lease vs. purchase - what, which & why?

simonineaston

Can any kind soul summarise the pros and cons of leasing against purchase, when considering a car? I have in mind a model launched this year, which costs about £30K. The most obvious point is, I suppose, that if I lease, I keep hold of the £30K... The only other car buying rule of thumb I know about is: Buy new and you lose x% of the car's cost price the moment you drive off the fore-court, x being debateable but I'd guess it equals about 12...
These days there's all sorts of other ways to drive a car - I'm thinking of:

• the discount websites, like carwow
• leasing
• and of course there's good old buying second-hand.

So my Q. this morning is, What are the benefits of the various ways to get hold of a car and which (this being MSE) is likely to be the best VFM?

foxy-stoat

If you have the cash then buy with that, you will own it outright and you can drive as many miles as you like and sell it when you like.

Buy GAP insurance and your covered for 3 years in case of a total loss.

AdrianC

If ever you hit cashflow issues, the big difference becomes clear.

You stop paying the lease, the car gets taken away, and you have nothing.
You sell the car you bought, you have £20k-odd in your pocket.

The same applies at the end of the three years. You have a car, or you don't have a car.


Either way, you're funding the depreciation.

System

simonineaston wrote: »

Buy new and you lose x% of the car's cost price the moment you drive off the fore-court, x being debateable but I'd guess it equals about 12...

It can work out to 40%-50% in the first two years. And if you lease that doesn't avoid paying for that, depreciation applies to lease cars just as much as it does to bought ones and the lease company have to both cover that, the interest on the finance they have and to make a profit too so you'll be paying for all three of those within the lease payments.

If like me you enjoy driving then the pitiful annual mileage allowances of lease or PCP will see you having a considerable penalty payment at the end. Also be aware that you cannot modify the vehicle and anything other than wear and tear that falls within a set list will see you paying or being billed to rectify that when you hand the vehicle back.

Lease and PCP literally exist only to allow people to ride around in cars they can't afford.

As for "good old second hand", I'd consider looking at cars two to three years old where they've gone through their fastest years of depreciation so you'll pay around 50-60% of the new price but they will still have some manufacturers warranty on.

neilmcl

Tarambor wrote: »

Lease and PCP literally exist only to allow people to ride around in cars they can't afford.

Still coming out with that utter carp again I see.

motorguy

AdrianC wrote: »

If ever you hit cashflow issues, the big difference becomes clear.

You stop paying the lease, the car gets taken away, and you have nothing. [but have £30K in the bank]
You sell the car you bought, you have £20k-odd in your pocket.

The same applies at the end of the three years. You have a car, or you don't have a car [but have £30K in the bank]


Either way, you're funding the depreciation.

Added the bits you missed.

Also whos more likely to have cashflow issues?

• Someone with £30K in the bank and a £250 a month lease payment?
• Someone who spent their £30K savings on a car?

motorguy

Tarambor wrote: »

It can work out to 40%-50% in the first two years. And if you lease that doesn't avoid paying for that, depreciation applies to lease cars just as much as it does to bought ones and the lease company have to both cover that, the interest on the finance they have and to make a profit too so you'll be paying for all three of those within the lease payments.

Sorry, but it doesnt.

A lease company will pay far far less for a £30K car when buying maybe 1,000 of the things than you or i would buying just one.

Whilst on a new car you or i might get 10% discount they are probably getting 40% discount.

They'll take a relatively small amount of profit on each car, therefore leasing can and often does mean you're paying less than if you bought the car for cash and ran it over the same timeframe.

The only time i'd think about buying cash would be if i planned on running the car indefinitely - ie, for 5-10 years. If the O/P plans on running a car for just 3 years, i'd say leasing will work out cheaper, AND on top of that you've the opportunity cost of what they can otherwise do with the £30K in terms of investing or using it elsewhere to fund something else.

motorguy

Tarambor wrote: »

If like me you enjoy driving then the pitiful annual mileage allowances of lease or PCP will see you having a considerable penalty payment at the end. Also be aware that you cannot modify the vehicle and anything other than wear and tear that falls within a set list will see you paying or being billed to rectify that when you hand the vehicle back.

So much wrong here i'll bullet point it as it'll be quicker....

• You can get lease deals from probably 6,000 to 60,000 miles per annum. Simply get the right size deal for your mileage.
• It would be wantonly foolish to take a 6,000 mile deal knowing you do 12,000 miles a year
• If your mileage requirements change, simply phone the leasing company and get your monthly payment adjusted.
• The actual mileage charges themselves may not be punitive. Often they are a few pence per mile. For example a +6,000 mile return at 6p per mile amounts to £360. Hardly ruinous.
• Technically, you can modify the vehicle, as long as you return it back to how they gave it to you, although not sure why you'd want to modify a brand new, under manufacturers warranty car
• Yes the car is subject to fair wear and tear but there there are industry standards for this which most leasing companies adhere to. Likewise, if you bought a brand new car and damaged it, then you'd have to pay to repair it anyway?

motorguy

Tarambor wrote: »

Lease and PCP literally exist only to allow people to ride around in cars they can't afford.

Complete nonsense.

motorguy

simonineaston wrote: »

Can any kind soul summarise the pros and cons of leasing against purchase, when considering a car? I have in mind a model launched this year, which costs about £30K. The most obvious point is, I suppose, that if I lease, I keep hold of the £30K... The only other car buying rule of thumb I know about is: Buy new and you lose x% of the car's cost price the moment you drive off the fore-court, x being debateable but I'd guess it equals about 12...
These days there's all sorts of other ways to drive a car - I'm thinking of:

• the discount websites, like carwow
• leasing
• and of course there's good old buying second-hand.

So my Q. this morning is, What are the benefits of the various ways to get hold of a car and which (this being MSE) is likely to be the best VFM?

I'll ask the important questions that seem to have been missed :-

• Whats the car in question?
• How long to you plan on keeping it?
• Are you set on that specific car?

wgl2014

+1 for motorguys posts.

If you have a specific car in mind get a quote from a broker for a best 'new car' price, a lease quote and then if possible look at how much a used car a couple of years old is.

Once you know the actual figures you will be in a better position to consider which option suits.