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Lease or purchase outright

jakesuk
jakesuk Posts: 226 Forumite
Can anyone explain to me in simple terms the financial merits of an operating lease vs hire purchase vs purchasing a car outright?

My employer offers a company car scheme on a 1, 2, 3 or 4 year basis . Included in the monthly lease cost (which is deducted from my gross salary) is road tax, insurance, servicing, repairs (£100 excess) etc. The only cost I would have to cover myself is fuel.

Are employer sponsored schemes generally more competitive than other leasing options which I could pursue?

Is purchasing a car always the best option if you have the cash upfront?

Any advice appreciated.

Thanks

Comments

  • colino
    colino Posts: 5,059 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Depending on the size and guile of your company will dictate how cheaply they can contract with leasing companies. Thinking only as a company car, a business tool, it makes sense to have predictable, monthly outgoings for cash-flow management and it makes no sense at all to take a big lump of cash from capital reserves to pay for a business tool that is depreciating from day one.
    Explore the alternatives you have personally, what will the company give you if you opt-out of the lease scheme and see what you have to provide as an alternative - there may be standards of car and age they will accept. Then try Lings for a personal lease, look around at what is available in your immediate neighbourhood for a car that you could buy, but in any case, don't put your own lump sum into a car you are going to use for business.
  • jakesuk
    jakesuk Posts: 226 Forumite
    The car is solely for personal use.
    My company is fairly large so I assume they have good negotiating power.

    Is there a general rule of thumb as to whether leasing works out more or less cost effective?

    It's not easy to do like-for-like comparisons because there are so many variations per model, all sorts of add-ons (sunroof, satnav, leather seats etc etc the list goes on and on). My issue is not with the maths really, it's being able to do an actual comparison because you have to compare like-with-like and even then many car dealerships may be willing to make a sale at a discount off list price.

    I just find the whole process to be a bit of a minefield.
  • welfayre
    welfayre Posts: 182 Forumite
    I always feel that if you can purchase outright then do so. That way the car's yours. No interest charges, mileage restrictions or final payment fees. Leasing a car means your essentially tied to that make forever unless your willing to stump up the final payment fee or walk away with nothing after 2/3 years of paying £x amount per month.

    That said leasing often allows you to "have" a car that you otherwise may not be able to afford. Whether this is a good thing or not I don't know.

    Just my opinion however.
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