Leasing is the way to go?

motorguy

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.

On a common or garden model such as a Focus TDI yes, i think leasing will work out cheaper, plus you dont have to use your capital to buy the car.

I would just be very sure your circumstances wont be changing significantly for two years as handing the car back early usually entails paying all the remaining payments due.

AdrianC

Let's pause and think about it for a minute.

Lease companies buy new cars, rent them out, sell them.
Yes, they get substantial discounts over list price on the purchase - but they still cover all their admin costs, the costs of financing the assets - and still make a profit. This means that they receive far, far more money than they spend on the deal.

If you're a business looking to have cars, then a slightly different set of rules apply, mostly down to the difference in accounting and taxation treatment of capital expenditure and operating expenditure - and because of the cost of administration of the car fleet. But, for an individual, I just completely fail to see how that can POSSIBLY be "cheaper" than buying it, owning it, selling it yourself.

If you want a nice easy low-hassle consumerist life of ever-present credit with a new car in the drive every X years, and aren't ever bothered about the fact that if you decide not to continue the payments you'll have nothing whatsoever to show for them, then - fine. But that's a different thing to being "cheaper".

Bigphil1474

I always thought the concept of new cars losing value as soon as you drive off the forecourt is sound. A new car attracts VAT, so the price you pay is 20% more than the value of the car. If you sold it after 1 mile, at best you'd only get the value of the car, not the cost of the VAT you've paid on top of that??

Hintza

And if you are going to lease, go for the deal and not the car. You want a Focus sized car check the deals on similar cars don't focus on a Focus.

marathonic

AdrianC wrote: »

I just completely fail to see how that can POSSIBLY be "cheaper" than buying it, owning it, selling it yourself.

Thinking logically, this is true. However, look at the numbers in my posts and tell me which number you do not agree with. To me, it appears to be costing the exact same as, or very close to, buying, owning and selling yourself.

I had always thought along the same lines as you do but, looking at it with an open mind, the numbers don't lie.

motorguy

AdrianC wrote: »

Let's pause and think about it for a minute.

Lease companies buy new cars, rent them out, sell them.
Yes, they get substantial discounts over list price on the purchase - but they still cover all their admin costs, the costs of financing the assets - and still make a profit. This means that they receive far, far more money than they spend on the deal.

They get massive discounts, they buy in massive volumes and they'll be borrowing millions at extremely low rates of interest.

There is no dealer, salesman and finance company in the equation, each looking to get their significant cut.

They're overheads are minimal compared to the size of their fleets and all their cars are under warranty, so they need budget nothing for repairs.

AdrianC wrote: »

If you're a business looking to have cars, then a slightly different set of rules apply, mostly down to the difference in accounting and taxation treatment of capital expenditure and operating expenditure - and because of the cost of administration of the car fleet. But, for an individual, I just completely fail to see how that can POSSIBLY be "cheaper" than buying it, owning it, selling it yourself.

Then you should be looking at the actual figures and deals out there, rather than be a nay sayer without looking at the actual deals available.

AdrianC wrote: »

If you want a nice easy low-hassle consumerist life of ever-present credit with a new car in the drive every X years, and aren't ever bothered about the fact that if you decide not to continue the payments you'll have nothing whatsoever to show for them, then - fine. But that's a different thing to being "cheaper".

Its not a credit agreement, its a rental agreement. And moreoften the monthly cost is less than the equivalent depreciation costs.

motorguy

marathonic wrote: »

Thinking logically, this is true. However, look at the numbers in my posts and tell me which number you do not agree with. To me, it appears to be costing the exact same as, or very close to, buying, owning and selling yourself.

I had always thought along the same lines as you do but, looking at it with an open mind, the numbers don't lie.

+1

Heres a deal on a new Fiesta ST-2 with metallic paint - two year lease including VAT comes in at £5220.

http://www.gateway2lease.com/z_ford_fiesta_1.6ecoboostst-23dr_15159_leasing.php#.U15LS1VdV1Y

Thats an £18,500 car. you're going to struggle to break £11K for it after two years, so even assuming a £2K discount, a lease deal is cheaper.

Even if its not, you still have your £16.5K in the bank for two years.

AND realistically, whats better? £16.5K in a depreciating asset for which you cant accurately predict the depreciation on OR £179 a month and your money in the bank?

motorguy

Bigphil1474 wrote: »

I always thought the concept of new cars losing value as soon as you drive off the forecourt is sound. A new car attracts VAT, so the price you pay is 20% more than the value of the car. If you sold it after 1 mile, at best you'd only get the value of the car, not the cost of the VAT you've paid on top of that??

The value of a car has nothing at all to do with the VAT rate. Thats an urban myth.

AdrianC

motorguy wrote: »

Its not a credit agreement, its a rental agreement.

You're driving around in a car you haven't paid for, that somebody will remove from you if you don't keep paying for it. That's what I was meaning by " a nice easy low-hassle consumerist life of ever-present credit"...

marathonic

AdrianC wrote: »

You're driving around in a car you haven't paid for, that somebody will remove from you if you don't keep paying for it. That's what I was meaning by " a nice easy low-hassle consumerist life of ever-present credit"...

But my investigation of lease deals suggests that they aren't restricted to those who can't afford a car. Indeed, I could afford to purchase the Focus mentioned in my original post outright - however, the lease appears to work out cheaper.

Therefore, I'm considering keeping the funds in my ISA and taking out a 2-year lease.