Car leasing or buying outright?

mrsmag

Hi there!

I've been hanging around the credit card and debt free wannabe areas here for a while, but now have a question that might be better answered here :wave:

Background is, we both bought our cars outright using savings thinking this was the way to save money (this was in 2007/8). I bought an alfa 147 (07 plate) and he bought a honda civic type r (05 plate).

We bought them to 'run into the ground' so to speak, we thought we'd be happy to keep them till they broke hence we thought it was worth owning them. But they are not cheap to run, with regards to petrol, road tax and OH's latest service came to over £800. Not to mention we have to MOT them each year, insurance etc etc. They are haemorrhaging money its one thing to say you are buying it to run it into the ground and you're not bothered about new cars every 3 years (which I'm not, on paper) but its a totally different matter when your latest service and MOT comes to £800! Its a joke!

So, we planned to trade both in for one newer family car in the next year to 18 months once we've really got on top of our finances. My car is (as predicted) worth virtually nothing now, I got it valued at £3500 last year so I'd imagine its lower than that now, OH's car would sell privately for about £5000-6000.

But OH made a good point yesterday, that by the time we have paid off our credit cards the cars will be worth nothing! So we'll be paying virtually the whole cost of the newish car, which we'll have to do in installments either by finance or 0% card.

I'm wondering if we'd be as well selling his car now, and using that to pay the credit card, then using just mine to trade in later for the newer car.

The idea of a leasing system is becoming appealing, but being from a family of mortgagers rather than renters it goes against the grain to pay for something you never own. I don't know if its as good sense as it seems!

I just wondered if anyone has strong views that leasing is a bad idea? At the moment I'm throwing good money after bad on these two cars and the appeal of owning one outright and being responsible for the maintenance of it as it ages has gone

mrsmag

ETA -

For clarification, (I think!) I'm not talking about traditional hire purchase, its like those leasing schemes the car manufacturers do themselves, I think Peugeot call it 'Peugeot passport' for example

and by 'buy outright' in the title, I really mean own outright as I couldn't just pay for the whole thing, I'd be paying it up and owning it at the end

Chimpofdoom

I'm not overly fond on the idea of leasing, basically because your tied in to a deposit + monthly cost (calculated to an average mileage, your charged more if you exceed your mileage) then at the end of (say 3 years), you either take out a new car on a new lease, pay outright to keep the car or settle the remaining balance.

Honda type R's nice to look at, powerful engine.. but cheap they are not.. Honda civic type S, retains the looks, more economical engine (than the type R), cheaper insurance group etc etc.

Not sure on the best course of action i'm afraid! Currently myself and my OH are clearing our debts and saving cash to put towards new cars. Not looking for anything fancy of course, she's looking at an older civic (2003) while i'm looking at the 2006 variant, but then we know an approved honda mechanic who does things on the cheap for us...

mrsmag

I know, they are just possibly two of the worst choices of cars if you want to save money! We weren't quite in that frame of mind when we bought them, but have since seen the light!

We're looking at cheaper cars next time.

I wonder, do you know what the limit is on mileage per year?

InsideInsurance

On a lease you set your mileage limit yourself, the default tends to be 10,000 but its in multiples of 1,000 miles.

Effectively they calculate the value of the vehicle when you terminate the lease and mileage is the biggest impact of this outside of what the vehicle is.

If you exceed the mileage you will pay a per mile fee for each you went over by. So if you had a 3 year lease on 10,000 miles a year and handed it back with 33,000 miles you will pay 3,000 times the cost per mile. In this scenario it will almost always have been cheaper to set the mileage at 11,000 from the outset than at 10,000 and pay the excess. On the flip side you obviously dont want to be paying for thousands of extra miles that you wont be using.

vikingaero

InsideInsurance wrote: »

If you exceed the mileage you will pay a per mile fee for each you went over by. So if you had a 3 year lease on 10,000 miles a year and handed it back with 33,000 miles you will pay 3,000 times the cost per mile. In this scenario it will almost always have been cheaper to set the mileage at 11,000 from the outset than at 10,000 and pay the excess. On the flip side you obviously dont want to be paying for thousands of extra miles that you wont be using.

Leasing/PCP/Whatever it's called works if your lifestyle is fixed. For example you drive 10 miles to work and back each day, pop to the supermarket once a week, go out at weekends. If so great then it could be for you.

Others may have to travel at random and rack up thousands of miles a month, have wacky hobbies involving hundreds of miles drive at weekends, so these schemes aren't so good.

You have to work out the cost of MPG/servicing/insurance/MOTs/tyres/road fund licence etc to see if it's beneficial to change.

Loads of people think "I have a car doing only 30mpg, if I spend £15k on a new car that'll do 40mpg, then I'll save". Right but wrong. You're paying £15k to save a little on fuel and £15k buys a lot of fuel, although there is the comfort/safety/change for changes sake/new tyres and brakes/no servicing for one year to consider on a new car.

mrsmag

vikingaero wrote: »

You have to work out the cost of MPG/servicing/insurance/MOTs/tyres/road fund licence etc to see if it's beneficial to change.

Loads of people think "I have a car doing only 30mpg, if I spend £15k on a new car that'll do 40mpg, then I'll save". Right but wrong. You're paying £15k to save a little on fuel and £15k buys a lot of fuel, although there is the comfort/safety/change for changes sake/new tyres and brakes/no servicing for one year to consider on a new car.

Yep, that's the difficult calculation I need to do. Because its not just about the cost of the fuel is it, the fuel efficiency leads directly to a reduction in road tax, whereby in some cases if I got a car with no road tax or even £30 per year, we'd be saving £390! Plus insurance might decrease (not sure about that one!)

And safety is a big one. I'd be happy to sell OH's car now to pay the visa and keep my car, but mine has only got a NCAP rating of 3stars which is pretty shocking. I know NCAP is not a sure sign of safety, and its a voluntary thing, but its pretty bad to have a 3 star one with a child

Plus its not got isofix which I'd like for the next stage car seat for my daughter, which I've been putting off getting because we can't make up our minds what we're doing. :undecided

Plus if we have another child we would be pushing it to fit another car seat behind the drivers seat if my OH was driving.......... oh the decisions!

But my lifestyle is pretty fixed. We could probably accurately predict our mileage use over 3 years I reckon, so maybe its not a bad idea.

Just need to work out if we can afford monthly payments with all our other outgoings!