Car Lease

Mondee

I am not sure this is the correct section but here goes…

So currently I lease a Alfa Romeo Giulia for £425 a month and have 17 months left on a 4 year lease. I initially got this due to a new job but with covid, I lost said job and no longer travel more than 5-10 miles each way every day.

Due to this and the very low mpg of this car around town, I have been looking at ending the lease early and go into a more economical car, specially with the current fuel prices.

I have been crunching the numbers and still don’t know if this would be the right thing.

Monthly Cost:
Car - £425
Service Plan - £30
Insurance - £58
Fuel - £150 

Extra cost: Tyres - One off payment £500

New proposed vehicle:

Car - £380
Service Plan - £15
Insurance - £25
Fuel - At the predicted mpg it’s around £50 a month

This seems like a no brained, however to hand the car back early I would have to pay 2k early termination fee and this is what is making me question it.

Any thoughts would be appreciated.

Thanks

Grumpy_chap

Is the Alfa on a true lease or a PCP?

What is the lead time for the potential alternative vehicle?

Given the low mileage you now need the car for, have you considered an EV?  That will save running costs.

Given the low mileage you now need the car for, have you considered a used car that you can buy outright?

Given the low mileage you now need the car for, have you considered alternatives such as walk, cycle, public transport, UBER?

10 miles each way every day is max 600 miles per month.
Standing costs of proposed solution £420 per month.
That's 70 pence per mile.

Ebe_Scrooge

On the figures you've given you'll be saving £200 per month, give or take.  So after 10 months you'll have recouped the early termination fee.  The remaining 7 months, should you keep your current car, will cost you £1400 more than if you switch to the cheaper deal.  So overall, you'll save £1400 overall (ballpark figures).

One thing to consider is, do you want to enter into another lease agreement, whereby you'll be tied in for 4 years or whatever it may be?  If you're only doing low mileage routinely, then it may make more sense financially to buy a half-decent used car outright.  That way you've got no worries about being tied into a 4-year deal, and it gives you far more flexibility should your circumstances/car requirements change in the next couple of years.

Mondee

The Alfa is on a true lease and the new vehicle will be on a 3 year lease as well.

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I have thought about buying second hand outright but with a baby on the way, I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

Also the second had car market has gone crazy and I would have to resort to a bank loan for low apr and I doubt the banks are looking to lend in that way at the moment.

I probably should have disclosed as well that I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

DrEskimo

Mondee said:

The Alfa is on a true lease and the new vehicle will be on a 3 year lease as well.

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I have thought about buying second hand outright but with a baby on the way, I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

Also the second had car market has gone crazy and I would have to resort to a bank loan for low apr and I doubt the banks are looking to lend in that way at the moment.

I probably should have disclosed as well that I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

I really don't understand the logic of buying new to guarantee you will be paying additional costs in depreciation/interest, to avoid potential costs with a used car.

In any case, nothing to stop you buying a used car under warranty. There are plenty of options at 1/2yrs old and it's possible to extend the warranty if wanted. I bought a 2yr old EV and it's still under warranty despite being over 5yrs old. Not that I have needed to use it at all mind...

I would be inclined to keep the current lease until used prices reach normal levels. Indications even now that prices are going back to 'normal'. You are stuck with new order delays anyway, so I would see what the market looks like in 3-6months and then decide.

Buying used, with the same warranty will be substantially cheaper over the same time frame. Case in point, lease deals on my EV 3-yrs ago came to about £7k over 3yrs. Having bought used, even pessimistic valuations after 3yrs represented around £2k depreciation, which on top of the extra warranty costs still make it substantially cheaper to drive and enjoy the same car. Not to mention complete freedom without being tied to any contract.

Urge you to look at used EVs too. Although the upfront cost can be marginally higher (an equivalent ICE to mine was only around £2k cheaper to buy), the strong residuals and dramatically lower running costs make them cheaper to own. Not to mention far nicer to drive!

Mondee

DrEskimo said:

Mondee said:

The Alfa is on a true lease and the new vehicle will be on a 3 year lease as well.

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I have thought about buying second hand outright but with a baby on the way, I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

Also the second had car market has gone crazy and I would have to resort to a bank loan for low apr and I doubt the banks are looking to lend in that way at the moment.

I probably should have disclosed as well that I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

I really don't understand the logic of buying new to guarantee you will be paying additional costs in depreciation/interest, to avoid potential costs with a used car.

In any case, nothing to stop you buying a used car under warranty. There are plenty of options at 1/2yrs old and it's possible to extend the warranty if wanted. I bought a 2yr old EV and it's still under warranty despite being over 5yrs old. Not that I have needed to use it at all mind...

I would be inclined to keep the current lease until used prices reach normal levels. Indications even now that prices are going back to 'normal'. You are stuck with new order delays anyway, so I would see what the market looks like in 3-6months and then decide.

Buying used, with the same warranty will be substantially cheaper over the same time frame. Case in point, lease deals on my EV 3-yrs ago came to about £7k over 3yrs. Having bought used, even pessimistic valuations after 3yrs represented around £2k depreciation, which on top of the extra warranty costs still make it substantially cheaper to drive and enjoy the same car. Not to mention complete freedom without being tied to any contract.

Urge you to look at used EVs too. Although the upfront cost can be marginally higher (an equivalent ICE to mine was only around £2k cheaper to buy), the strong residuals and dramatically lower running costs make them cheaper to own. Not to mention far nicer to drive!

You make very compelling points and an EV or hybrid was very much on the cards until recently.

The issue for me is that I am picky for one, and there are not many EVs or plug in hybrid I like, so it limits my choice. Then we have the prohibitive price of many of these models.

I know I can buy used but the market favours more a new car these days unless you paying cash due to interest costs.

I probably wouldn’t have looked at replacing the Giulia if fuel prices were not as ridiculous as they are now and probably going to get worse. 

I personally don’t think the situation will get better any time soon so the longer I leave it the more chance of prices being raised etc.

Out of interest, which EV do you own?

DrEskimo

Mondee said:

DrEskimo said:

Mondee said:

The Alfa is on a true lease and the new vehicle will be on a 3 year lease as well.

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I have thought about buying second hand outright but with a baby on the way, I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

Also the second had car market has gone crazy and I would have to resort to a bank loan for low apr and I doubt the banks are looking to lend in that way at the moment.

I probably should have disclosed as well that I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

I really don't understand the logic of buying new to guarantee you will be paying additional costs in depreciation/interest, to avoid potential costs with a used car.

In any case, nothing to stop you buying a used car under warranty. There are plenty of options at 1/2yrs old and it's possible to extend the warranty if wanted. I bought a 2yr old EV and it's still under warranty despite being over 5yrs old. Not that I have needed to use it at all mind...

I would be inclined to keep the current lease until used prices reach normal levels. Indications even now that prices are going back to 'normal'. You are stuck with new order delays anyway, so I would see what the market looks like in 3-6months and then decide.

Buying used, with the same warranty will be substantially cheaper over the same time frame. Case in point, lease deals on my EV 3-yrs ago came to about £7k over 3yrs. Having bought used, even pessimistic valuations after 3yrs represented around £2k depreciation, which on top of the extra warranty costs still make it substantially cheaper to drive and enjoy the same car. Not to mention complete freedom without being tied to any contract.

Urge you to look at used EVs too. Although the upfront cost can be marginally higher (an equivalent ICE to mine was only around £2k cheaper to buy), the strong residuals and dramatically lower running costs make them cheaper to own. Not to mention far nicer to drive!

You make very compelling points and an EV or hybrid was very much on the cards until recently.

The issue for me is that I am picky for one, and there are not many EVs or plug in hybrid I like, so it limits my choice. Then we have the prohibitive price of many of these models.

I know I can buy used but the market favours more a new car these days unless you paying cash due to interest costs.

I probably wouldn’t have looked at replacing the Giulia if fuel prices were not as ridiculous as they are now and probably going to get worse. 

I personally don’t think the situation will get better any time soon so the longer I leave it the more chance of prices being raised etc.

Out of interest, which EV do you own?

Completely get that. I didn't want an EV due to lack of choice, and even now there is not much that I really really like. In the end, because I do relatively little mileage, I just bought with my head instead of heart. 

I went from an Audi S5, to now owning a second generation Renault Zoe. This has the larger 41kWh battery which gives me an average 150mile range. I also spent a long time looking for a battery owned version, as the battery lease models were more popular. Certainly not a good looking car, but practical, easy to park and relative to other ICE equivalents it certainly beats them in terms of acceleration and gearbox (i.e. it has none!). I dread going back to any ICE now.

Honestly the costs are stupidly low. I reckon if I sold tomorrow, I would see overall costs over 3.5yrs/15,500 miles of around £3k, which includes deprecation, servicing, maintenance, 'fuel', and insurance. I think petrol alone would have been close to costing that in an ICE.

I am currently borrowing my partner's Dad's 2017 Tesla Model S 75, and that's about the only car I would replace this with.

Mondee

DrEskimo said:

Mondee said:

DrEskimo said:

Mondee said:

The Alfa is on a true lease and the new vehicle will be on a 3 year lease as well.

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I have thought about buying second hand outright but with a baby on the way, I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

Also the second had car market has gone crazy and I would have to resort to a bank loan for low apr and I doubt the banks are looking to lend in that way at the moment.

I probably should have disclosed as well that I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

I really don't understand the logic of buying new to guarantee you will be paying additional costs in depreciation/interest, to avoid potential costs with a used car.

In any case, nothing to stop you buying a used car under warranty. There are plenty of options at 1/2yrs old and it's possible to extend the warranty if wanted. I bought a 2yr old EV and it's still under warranty despite being over 5yrs old. Not that I have needed to use it at all mind...

I would be inclined to keep the current lease until used prices reach normal levels. Indications even now that prices are going back to 'normal'. You are stuck with new order delays anyway, so I would see what the market looks like in 3-6months and then decide.

Buying used, with the same warranty will be substantially cheaper over the same time frame. Case in point, lease deals on my EV 3-yrs ago came to about £7k over 3yrs. Having bought used, even pessimistic valuations after 3yrs represented around £2k depreciation, which on top of the extra warranty costs still make it substantially cheaper to drive and enjoy the same car. Not to mention complete freedom without being tied to any contract.

Urge you to look at used EVs too. Although the upfront cost can be marginally higher (an equivalent ICE to mine was only around £2k cheaper to buy), the strong residuals and dramatically lower running costs make them cheaper to own. Not to mention far nicer to drive!

You make very compelling points and an EV or hybrid was very much on the cards until recently.

The issue for me is that I am picky for one, and there are not many EVs or plug in hybrid I like, so it limits my choice. Then we have the prohibitive price of many of these models.

I know I can buy used but the market favours more a new car these days unless you paying cash due to interest costs.

I probably wouldn’t have looked at replacing the Giulia if fuel prices were not as ridiculous as they are now and probably going to get worse. 

I personally don’t think the situation will get better any time soon so the longer I leave it the more chance of prices being raised etc.

Out of interest, which EV do you own?

Completely get that. I didn't want an EV due to lack of choice, and even now there is not much that I really really like. In the end, because I do relatively little mileage, I just bought with my head instead of heart. 

I went from an Audi S5, to now owning a second generation Renault Zoe. This has the larger 41kWh battery which gives me an average 150mile range. I also spent a long time looking for a battery owned version, as the battery lease models were more popular. Certainly not a good looking car, but practical, easy to park and relative to other ICE equivalents it certainly beats them in terms of acceleration and gearbox (i.e. it has none!). I dread going back to any ICE now.

Honestly the costs are stupidly low. I reckon if I sold tomorrow, I would see overall costs over 3.5yrs of around £3k, which includes deprecation, servicing, maintenance, 'fuel', and insurance. I think petrol alone would have been close to costing that in an ICE.

I am currently borrowing my partner's Dad's 2017 Tesla Model S 75, and that's about the only car I would replace this with.

Fair enough, makes sense with such low costs.

I wouldn’t mind a model 3 but even they are way to high for private lease users.

Grumpy_chap

Ebe_Scrooge said:

On the figures you've given you'll be saving £200 per month, give or take.  So after 10 months you'll have recouped the early termination fee.  The remaining 7 months, should you keep your current car, will cost you £1400 more than if you switch to the cheaper deal.  So overall, you'll save £1400 overall (ballpark figures).

I don't think the OP is going to save £200 per month.

Fixed costs for the Alfa = £513 per month
Fixed costs for the alternative = £420 per month
Saving £100 per month

OP does 600 miles per month
Fuel for the Alfa stated at £150 per month
Fuel for the alternative stated at £50 per month

Even the most powerful Giulia quotes 28 mpg. 
600 miles per month, so 22 gallons per month. 
£1.80 per litre so £8.20 per gallon
£180 per month petrol cost

Assume the OP won't buy diesel for such a low mileage.
The OP stated:

Mondee said:

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

So, assume the alternative is still a reasonably punchy petrol equivalent to the Alfa, so something like 45 mpg.
600 miles is 14 gallons per month.
Still £8.20 per gallon
£115 per month petrol cost

Saving on petrol £65.

Total saving fixed plus variable costs £165 per month.

17 months remain on the lease.
Early termination £2k
12-months to cover the penalty period.

Mondee said:

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

3 - 6 months to wait for the replacement car
12 months plus 3 months = 15 months, so only just 2 months before the lease ends
12 months plus 6 months = 18 months, so the lease on current car has ended anyway before the penalty is recouped.

It looks as though the OP has little to gain by not sitting this lease out, unless the OP goes for a used car that they can buy without finance.  Used does not need to mean an old banger.  

I also don't understand the logic of guaranteed expense to avoid a possible expense:

Mondee said:

I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

Mondee

Grumpy_chap said:

Ebe_Scrooge said:

On the figures you've given you'll be saving £200 per month, give or take.  So after 10 months you'll have recouped the early termination fee.  The remaining 7 months, should you keep your current car, will cost you £1400 more than if you switch to the cheaper deal.  So overall, you'll save £1400 overall (ballpark figures).

I don't think the OP is going to save £200 per month.

Fixed costs for the Alfa = £513 per month
Fixed costs for the alternative = £420 per month
Saving £100 per month

OP does 600 miles per month
Fuel for the Alfa stated at £150 per month
Fuel for the alternative stated at £50 per month

Even the most powerful Giulia quotes 28 mpg. 
600 miles per month, so 22 gallons per month. 
£1.80 per litre so £8.20 per gallon
£180 per month petrol cost

Assume the OP won't buy diesel for such a low mileage.
The OP stated:

Mondee said:

I have looked at EVs and hybrids but the entry price for a decent car is just too high.

I am a bit of a petrol head and while I am generally very frugal in other parts of my life, I would pay more for a car I like than just the cheapest available.

So, assume the alternative is still a reasonably punchy petrol equivalent to the Alfa, so something like 45 mpg.
600 miles is 14 gallons per month.
Still £8.20 per gallon
£115 per month petrol cost

Saving on petrol £65.

Total saving fixed plus variable costs £165 per month.

17 months remain on the lease.
Early termination £2k
12-months to cover the penalty period.

Mondee said:

The lead time for the new car is from 12-26 weeks unfortunately due to all the current chip issues.

3 - 6 months to wait for the replacement car
12 months plus 3 months = 15 months, so only just 2 months before the lease ends
12 months plus 6 months = 18 months, so the lease on current car has ended anyway before the penalty is recouped.

It looks as though the OP has little to gain by not sitting this lease out, unless the OP goes for a used car that they can buy without finance.  Used does not need to mean an old banger.  

I also don't understand the logic of guaranteed expense to avoid a possible expense:

Mondee said:

I want certainty and peace of mind that I won’t have any unexpected costs for repairs, etc, so that’s worth the extra money in my mind.

This is exactly what is making me question the whole thing. If the car was available now I think I would have gone for it.

The only other thing I didn’t realise is that in 6 months time the early termination fee will be lower, however not sure how much that would sway things.