Leasing vs Buying

RedLichtie_2

Hullo!

I am looking into buying a new car and have seen some car leasing deals that appear to be quite attractive. I'm always sceptical of these types of things as the leasing co act as a middle-man and will be making money somewhere. Is car leasing ever a good idea?

For example, if I lease a car for 3 years it will cost me around @287pcm (3+35months)*£287= ~£11,100.

If I buy, it would cost me around £620 pcm (assuming a car is £20k and loan rate of 8.9% APR over 36 months).

Now I realise I would own the car at the end of the personal loan deal, but then again I would have another £300 in my pocket every month with the lease deal, which I would prefer. I realise I am not factoring in the resale value of the car after 3 years - in this case, would taking out a longer term loan that allows for quicker lump sum repayments be wise (i.e. idea of paying a lower rate month to month, then paying off the entire loan when I sell)?

What happens with a lease if I need to cancel the lease before 3 years (e.g. offered a car at work, lose job, break legs etc etc)?

Many thanks in advance!

Kilty_2

RedLichtie wrote: »

would taking out a longer term loan that allows for quicker lump sum repayments be wise (i.e. idea of paying a lower rate month to month, then paying off the entire loan when I sell)?

This is the only one of your questions I really know anything about so I'll respond to it

Since cars lose a large amount of their value in their first 3 years if you take out for example a 5 year loan and sell the car after 2-3 years then you might find you still owe more than the value of the car!

Wouldn't recommend long term loans to keep payments down if you want to be changing car a lot.

RedLichtie_2

Kilty wrote: »

Since cars lose a large amount of their value in their first 3 years if you take out for example a 5 year loan and sell the car after 2-3 years then you might find you still owe more than the value of the car!

Yep, I was thinking of that actually. I guess a potential solution would be to buy used, although annoyingly the car I'm interested in just brought out a new model and the other I could be interested in isn't available until spring! I never thought I'd ever buy new given the immediate depreciation, but the new models may sway me. Boo!

Edit... I guess this depreciation pushes the thinking even more in favour of the lease. :-o

adsk

There are several things to consider.

1. You are commited to the lease for 3 years - so if you become unemployed you will have to keep paying. The same would apply to a loan unless you took out loan insureance or if selling the car would pay off the loan oustanding (depreciation could cause a problem here.

2. Be flexible - you can get a good deal if you are not too fussy about make/model. For a variety of reasons manufacurers want to shift cars and often use leasing as a way to put them on the market.

3. If you get a good offer (as in 2) you can end up with a very good deal. The cost over 3 years of the car I'm leasing is less than the depreciation over this time which makes it a good deal.

If you are worried about saving money or unemployement don't buy a new car - lease, loan etc it doesn't matter - buying a new car is very expensive. Get a 12 months old car with 2 years warranty left and make a big saving. If you are not worried about warranties get a 3 year old car that someone else has had on a lease!

AdrianHi

Good advice above RE: leasing. For the right car leasign can be cheaper.
If you wanted to go the loan route with the flexibility of selling the car before 3 years is up but not having to pay the whole value of the car over 3 years a PCP (personal contract plan) is a popular way to do it.
You pay a deposit, often trade in of current car, you pay interest charges on the whole value of the new car in addition to capital repayments equal to depreciation plus some extra to ensure your not in negative equity at the end of 3 years. Lower monthly payments simialr to leasing.
PCP is not neccessarily cheaper than leasing, depends on the car and the deal.

Another option is to buy something like a Mondeo that looses lots of value in the first few months and then relatively little for the remainder of it's 36 month warranty - equivalent to around £1500 a year for a 2.0 litre.

Mini_Bear

I recently did what the above poster said and bought a 3 year old car someone else had leased. i got a brilliant deal (at auction), the car has low mileage and all service stamps. i saved a packet and paid cash. so no nasty interest charges.
As other posters have said if there is any chance u could lose your job in next 3 yrs - dont get a lease/loan. 20k for a car is quite an extravagance, surely the better (read boring) thing to do would be to buy sumat at around 8k cash and use any extra ££ to pay down debts/mortgage. i guess if heavily depends on ur age (im 24!!)
Good luck tho wateva u decide!!

charlearose

if you like to have a new car every few years with hassle free motoring then leasing is very good ok you dont own the car but its rare that you do unless you take out a loan and getting a loan for 20k plus can be difficult sometime

i have had 3 lease cars a bmw z4 in 05 at 299 a month
mazda mx5 at 189 a month
and we currently lease audi tt roadster 09 plate at 350 a month inc
had no probs with any of these cars - all included vat ect and rd tax and had 12,000 mile a year allowed

had to put down 3 month of the rental cost in advance then monthly payments afterwards

no probs if you have a car that you like in mind but dont be to specific for example when i got my audi i wasnt bothered if i got an tt or slk colour was not important monthly payment was more the issue for us

phil-d_2

Me and a few friends have been looking into car leasing recently, theres some good deals around at the minute considering the current climate, we came across badger car leasing.com and received some good quotes off them. I really fancied a Merc C Class and they provided some fantastic prices. Definetly worth considering instead of pulling out big lump sums and being hammered on depreciation.