lease vs. purchase - what, which & why?

motorguy

JP1978 wrote: »

I honestly dont know and yes, quite possibly more discount to be had but would that have been as a cash sale or part of a PCP ( we all know how dealers love their PcP's) but that would have had to have been about a £10k discount in total..... if DtD was only at £37k, cant really imagine getting it down another 5k!.

It is (was) an outgoing model and the car had already been made and was sitting at the German port and had already been allocated to a dealer.

There wasnt a further £5K discount for a retail customer. People forget that leasing companies have massive buying power, far beyond what you or i could dream of and that leasing companies deal direct with the manufacturer (or their importer / UK subsiduary) which cuts out the dealer network middle man.

Its the same with car rental companies, they're buying at a fraction of the retail price because they're buying 1,000's at a time.

Also leasing / PCP deals can often be heavily subsidised if the manufacturer wants to support that particular car in the market / wants to increase market share. Its about finding those deals and taking advantage of those scenarios.

simonineaston

motorguy wrote: »

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

• Volvo XC40, launched spring '18, I think
• As long as I have to drive longish distances - probably a minimum of 5 years, if God spares me...
• I have decided on this particular model, after lots of careful thinking & reading but would not exclude any other vehicle, so long as it fits my criteria.

tired_dad

Advantage of cash: simple no frills transaction. Modern cars if looked after will last years and years. 3 years is nothing. There is simply no pressure on you to source a new car by a specific date. The car is yours. It will sit on your driveway as long as you want. There is no loan in this arrangement. No interest to pay.

Anything else, whatever you call it/package it/market it is fundamentally a loan. Your borrowing someone’s money. The person lending you money has also borrowed it. They are paying interest on their loan. They will charge you more interest to cover their costs + profit.

Neither is right or wrong. They’re just different ways of buying a car.

To fully understand a lease system one should not just look at that specific deal for 3 years (or whatever the term is). Assume you’ll always be needing a car. Take a 10-15 y projection. Add up cost of multiple lease agreements over time to keep you in a car. The figure will be eye watering.

When you buy outright, there is a complete absence of any pressure to change car. Therefore the next purchase would usually be driven by the car not being up to requirements or change of circumstance. That is to say the need to change is biologically driven. Most outright purchasers I know tend to hit that zone after more than 3y.

Over 15y a leaser would typically go through 5 cars (3x5=15). Some outright purchasers would rotate fewer. Say 3 cars.

You will soon realise that serial leasing is the most expensive way of keeping a car. It’s very cleaverly packaged to hide this fact.

movilogo

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?

Someone who has managed to save £30k is far less likely to have cashflow problem compared against someone who is unlikely to save around £30k.

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

It is true (and truth hurts). PCP is renting. However, unlike renting a house, you can't really quit before term ends (you can after 50% of payment is made but as you have a balloon payment later you realistically can't quit).

Best way to buy a car is 2-3 years old when most of depreciation has taken place.

edde

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?

Lease is easy imo best for low milage people who want that new car for 2 to 3 yrs and then get another new one.
Buying new is so expensive I'd never recommend it. Only exception is if you'll own it till it dies and then the savings aren't huge and it's a nice to have feeling to be buying a new car.

Personally I'd recommend if you like the xc40 ie high volvo then look at a year or two old xc60 much cheaper bigger car (better imo for motorways and big milage) and will cost less overall. However what do you want do you want to spend 30k or want a brand or want just a good value nice car?

For 20k you an get a nice range or 1 or 2 yr old high up nice cars that are 10k less to buy and ok will loose money but if both the xc40 and say a bmw x1 loose half there values that's probably 13k over 5 yrs in your pocket saved. (should be 15k but allow for an extra service etc)

Nathaniel_Essex

All comes down to your personal finances, circumstances for needing a car and whether you want to be driving a new car often.

If you're quite wealthy, can easily afford the monthly payments and want to be driving a new car every 3 years or so, then leasing works. If you're not so wealthy and in a situation where you need a car ASAP for work, then again leasing is probably more suitable (as well as typical financing).

However, if you don't use a car to travel to work and only bothered about it getting you to A to B on the weekends and evening shop, then saving the cash and buying the car would probably be the more sensible option, regardless of your financial status.

I purchased my car cash. I did buy it primarily for work but always knew I was going to drive it into the ground as I have little interest in driving a flashy car. £9,500 it cost me and I've had it for almost 6 years. Equates to about £132 a month and looking over a 5 year period, I've probably spent sound £4,000 less, didn't have to put down a deposit and don't have a final payment to worry about if I had took the car on a PCP deal.

Furthermore, aside servicing, I don't have to worry about the car being part of my bills. When doing my mortgage application, I legitimately have no debt or bills to worry about aside from my housing cost.

As we are planning baby number 2, we are looking to get a SUV. Even that we will save the cash for.

simonineaston

Hi folks, I've read all your posts and digested your jolly comments - thanks and Happy New Year to you all :-)

simonineaston

Happy New Year to one & all!!
...so I've been thinking about your posts, folks, and here's my follow-up Q.. If I find an vehicle I like and decide to buy, I'm likely to be offered 'finance'. In my Winnie The Pooh-type world, it seems a good idea to pay by arranging a split, to wit a proportion of the total price to be paid in cash, the remainder paid by a loan, assuming it to attract zero interest. Assuming too I make the payments according to the terms agreed, does that mean I get my cake and eat it too, or have I missed something? If so, surely the cheapest way to pay for the vehicle is straight cash? But does that in turn mean the garage is likely to quote me a higher price if they know I want to pay cash??

tonyh66

simonineaston wrote: »

Happy New Year to one & all!!
...so I've been thinking about your posts, folks, and here's my follow-up Q.. If I find an vehicle I like and decide to buy, I'm likely to be offered 'finance'. In my Winnie The Pooh-type world, it seems a good idea to pay by arranging a split, to wit a proportion of the total price to be paid in cash, the remainder paid by a loan, assuming it to attract zero interest. Assuming too I make the payments according to the terms agreed, does that mean I get my cake and eat it too, or have I missed something? If so, surely the cheapest way to pay for the vehicle is straight cash? But does that in turn mean the garage is likely to quote me a higher price if they know I want to pay cash??

If the garage offers financial incentive (deposit contribution, low APR, reduced price) for taking finance, take it then phone the finance company a week later and pay the finance off.

TheMoonandBack

simonineaston wrote: »

Happy New Year to one & all!!
...so I've been thinking about your posts, folks, and here's my follow-up Q.. If I find an vehicle I like and decide to buy, I'm likely to be offered 'finance'. In my Winnie The Pooh-type world, it seems a good idea to pay by arranging a split, to wit a proportion of the total price to be paid in cash, the remainder paid by a loan, assuming it to attract zero interest. Assuming too I make the payments according to the terms agreed, does that mean I get my cake and eat it too, or have I missed something? If so, surely the cheapest way to pay for the vehicle is straight cash? But does that in turn mean the garage is likely to quote me a higher price if they know I want to pay cash??

Personally, if it must be a new car, I would lease it. 20% of the purchase price is VAT, add in the first 3 years depreciation and the fact you’ll pay more for it than the lease companies as explained by motorguy, then your turning £30k into a lot less very quickly.
Spending your own cash I would always get used or pre reg’d.

If you are going to buy new though - don’t tell the dealer you want to pay for the whole thing. Instant turn off for the salesperson and dealership who get commission and/or bonuses from the finance provider.
You may get service deals, deposit contributions, 0% etc with their hp or pcp. Take it to get the best deal and pay it off at your leisure once you have the car.