Leasing is the way to go?

marathonic

Hi,

Do many of you lease as opposed to buy your cars? I've always planned on going the traditional route of buying for my next car but have just looked into leasing and it looks pretty compelling.

First things first, I've always subscribed to the logic of "never buy a new car as it loses a fortune the second you drive off the forecourt". Therefore, I'd always buy used cars. For this reason, I am comparing a lease contract to the purchase of a 1-year old used car.

According to the link below, I can lease a Ford Focus 1.6 TDCi 115 Zetec 5dr for £935.94 upfront and £155.99 for a further 23 months giving a total cost of £4523.71 for the 2 years.

When I search Auto Trader, I see 1 year old versions of this car are available for a little over £11,000.

If I build £11,000 up in my Newcastle Regular Saver ISA at 3%, I could buy a 1-year old version at £11,000 or leave the majority of my £11,000 in the ISA - only withdrawing for the lease payments.

According to a spreadsheet I set up, withdrawing the initial payment and then each subsequent payment, allowing for the 3% interest I earn, would result in £6970.75 remaining in the ISA after 2 years. I estimate that this is about the same amount that the 1 year old car, after keeping for 2 years, would be worth.

With this in mind, am I better going for the lease or is there something that I am missing?


http://www.evanshalshawleasing.com/models2.asp?manuname=Ford&modelname=FOCUS&derivative=1.6%20TDCi%20115%20Zetec%205dr&mode=derivatives&type=C&mfctr=2514&range=256&model=53848&capid=50252&rate=P&tabtype=E&rateId=36937

DUTR

The concept that you lose money as soon as you drive off the forecourt is silly, would you buy a car from a dealer take it home and then put it in the advertiser?
Few cars increase in value, so when you buy, accept that the money has gone, and when you come to sell , anything you get back is a bonus, in the meantime you are enjoying the ownership of the vehicle (this can vary from vehicle to vehicle, as some are literally get me from A-B, some offer performance or prestige for those willing to pay) .
When you lease a car, the payments will be covering the depreciation, so after say 3 yrs , chances are you would have paid 50% of the purchase price and the ballon payment is likely to be much less than purchasing a car of the same age/mileage, also the interest in your account is likely to be paying much less than the interest you are paying out on the lease plan (which more often than not is defffered loan ).

marathonic

DUTR wrote: »

When you lease a car, the payments will be covering the depreciation, so after say 3 yrs , chances are you would have paid 50% of the purchase price and the ballon payment is likely to be much less than purchasing a car of the same age/mileage, also the interest in your account is likely to be paying much less than the interest you are paying out on the lease plan (which more often than not is defffered loan ).

The above all makes sense but I am trying to put some figures against it and, based on my initial post, the cost of leasing a brand new Focus for two years appears to be exactly the same as the cost of buying a 1-year old car outright and selling it again after 2 years.

DUTR

marathonic wrote: »

The above all makes sense but I am trying to put some figures against it and, based on my initial post, the cost of leasing a brand new Focus for two years appears to be exactly the same as the cost of buying a 1-year old car outright and selling it again after 2 years.

How much are 3 yr old Focus's fetching? The 85ps Focus is showing as just under £14k, I guess there are discounts to be had.
On brokers4cars your chosen model is showing at £13316 (is there a facelift focus just recently?) .
I don't know the Ford prices, .

marathonic

My search on brokers4cars came up with £14,066. Regardless, I wouldn't buy outright new but would consider a lease if the total cost looked similar to the outright purchase of a year old car.

According to Parkers, the cheapest model of Ford has the following estimated values:

New: £13,870
1 year old: £9,469
3 year old: £6,179

Therefore, between year 1 and year 3, they estimate 35% depreciation over the two years.

Given the 1-year old model I'm looking at now costs £11,000 in Auto Trader, that gives an estimated depreciation of £3,821.

My plan of having the £11,000 in the ISA and withdrawing for the lease payments means I'd end up with £4,029 less in the ISA than I started with.

Using this method of calculation, it looks like it's £200 more expensive to lease a new car for 2 years than it is to buy a 1-year old car and keep for 2 years (less the tax which will be paid for by the lease company).

DUTR

marathonic wrote: »

My search on brokers4cars came up with £14,066. Regardless, I wouldn't buy outright new but would consider a lease if the total cost looked similar to the outright purchase of a year old car.

According to Parkers, the cheapest model of Ford has the following estimated values:

New: £13,870
1 year old: £9,469
3 year old: £6,179

Therefore, between year 1 and year 3, they estimate 35% depreciation over the two years.

Given the 1-year old model I'm looking at now costs £11,000 in Auto Trader, that gives an estimated depreciation of £3,821.

My plan of having the £11,000 in the ISA and withdrawing for the lease payments means I'd end up with £4,029 less in the ISA than I started with.

Using this method of calculation, it looks like it's £200 more expensive to lease a new car for 2 years than it is to buy a 1-year old car and keep for 2 years (less the tax which will be paid for by the lease company).

That is a very optimistic depreciation %, 3yrs is 50%, what is the balloon payment in the deal?

marathonic

DUTR wrote: »

That is a very optimistic depreciation %, 3yrs is 50%, what is the balloon payment in the deal?

There is no balloon payment apart from the upfront £935.94. It's a 2-year lease so you hand the car back after 2-years and the cost is, roughly, similar to the depreciation had you bought a 1-year old version of the car.

Of course, you are limited to 10,000 miles per annum so, for someone doing more, the calculations would be different.

I normally work out depreciation as roughly 20% per year. Therefore, every £100 is worth £80 after a year, £64 after two years and £51.20 after 3 years. In most models of cars I look at, this doesn't result in a figure that's too far wrong.

DUTR

marathonic wrote: »

There is no balloon payment apart from the upfront £935.94. It's a 2-year lease so you hand the car back after 2-years and the cost is, roughly, similar to the depreciation had you bought a 1-year old version of the car.

Of course, you are limited to 10,000 miles per annum so, for someone doing more, the calculations would be different.

I normally work out depreciation as roughly 20% per year. Therefore, every £100 is worth £80 after a year, £64 after two years and £51.20 after 3 years. In most models of cars I look at, this doesn't result in a figure that's too far wrong.

So it seems like a long term hire at £44.62 per week , than a lease, other than you have to pay for the servicing etc, or the total deal of £4639.70 to use the car for 2years.

rexmedorum

marathonic wrote: »

The above all makes sense but I am trying to put some figures against it and, based on my initial post, the cost of leasing a brand new Focus for two years appears to be exactly the same as the cost of buying a 1-year old car outright and selling it again after 2 years.

where are you getting 3% the top cash ISA is 2.75% according to MSE

marathonic wrote: »

Of course, you are limited to 10,000 miles per annum so, for someone doing more, the calculations would be different.

Yes buying would be more adaptable to changing circumstances.
Also if you bought a 1 year old car you could keep it going for say 4 years. If you compare that to 4 years of leasing on this deal it would be much cheaper.

Of course you'd be driving a car that's between 1 and 5 years old rather than 0 to 2 years old

motorguy

DUTR wrote: »

When you lease a car, the payments will be covering the depreciation, so after say 3 yrs , chances are you would have paid 50% of the purchase price and the ballon payment is likely to be much less than purchasing a car of the same age/mileage, also the interest in your account is likely to be paying much less than the interest you are paying out on the lease plan (which more often than not is defffered loan ).

I'm not sure you understand leasing?

There is no balloon payment and you dont pay interest as you're only renting the car.

Also, you're "assuming" you're going to have to pay all the depreciation in the monthly rental that you would otherwise pay as a private individual. Not true. The lease company will be getting a massive fleet discount and will benefit from rates of interest that you or i can only dream of.

motorguy

DUTR wrote: »

So it seems like a long term hire at £44.62 per week , than a lease, other than you have to pay for the servicing etc, or the total deal of £4639.70 to use the car for 2years.

Yes, with leasing you're hiring the car.