car lease questons?

netgear11

This might not be the most suitable forum for this thread, so please move if it isn't!

I'm planning on leasing a car and wondered if you could could explain some stuff for me?

For example: http://www.ukvf.co.uk/OfferDetails.asp?OfferID=958 - what does the "3+23" mean? 3+23 what!?

also, what are the pitfalls I should be aware of and whatnot?

Thanks guys!

Malky

3 months up front then 23 payments........I think!

bumpoowee

Well just from personal experience, I've currently got a car on lease/PCP (9 months into a 24 month contract), apart from it being quite an expensive way to obtain a car, I've hit the following problems:

1. My partner got pregnant shortly after we'd taken the lease out and we now have a baby, which wasnt really in our plan - the car is 3 door which isn't ideal for fitting a baby seat in, and if we'd known we were having a baby we would have got a 5 door car.
2. My partner was assigned a company car shortly after we'd taken the lease out which is 5 door + more cost effective to drive hence we don't use the lease car very much any more!

So I guess the problem I had was that my personal circumstances changed which made leasing a car the wrong choice with hindsight. From what I understand of the contract, to just hand the lease car back means I would have to pay half the remaining payments back, so isn't really worth doing in case my personal circumstances change again!

Obviously my problems may not have potential to apply to your situation, but I'll leave that for you to decide.

Next time what I'm going to do is take out a loan, buy the car outright which should be cheaper + more flexible.

netgear11

Only problem with that is - i don't have excellent credit. Admittedly its not the worst, but its borderline poor and average. s just below midway point.. just..

so a loan will be hard to come by, right?

i thought that with such low monthly repayments (way lower tan loan int. rates...), hire lease or hire purchase would be a cheaper option...?

bumpoowee

Yeah fair enough if your credit rating isn't great you may have trouble getting a loan, depending on your circumstances etc.

The interest rate on my lease is 15% APR (or thereabouts), which is much higher than a loan which I probably could have got for 7.9-9.9%. Plus there was a £150 admin charge for using the dealers finance arangement.

When you say the lease has low interest rates are you sure you haven't been given a 'flat' interest rate as opposed to APR? My arrangement was sold as 6% (ish) interest rate, but this is a flat rate and equates to the 15% APR i mentioned.

On balance I think taking a bank loan is normally cheaper, but like you said you may struggle to get a decent interest rate or approved for a loan at all, so you might need to do your sums. Obviously it's cheapest to buy the car outright without taking out credit!

Certainly a lease makes getting a decent car more affordable on a monthly basis for many people, and if you can't waste your money what's the point in having it!

netgear11

bumpoowee wrote: »

Yeah fair enough if your credit rating isn't great you may have trouble getting a loan, depending on your circumstances etc.

The interest rate on my lease is 15% APR (or thereabouts), which is much higher than a loan which I probably could have got for 7.9-9.9%. Plus there was a £150 admin charge for using the dealers finance arangement.

When you say the lease has low interest rates are you sure you haven't been given a 'flat' interest rate as opposed to APR? My arrangement was sold as 6% (ish) interest rate, but this is a flat rate and equates to the 15% APR i mentioned.

On balance I think taking a bank loan is normally cheaper, but like you said you may struggle to get a decent interest rate or approved for a loan at all, so you might need to do your sums. Obviously it's cheapest to buy the car outright without taking out credit!

Certainly a lease makes getting a decent car more affordable on a monthly basis for many people, and if you can't waste your money what's the point in having it!

thanks for your reply bumpoowee.

I don't think i fully understand this leasing this.. Have a look at this Golf Scirocco here: http://www.ukvf.co.uk/OfferDetails.asp?OfferID=958.

It says £249.99 exc. VAT.What's the price inc. VAT and how is it calculated?

And where is this APR tax added that you speak of?

I just thought it was monthly payments, as advertised and when the times up, they relinquish the car or u renew.. ... would love it if you coul explain from ur experience..!

cirrus1007

PCP or personal contract purchase is a very popular way of financing a vehicle. It has many benefits over and above HP (hire purchase). Noteably, the agreement will have a balloon payment at the end which means that the monthly payments are much lower than they will be on straight finance (HP). There are many deals - 3 + 23, 3 + 33, 3 + 36 etc etc. If you can put a higher deposit doen (say 6 + 23) then the monthlies will reduce AND the finance company may look at you more favourably. As a private user your cost will be plus VAT, so £249 + VAT at 15% = £286.35. If you are a business then contract hire may be better as there are other tax breaks and the opportunity to reclaim the VAT. My advice - try and speak to an independant broker. I used to work in the industry and can put you in touch with a couple of reputable brokers if you need help.

netgear11

Hi cirrus,

Thanks for shedding light on that! So, there is "Personal Contract Purchase" AND "Personal Contract Hire", where the latter is pretty crap because you never do and never can own the car outright.

So, I'm interested in going down the PCP lease path - purely because the lower monthly repayments are lower than those of HP..., but still have a couple of questions:

1. what's the difference between "lease purchase" and "cash purchase"?

2. What does this mean, as found on one particular car leasing website: "Finance payments are not subject to VAT. If the optional service package is taken, VAT is payable on the service costs." ???

3. What is an independent broker in this sense and how can he/she help me? Scuse my ignorance!!

netgear11

ignore my first questions please lol.

cirrus1007

Ok Netgear11. Firstly, 1) Cash purchase is where you pay for the car outright - no finance needed. Very rare thing to do. Lease purchase is a preferred route for businesses so ignore this would be my advice. PCP is what you want.
2) Basically, the finance monthly payments are not subject to VAT. However, if you opt for the service package which covers the servicing of the car, tyres etc) then this proportion (say £40 a month for arguments sake) attracts VAT.
3) An independent broker is able to get you the best possible deal as they have arrangements in place with the manufacturers and due to the volume of units they shift, they pass these savings on to you. They organise the whole thing for you and take a comission (don't worry it isn't an extra but is included in the price you pay or is a kick back from the manufacturer / finance company).

Hope this helps. Try typing Tilsun vehicle rental into google - my old firm will be happy to help

netgear11

cirrus, you're a star, thanks so much!

seeing as you worked in the industry do you think I could also extract some extra tips from you? like exactly what questions to ask, in like a list format - all the things i need to ask and know... and also, what is there stance on bargaining, like, leather upgrades and what not

thanks again!