100 odd quid a year?) for roughly 5 grand for the 2/3 years. over 8/12 years thats around 20 grand which is what you'll have to pay for a nice car anyway.

P.s. i haven't actually leased a car (i dont currently driving living in southern softy london land) but my brother keeps banging on about it and it does make sense

That's the biggest draw back imo. Because at the end of that time having paid out all that money, you own nothing. You have nothing to show for all that money spent - but can look back on the nice cars you drove, once .....

 

[Tobes]

I think you said earlier it's swings and roundabouts. If you get on the lease roundabout you get used to always having a new car, monthly payments you can afford, otherwise why are you making them. The problem occurs if you get off the roundabout, like my experience, paying out essentially about £24k in lease payments which had to end [not getting into why] and now I have neither of those cars. Just imagine what kind of car I would still own having paid out that amount of money!

If you bought a £24k car today for cash, then 6 years down the line (2x 3 year lease equivalents) you'd have a 6 year old car, that you'd be lucky if it was worth £6k and you'd have had 3 years of maintaining it out of warranty to come off that value, before you even factor in what you could have earned of that capital in 6 years.

 

[InBiscanWeTrust]

I think you said earlier it's swings and roundabouts. If you get on the lease roundabout you get used to always having a new car, monthly payments you can afford, otherwise why are you making them. The problem occurs if you get off the roundabout, like my experience, paying out essentially about £24k in lease payments which had to end [not getting into why] and now I have neither of those cars. Just imagine what kind of car I would still own having paid out that amount of money!

True, but then think of the mot, servicing, tax costs you'd also have to pay over those 10 years as well as any replacement for tyres or scratches etc...

 

[Super G Ted'inho]

No chance I'd buy an old banger when I do 60 miles a day

I wasn't being serious, I was taking the piss out of the financial focus

 

[InBiscanWeTrust]

I'm not a massive petrol head and not overly fussed about getting 'nice cars'. I just want something bit more power and that'll lasts me doing 60 miles every day for work on a motor way.

I spent 6k on my car nearly 5 years ago and it's now worth 1500 at px value (2k private) so lost 4k on it in that time as well as having to spend on 4 new tryes and 3 mots and services.

Ive ways thought I'd prefer to 'own'y car, but why? End of the day, as long as can always lease then still probably spending same amount of money over 6 years than I would do by buying a card and then running it myself... Just worth a new car you have better chance of it not falling apart on you than you do with a 2nd hand car that's 4/5 years old

 

[johnsonsbaby]

True, but then think of the mot, servicing, tax costs you'd also have to pay over those 10 years as well as any replacement for tyres or scratches etc...

Unless you take out a maintenance agreement you have to pay for a service on a leased car. Mine cost £500 a go as well. MOT costs what about £40 once a year, if you look after your car there's no reason it shouldn't pass every year. You also have to pay for all damage on a leased car unless you want to take a chance that the excess they charge you for a small scratch will be equal to, or less than a garage repair - without the hassle.

 

[InBiscanWeTrust]

Good to get everyone's opinions though... Def have to look into the different options that Tobes and JB have mentioned.