Is it worth leasing a car personally?

woodhouseian

Hi

Does anyone have any views on leasing a car personally, rather than buying one outright? Does this make financial sense?

I know companies have traditionally leased their cars but some of this is related to specific tax advantages which don't apply to individuals.

It just seems quite tempting to pay to 'rent' a car rather than buying, and wasting 20% of the value upfront.

Is the short answer that leasing is worthwhile, until you get to a certain age of car (eg 2 years), then it's better to buy one?

Thanks

LandyAndy

The answer is it depends on the car you have in mind and the amount of use you are going to put it to together with whether you are a private individual or self employed.

Give us a few more details and wait for AdrianHi to see your post and give you a few pointers.

woodhouseian

Ok thanks.

Budget of about £300 per month, would prefer a family car eg Honda Accord. Preferably a 3 year lease, about 10k to 12k miles per year. Private individual, basic rate taxpayer. Looking to minimise total cost of motoring ie including fuel, insurance, RFL etc

Alan_M_2

Leasing comes into it's own on vehicles that have high residual values. This then creates some anomalies particularly for higher priced desirable cars.

Fords and Vauxhalls etc deprecite at a higher rate so aren't so attractive.

Just do the maths.

I contract hire, but I'm a business that's VAT registered so it's completely different.

But I still weigh up the options.

Say a car is available on a deal of 3+35 for a 3 year lease at £300.

PCH (Personal Contract Hire)
Your deposit is £900
You then pay 35 x £300 = £10,500
Then hand the car back at three years.

Total cost of motoring for 36 months = £11,400 or £3800 per year.

Now look at the cost of buying outright and PCP deals.

Say this is a £16000 car.

You buy outright for £16000. If the car is worth more than £4,600 at three years then it's a better deal, if it's going to be worth less than PCH is a better deal. Do remembr to factor in finance and paperwork costs.

The answer is it changes from manufacturer to manufacturer and even from model to model.

I find I'm best being very flexible with the vehicle I want....I'll go to a dealer and ask them what they have available on offer or in stcok that they want a deal on......If you're going to buy from a brochure and tailor the car to you, you pay the money.

Also ask for pre registered or ex demo deals, these can offer substantial savings.

woodhouseian

Thanks for that.

Sorry I'm a bit lost about the £4600.Can you clarify it please?

Are we saying it's worth choosing to lease if the leasing company get the residual value wrong, eg they think it is say £4600 but it turns out to be £4400 because it's depreciated more than the company thought?

And if I choose a 'low depreciation' car eg a BMW, this is more likely to happen?

flyingscotno1

woodhouseian wrote: »

Thanks for that.

Sorry I'm a bit lost about the £4600.Can you clarify it please?

Are we saying it's worth choosing to lease if the leasing company get the residual value wrong, eg they think it is say £4600 but it turns out to be £4400 because it's depreciated more than the company thought?

And if I choose a 'low depreciation' car eg a BMW, this is more likely to happen?

Yep, he is saying that if you deduct the total leasing costs from the cars list price you get what the leaser expects the car to cost- £4600 in this case. Of course if the car retains 50% of it's value it is a poor deal as a £16,000 is now worth £8K, so you've lost roughly £3000 to the leasing company! Lower leasing prices appear on low depreciating cars like BMWs making it seem a good deal against a Mondeo but these are down largely to depreciation.

I looked at it a while back. If you do not care what car you get and are willing to go for the special offers section you can do alright, otherwise you need to do the math and work out your cost of finance and depreciation.

I've often found getting pre-reg or nearly new cars is a better solution, I did that, got £6K off, and even if I trade it in a couple of years, I would only loose about £4K.

Chippy_Minton_2

I know someone who took out a personal lease and I now facing redundancy. They have signed up to a three year deal and are therefore contracted to keep the vehicle. Make sure you consider job security or a get out clause should the worst happen.

woodhouseian

flyingscotno1 wrote: »

...if you deduct the total leasing costs from the cars list price you get what the leaser expects the car to cost- £4600 in this case. Of course if the car retains 50% of it's value it is a poor deal as a £16,000 is now worth £8K, so you've lost roughly £3000 to the leasing company! Lower leasing prices appear on low depreciating cars like BMWs making it seem a good deal against a Mondeo but these are down largely to depreciation.

Don't the leasing companies have access to all the same information about residual values as anyone else? In other words shouldn't their estimate of £4600 be accurate - or at least as accurate as I can predict? Isn't it very difficult to beat the leasing companies at their own game?

marmitedog

woodhouseian wrote: »

Don't the leasing companies have access to all the same information about residual values as anyone else? In other words shouldn't their estimate of £4600 be accurate - or at least as accurate as I can predict? Isn't it very difficult to beat the leasing companies at their own game?

True, the lease company I use tends to use CAP. However, this is only a guide and general market conditions can affect values. Also, predicting residuals of new models can be a black art.

Hintza

OP try searching fo lease or leasing on the forum and you will see what has been covered before.

Baically do the sums and go for the deal and NOT the car.

I have a funny feelng that leasing is not going to be as attractive as it used to be; I an't see as many deals around as there used to be in the last year or two.

Having said that the Volvo XC90 is cheap (but that is the type I would be looking for, for towing:))

AdrianHi

Most often its the less desirable heavier depreciating cars that are better value leased so long as the leasing company was able to get the big discount that lets them lease it for less - Ford, Vauxhall, Chrysler (;)) for example.
Subaru is an example of where it goes wrong both ways, heavy depreciation, nothing much in the way of discounts for leasing companies so silly high lease prices.
BMW, Audi etc. not too bad for leasing due to good residual value but each time I do the sums buying works out slightly better unless you need to borrow a lot or do a PCP to get it, then it's similar.

What you are comparing is the projected depreciation cost over the 36 months (or possibly 24 months) you will use the car + finance charges + tax disk cost (usually included in the lease cost) versus the sum total of the lease charges plus any admin fees. Don't forget to account for VAT in any lease prices you see as most are quoted ex VAT.
What Car has a "Lease this car" link on the details page for a specific car you look up, good prices there.

As said, finance charges are higher these days so it is harder than it was to make leasing better, still worth looking into though. Skoda Fabia was a good option for leasing 1 month ago when I looked.