Very confused..to buy or to lease car?

BungleGirl

I don't know if anyone can help me understand how best to compare the cost of leasing vs. buying a car. My husband now needs a good car to use for business (self employed) as he will be doing around 40k miles per year :eek:

He wants a Citroen C5 Tourer VTR 2.0 diesel. I have today phoned our local dealer for cash and finance prices on buying a brand new one and also the same but for an '08 ex-demonstrator. I have asked for the cash price on both so that I can look into whether a loan could be cheaper than the finance options.

I am also trying to get prices for leasing but the problem seems to be that once you have gone from the standat 10K pa miles to 40k pa the price sky rockets - I assume that any finance deals from the dealer would have limited mileage so we would have the same problem there.

I am thinking that the best thing to do is to work out the total cost of each option and then deduct the likely value of the car at the end of the term (in the case of buying) to work out the best deal?

I'm so confused . Are there any other ways of financing it that I should look into?

Any help, tips etc. would be very much appreciated.

Sophie (who having decided to stop driving and get a bike instead to simplify her life, is now unable to think about anything other than bloomin' cars! Bloomin' husband!)

Hintza

Yes basically you are correct 40k miles will almost certainly mean buying is the only real option.

Get a spread sheet set up and put in all the costs over the period of time you intend to keep the vehicle and do the same for a lease.

Adrian Hi is good on this stuff but I'm sure he would suggest either the demonstrator or one about a year old that has taken the big hit in depreciation. Having said that the way the market it is some new cars might just about work out cheaper so keep all options open.

BungleGirl

Thank you Hintza - at least i am know that I am on the right track!

I know that the ex-demo is being advertised on their website at £13,995 and as an ex-demo won't have too many miles on the clock. I'm sure that the price is negotiable.

The starting price for a new one same spec is about £19,000 plus we would get £3000 scrappage as Citroen give £2k themselves plus the £1k from the government which would take it down to £16,000.

If the difference between the two is £2,000, the only benefit of the brand new one as far as I can tell is that we would have the full manufacturers warranty as the ex-demo is about a year old I think (08 plate), and my husband could choose colour etc.

The dealership is quite big and has several branches so it may be that they have a brand new pre-registered car that they are keen to shift which might bring the price down a bit, although I don't know if they can do the scrappage on a pre-registered car.

Has anyone had much success getting the scrappage and still managing to get the price down in addition to that?

The dealer is due to call me back early afternoon with some options so things should be a bit clearer then.

Hintza

Citroen C5 Tourer 2.0HDi 16V VTR+ 5dr £14,817 Saving £5,013 with drivethedeal last week. If you go with scrappage I think you might get another £1k off that price (but don't quote me on that) but don't expect to get £2k scrappage off that price as it is already heavily discounted. It might in fact be better to trade in or sell privately your old car.

http://www.honestjohn.co.uk/best_deals/item.htm?id=3858

Armengar

I dont think drivethedeal or dealdrivers partners will take scrappage on citroens - they werent 2 weeks ago but things change. Finance deals are dependant on many things. I got my new SMax on ford acquire, basically a loan so the mileage is irrelevent. Dont forget that the manufacturers warranty has a mileage stipulation in most cases citroen are 2 year unlimited I think not sure what the 3rd year is.

Hintza

Armengar wrote: »

I dont think drivethedeal or dealdrivers partners will take scrappage on citroens - they werent 2 weeks ago but things change.

I did wonder that but do thy not put you in touch with a main dealer? That is why I was suggesting you might only get the £1k that is the govenment portion at best.

Lemonade_Pockets

40k a year is going to make it expensive which ever way you look it however:


Contract Hire (sometimes called leasing): You effectively rent the car from the finance company for an agreed period with an agreed maximum mileage. If you go over this you will get stung for a excess mileage charge when you hand the car back. However you don't need to worry about depreciation. Maintenance can be included in the monthly figure - but it doesn't often work out cheaper than paying it yourself as and when.

PCP: Like contract hire but you have the option to buy the vehicle at the end, part exchange and keep any profit, or hand the car back - excess mileafe charge may apply. Mileage will be pre-agreed. Car is owned by the finance company unless you pay the Gaurenteed future value.

With these two options the reason the monthly figure goes through the roof when you put in 40k p.a. vs 10k. Is because effectively your monthly payments are covering the cost of the depreciation. A car thats had 30k miles added in three years is going to have depreciated less than a car thats had 120k added.

Hire Purchase: The most conventional way of buying a car. Basically you take a loan out, when you've paid the last payment you own the car. If you plan to change the car before you finnish paying for the loan you need to make sure that the car hasn't depreciated faster than you've been paying it off.

Lease Purchase: Like hire purchase, but there is a balloon payment. So 5yr loan becomes a 4yr loan with a baloon. This is usually based around a expected value of your car. So the baloon will be roughly what the car is expected to be worth. However this is not garaunteed.

To answer your question monthly payment wise HP may seem the most manageable but you need to factor in the costs when you come to change the car. E.g. In three years time you might have £5k owning on a loan but the car is only worth £3k.

With regards the scrappage as a general rule take the lowest price advertised and you should be able to get a additional £1k knocked off for your part exchange.

But if you looking at a citroen unless there are some storming deals on i'd look at a 1yr old one as they depreciate heavily - as a high mileage user if you can get someone else to bear the brunt of the depreciation happy days.

I know i haven't been very definative but its hard to say. As hintza said get a spread sheet set up and cost out each option. You may also want to consider VAT implications if you Husband is going to be VAT registered. This can make CH effective for instance.
A more general note if he is starting out by himself, i'd maybe think about staying away from personal loans. You may find you need this line of funding for the business later. Many good business go under because of cash flow problems so if your starting out i wouldn't be limiting my cash flow options

Armengar

They do but some dealers act as "box shifters" they dont want the hassle of dealing with scrappage cars. Some do deal with scrappage (their chelsmford Ford do *but* you obviously need to get your car to them....) dealdrivers clearly state the options (such as ford require you to pay them 275+vat to get 2000 back etc)

edit: intended reply to hintza