Is leasing ever a good thing?

pinkteapot

We're losing one of our cars next year (company car which we'll no longer have - not being replaced) so need to plan for getting a replacement ourselves.

I can go into the full details of what we have and our options, but the essence is:

On the basis that we like new-ish cars because we like relative reliability (eg we bought a one-year old Mondeo in 2011 and would probably ditch it at 6-7 years old at the latest), is leasing ever a better option (financially) than owning?

Hubby suggested we look at leasing. My immediate reaction is surely it's for people who don't have the money to buy, and must cost a lot more. Like renting your washing machine from Bright House.

But then I think about the depreciation if you don't keep cars for the long term and wonder if leasing may actually be better...

I know it's a REALLY general question, and I also know the MSE thing to do is to keep cars considerably longer than we prefer to. But has anywhere here leased after doing the maths on buying vs leasing?

neil.woos

pinkteapot wrote: »

We're losing one of our cars next year (company car which we'll no longer have - not being replaced) so need to plan for getting a replacement ourselves.

I can go into the full details of what we have and our options, but the essence is:

On the basis that we like new-ish cars because we like relative reliability (eg we bought a one-year old Mondeo in 2011 and would probably ditch it at 6-7 years old at the latest), is leasing ever a better option (financially) than owning?

Hubby suggested we look at leasing. My immediate reaction is surely it's for people who don't have the money to buy, and must cost a lot more. Like renting your washing machine from Bright House.

But then I think about the depreciation if you don't keep cars for the long term and wonder if leasing may actually be better...

I know it's a REALLY general question, and I also know the MSE thing to do is to keep cars considerably longer than we prefer to. But has anywhere here leased after doing the maths on buying vs leasing?

The notion of a car being newer doesn't always necessarily equate to being more reliable. From a money saving and reliability perspective I'd rather have an older car with a solid service history that I own outright.


Unless you want to impress your neighbours with a spanking new car that you wouldn't ordinarily afford like an Audi/BMW/Merc I wouldn't bother with leasing for any other lesser car.


Personally I'd rather have an older second hand 'premium' car like a Volvo or the like that has been looked after well that would still drive better than a brand new Mondeo or those class of cars, whilst being cheaper in the longer run.

ChumLee

neil.woos wrote: »

The notion of a car being newer doesn't always necessarily equate to being more reliable. From a money saving and reliability perspective I'd rather have an older car with a solid service history that I own outright.


Unless you want to impress your neighbours with a spanking new car that you wouldn't ordinarily afford like an Audi/BMW/Merc I wouldn't bother with leasing for any other lesser car.


Personally I'd rather have an older second hand 'premium' car like a Volvo or the like that has been looked after well that would still drive better than a brand new Mondeo or those class of cars, whilst being cheaper in the longer run.

You sound like what's his name?

Maybe while you're on Darkmatter can you explain why a premium V50 Volvo will driver better than the Ford Focus estate, when both have come off the same production line in Belgium?

WellKnownSid

Lots of debate on here about it - it doesn't suit everyone. I've done a lot of calculations on it and it saves me money because I run both an older car (actually, several - but that's another story) and a lease car.

First and foremost - if you don't / can't / won't look after your car - don't lease! You may only pay a small amount, but you're responsible for the whole car. Doesn't mean it has to return factory fresh - there are guidelines the leasing companies adhere to, like with car hire. Plus - returning early is likely not possible. You'll be stuck with it.

The positive side is it can be cheap. I do 20,000+ miles a year - 15,000 of which are in a lease car which is changed every 18 months to two years. Total cost to me including lease cost, servicing (one oil change), fuel, insurance, everything (no worries about tyres and MoT) is under £280 a month - around 24p per mile. Nearly 10p of that is for the fuel!

I also run a bigger, older car for family trips - but bought cheap at 6-10 years old when everything has just been replaced and run for around three years. Because it's only doing 6,000 miles a year then statistically it's not going to kill it / need massive repairs within a couple of years. By comparison, this costs me 33p per mile assuming only tyres, no repairs and £50 a month depreciation. Fuel costs are higher.

So - a new leased car costs less per mile to run overall than a 10 year old...

Why? Not all lease deals are cheap, but in general manufacturers make too many cars so they have to go somewhere. By getting them out on lease, new car buyers aren't immediately aware that there are discounts of 40-50% being given away. It's only when the new car buyer comes to trade in their 3 year old car to discover second hand car market has been destroyed by so many ex-lease cars flooding the market!

Second thing, of course - fuel - which also equates to road tax. Fuel is the biggest single cost of running a car now - so that second hand premium Volvo could cost 10p a mile extra in fuel and £200+ a year in road tax (which is normally included in most lease contracts, and £0 for many new cars anyway).

The final thing is timing - I time it so I'm handing my cars back before they need a major service, MoT, tyres, exhaust, brakes... anything expensive! No benefit leasing for four years if you've got to replace half the car by the time you hand it back...

pinkteapot

We could afford an Audi/BMW/Merc (well, one of their normal family cars anyway). Though I've always said I wouldn't buy one because I wouldn't pay the premium for the badge. Company car is an Audi A1 and, while it's lovely, I don't see how the difference in price between that and, say, a Focus can possibly be justified. We only got it (instead of one that would have cost us less in tax per month) because hubby's company are insistent on people having premium badges on their company cars.

My preference next Oct is to keep the Mondeo (will be six years old) and buy outright a small town car, low on VED, cheapish make and probably 2-3 years old ish. We do so few miles in that it would last us a decent amount of time. Keep the Mondeo until it starts costing us money or having breakdowns.

Hubby's suggestion was sell the Mondeo to buy the town car, then lease a new Mondeo or equivalent. The Mondeo is the car we do the much higher mileage in, and it's almost all leisure mileage. We do a lot of long-distance days out and very long-distance holidays. He did mention that you get a new car every four years which may be the main selling point for him. And he knows I'd never buy outright a brand new car due to the premium. As I said, we got the Mondeo at one year old to save about £10k.

I said 6-7 years on the basis that our last car was an Astra which did become unreliable and had a lot of expensive repairs by 9 years old (and the last two years we had it were expensive).

Of course we could compromise by buying the town car next year, keeping the Mondeo, then having the argument over buying nearly-new vs leasing as and when the Mondeo reaches the end of its life with us...

Cornucopia

pinkteapot wrote: »

Hubby suggested we look at leasing. My immediate reaction is surely it's for people who don't have the money to buy, and must cost a lot more. Like renting your washing machine from Bright House.

But then I think about the depreciation if you don't keep cars for the long term and wonder if leasing may actually be better...

I know it's a REALLY general question, and I also know the MSE thing to do is to keep cars considerably longer than we prefer to. But has anywhere here leased after doing the maths on buying vs leasing?

It's a question that has been asked many, many times on MSE/Motoring in a variety of different ways.

The problem is that you are not comparing like with like. A Lease is more than just a complex finance agreement - the most important difference is that it has built-in protection from (excessive) depreciation (which is usually the biggest cost of buying a brand new car) and it has the characteristic of knowing at the outset, the full routine cost of ownership. A PCP shares these characteristics whilst being slightly more flexible than a Lease.

It basically comes down to the numbers. A Ford Fiesta 1.0 Zetec would be around £150pm inc vat for a 3 year lease. So £900 deposit, and £5250 in payments, £6150 in total.

If you purchased the same car for cash, it would be something like: £900 + 36 * £319, but you would own this car at the end of 36 payments. You'll have paid £12384 in total, and if the car is still worth £6234, then you'll have saved money by Buying rather than Leasing, and in Ford's PCP scheme, they value the car at £5954.

It's tricky, and even getting a good discount or a 0% offer on finance can sway the figures. Personally, I value having some protection on depreciation, having been stung by excessive depreciation on cars in the past (most notably on a nearly-new car). I would not want to "invest" £15k or £20k of my own money in a vehicle, whilst having no guarantee against its future value.

pinkteapot

Thanks WellKnownSid - that's interesting and I'll look more closely at your figures. They're the sort of figures we need to work out.

I think hubby was thinking of a lease like he has with his company car, where MOT/servicing and any repair costs are included. I have to say, I do like knowing that if anything goes wrong, the lease company come to take it away and sort it all out so it is less hassle. But, even if this type of lease is available privately, I'm guessing you pay a big premium for it! If available, we'd have to compare this with the type of lease you've got, again vs buying.

I'll look through the other threads on this too.

EDIT: Thanks also, Cornucopia. We've got almost six months to figure it out so I'll get some spreadsheets going. Understand your point completely. Mondeo was £11k at one year old, saving us a huge amount on its new price, but it's still lost a lot since then of course.

Thanks both for giving us some of the initial things to consider. :money:

pinkteapot

Just found this page:
http://www.whatcar.com/car-leasing/car-leasing-guide/whats-the-best-type-of-personal-car-lease-for-me.php

Based on that, we'd be looking at Personal Contract Hire (unless we're offered a cheaper deal for PCP). We're highly unlikely to be interested in buying the car at the end if we do decide to lease. If we were going to buy it we'd just buy it outright (I think would be my view, though I need to remember Cornucopia's point re depreciation protection!).

If PCH is calculated using the depreciation on the car, that is presumably the depreciation from its brand new price. If our preference is to buy nearly-new, avoiding that horrendous first year, I wonder how it works out as PCH would incorporate that Year 1 plummet... As I said, will get the spreadsheets out.

Cornucopia

I have servicing included in my PCP at virtually no extra cost (I think it worked out at something like £4 per month). The car is zero-rate road tax, anyway, and being brand new, I'm not anticipating huge maintenance costs beyond maybe a set of tyres and some brake pads.

The PCP is also 0% APR, so all-in-all I'm expecting it to be both a reasonable cost, and a known cost.

When I was looking for a car, I found that there was no significant saving to be had on buying nearly-new. The screen price might have been £10-12k, say, against £15-17k for a new car, but once you'd factored in fewer incentives and depreciation that was still quite high, there wasn't much in it. Certainly not enough for new car finance at 0% not to be cheaper than used finance at 9.9%.

It would be nice to come up with a definitive yes/no answer on this, even if it only applied in the current market, and with a particular brand or type of vehicle, but even that looks difficult. The bottom line is that the various schemes are never going to be that far apart from each other, because if they were, then all the customers would drift in that direction.

DominicH

ChumLee wrote: »

Maybe while you're on Darkmatter can you explain why a premium V50 Volvo will driver better than the Ford Focus estate, when both have come off the same production line in Belgium?

It is news to me that the Volvo plant in Ghent made Ford Focus estates.

neil.woos

pinkteapot wrote: »

We could afford an Audi/BMW/Merc (well, one of their normal family cars anyway). Though I've always said I wouldn't buy one because I wouldn't pay the premium for the badge.

Unless you can afford one to pay outright in cash, no you can't afford it.