Car lease during covid

Aylesbury_Duck

ijwrighty said:

I’m paying for something that I cannot use due to circumstances out of my control. This is no different to booking holidays abroad and not being able to go on them. 

You can use it, you're choosing not to. You agreed to the deal in anticipation of different circumstances, which is unfortunate, but it's very different to booking a holiday and not being able to go on it.  Firstly, anyone sensible will have taken out travel insurance so they were compensated if the trip didn't go ahead.  Secondly, people don't tend to agree to a holiday contract lasting several years.

ijwrighty

I don’t think you’re getting where I’m coming from here. I agreed with a company that I would do x amount of miles over the term. I’ve had leases for about 10 years now, sometimes I’ve been under the agreed mileage, sometimes over. That’s just the way it is. Why should I pay for a car that’s expected to have 40k miles on it when the reality is, it will have 10-15k returned due to the government locking us down and saying work from home etc? It’s not upto my employer to contribute towards my lease. It was my choice, I get that, but the circumstances have changed massively. It’s my choice if I do 15k, 20k, 40k whatever. In the current scheme of things, it’s the government telling me I cannot travel without good reason therefore I’m paying x a month to a leasing company (assuming I’m doing 40k). At the end of it they will be rubbing their hands together, as a car they are expecting to be worth say 30k is actually worth 40k as I’ve not used it. The payments I’ve been making reflects the 40k mileage not the 15k I’ll be returning it at and therefore, that car will be more profitable for the leasing company. They will be getting thousands of cars back at the end of this way under mileage at the cost of the consumer due to something totally out of our control.

Grumpy_chap

ijwrighty said:

is there any way to get money back from leasing companies / government when it comes to car leases?

ijwrighty said:

I’m paying for something that I cannot use due to circumstances out of my control. This is no different to booking holidays abroad and not being able to go on them. There should at least be a significant drop in the monthly cost if you are literally doing 0 miles in the car. Let’s flip it then, the rate it’s going I will have a car that, after 4 years will have 10k on the clock rather than 40k on the clock. Seems a bit unfair that they will be making a margin as part of the monthly payments and the a massive profit on the car at the end of the term. I have no issues with all of the above under normal circumstances as that’s what I signed up for.

There is nothing back from the Government for the fact that you cannot use your PCP car. 
Similarly, I do not have to pay the Government for reduced depreciation and running costs in my (owned) car because I am not using it.

Nor is there anything back from the Government if you cannot go on holiday - you may get a refund from the travel company or your insurance may cover the eventuality.  Not the Government though.

Do you have insurance in place to cover you for "losses" of paying for non-use of the car during lock-down?  

Well, this is a PCP agreement, so that process does in effect offer you the potential for the refund and / or the insurance pay-out for non-use.  The mechanism is more complicated though:

To simplify a bit, let's assume the following was the plan:

• £20k car
• £2.5k deposit
• £300 per month for four years = £14.4k
• Plan mileage 40k (10k/year)
• MGFV £10k

Everything goes to plan, so at the end of 4-years and 40k miles, you have paid £16.9k, hand the car back and walk away.

Now you are not doing the mileage, so the residual value will be higher:

• You still paid £16.9k over 4 years
• The mileage at the end is 10k rather than 40k
• The residual value is therefore £12k rather than £10k

So, you paid the £16.9k, but can now sell the car for £12k to realise £2k above the £19k GMFV and then pay the GMFV to the supplying dealer.  You are therefore better off by £2k.

What is guaranteed in the above?  Not a great deal. 
Will the lower mileage reflect higher residual value given the high number of cars being returned with the lower than anticipated mileages?
Will the state of the economy mean that low demand results in reduced residuals even though mileages are lower?

There is a mechanism at the end of the PCP term to realise the benefit of non-use if you see the term out.

I know you have suggested earlier VT.  I cannot advise how the above will be influenced if you VT at 50%, except on a PCP, the 50% is nor reached until very late in the overall process.

ijwrighty

Grumpy_chap said:

ijwrighty said:

is there any way to get money back from leasing companies / government when it comes to car leases?

ijwrighty said:

I’m paying for something that I cannot use due to circumstances out of my control. This is no different to booking holidays abroad and not being able to go on them. There should at least be a significant drop in the monthly cost if you are literally doing 0 miles in the car. Let’s flip it then, the rate it’s going I will have a car that, after 4 years will have 10k on the clock rather than 40k on the clock. Seems a bit unfair that they will be making a margin as part of the monthly payments and the a massive profit on the car at the end of the term. I have no issues with all of the above under normal circumstances as that’s what I signed up for.

There is nothing back from the Government for the fact that you cannot use your PCP car. 
Similarly, I do not have to pay the Government for reduced depreciation and running costs in my (owned) car because I am not using it.

Nor is there anything back from the Government if you cannot go on holiday - you may get a refund from the travel company or your insurance may cover the eventuality.  Not the Government though.

Do you have insurance in place to cover you for "losses" of paying for non-use of the car during lock-down?  

Well, this is a PCP agreement, so that process does in effect offer you the potential for the refund and / or the insurance pay-out for non-use.  The mechanism is more complicated though:

To simplify a bit, let's assume the following was the plan:

• £20k car
• £2.5k deposit
• £300 per month for four years = £14.4k
• Plan mileage 40k (10k/year)
• MGFV £10k

Everything goes to plan, so at the end of 4-years and 40k miles, you have paid £16.9k, hand the car back and walk away.

Now you are not doing the mileage, so the residual value will be higher:

• You still paid £16.9k over 4 years
• The mileage at the end is 10k rather than 40k
• The residual value is therefore £12k rather than £10k

So, you paid the £16.9k, but can now sell the car for £12k to realise £2k above the £19k GMFV and then pay the GMFV to the supplying dealer.  You are therefore better off by £2k.

What is guaranteed in the above?  Not a great deal. 
Will the lower mileage reflect higher residual value given the high number of cars being returned with the lower than anticipated mileages?
Will the state of the economy mean that low demand results in reduced residuals even though mileages are lower?

There is a mechanism at the end of the PCP term to realise the benefit of non-use if you see the term out.

I know you have suggested earlier VT.  I cannot advise how the above will be influenced if you VT at 50%, except on a PCP, the 50% is nor reached until very late in the overall process.

Thank you for this. Pretty much on the money with my thoughts. I have emailed the FSA just incase but it feels to me leasing companies will make a killing at the end of people’s terms.

Grumpy_chap

ijwrighty said:

it feels to me leasing companies will make a killing at the end of people’s terms.

How?

Also, have you got a lease or a PCP?
The two are different, particularly in the options for the car user at the end of the term.  PCP certainly offers the opportunity for the car user to capitalise any benefit in residual value above the MGFV, rather than the dealer / finance company.

I did understand you had a PCP, but you insist on using the term "lease":

ijwrighty said:

Hi, sorry it’s a PCP 

If you don't understand the difference between a lease and a PCP, you are going to really struggle with this.

ijwrighty

I do know the difference I’ve just, wrongly, mixed the terminology.

sounds like my only option will be VT which will be very close to the end of the lease anyway. 

Thank you for the help.

ijwrighty

ijwrighty said:

I do know the difference I’ve just, wrongly, mixed the terminology.

sounds like my only option will be VT which will be very close to the end of the lease anyway. 

Thank you for the help.

See, I’ve done it again there, PCP 😂

Grumpy_chap

Why do you think your only / best option will be VT?

eskbanker

ijwrighty said:
I have emailed the FSA just incase

Just in case the Food Standards Agency decides to diversify into supervising vehicle leasing/PCP arrangements?

Aylesbury_Duck

ijwrighty said:

I don’t think you’re getting where I’m coming from here. I agreed with a company that I would do x amount of miles over the term. I’ve had leases for about 10 years now, sometimes I’ve been under the agreed mileage, sometimes over. That’s just the way it is. Why should I pay for a car that’s expected to have 40k miles on it when the reality is, it will have 10-15k returned due to the government locking us down and saying work from home etc? It’s not upto my employer to contribute towards my lease. It was my choice, I get that, but the circumstances have changed massively. It’s my choice if I do 15k, 20k, 40k whatever. In the current scheme of things, it’s the government telling me I cannot travel without good reason therefore I’m paying x a month to a leasing company (assuming I’m doing 40k). At the end of it they will be rubbing their hands together, as a car they are expecting to be worth say 30k is actually worth 40k as I’ve not used it. The payments I’ve been making reflects the 40k mileage not the 15k I’ll be returning it at and therefore, that car will be more profitable for the leasing company. They will be getting thousands of cars back at the end of this way under mileage at the cost of the consumer due to something totally out of our control.

On the contrary, I get where you're coming from, you want someone else to pick up the tab for what has turned out to be an unfortunate deal.  That's why I made the suggestion about your employer pitching in.  You've said you only do business mileage in this car, for which you're paid by your employer.  Your employer is no longer paying you for business mileage so your shortfall is down to them.  You suggest the lease company will profit from this, but so will your employer.  Why are you so keen to chase the lease company for a discount but you don't think it's up to your employer to pay for your lease (which you said they were doing befoehand, in a practical sense)?

I don't actually expect your employer to stump up, but it illustrates the point that there are winners and losers in all of this, and in your car situation, it's your employer and the lease company that are better off, so why is only one of them your target?  You entered the deal on the basis your employer would effectively be paying the lease costs for you.  Why is it now the lease company's problem?