Explain it Like I'm 5 Years Old - Car Leasing

isplumm

I have a Lease car - I checked PCP - found it more expensive - one thing I liked with leasing is that you can put down a very low deposit - 3 months ... the big benefit to PCP against lease is that you agree a set mileage up front - if you do less on lease, then its your hard luck - whereas PCP means the car might be worth more.

Nebulous2

I have a leased Nissan Leaf. There are many variations of financing methods for a vehicle, as referenced already. A lot of the leases are business only, but many of the companies will also do personal leases. 

Particularly when cars weren't selling faster than they could be made, manufacturers would sell cars in bulk to lease companies at good rates. The lease company owns it then leases (rents) the car to an individual. You need to check the figures carefully and watch for deals to see if it works. I once saw a Seat mii on offer for £67 a month over 18 months. At the time several of my colleagues were paying more than that for a mobile phone. 

I wanted to try an electric car, and was concerned about the high cost of buying them, so hunted for a lease. Supplies were drying up as we were coming out of lockdown, I got a quote for a lease, valid for 30 days - hunted around and discovered dealers had no stock at all and were quoting me a 6 month wait. I went back to the lease company and they still had two, in different colours, they honoured the quote I'd been given, and delivered it in less than 3 weeks. 

I'm paying just under £9k in total for 3 years lease fees. I paid an upfront cost of around £1600 and pay a monthly cost of £211 for 35 months. In addition I have to insure it, service it and pay for any repairs not covered by the warranty. If anything is regarded as more than fair wear and tear I can be charged for that as well, on sending it back. I'm limited to 10,000 miles a year, and have to pay a penalty if I drive more than that. 

This was a £32k car, which on current figures will be worth around £14k at the end of the lease. If I had bought it, it would have cost me twice what I will have paid for it in depreciation alone, while still having all the other costs. In addition I would have lost the interest I will have made on £32k of savings in the meantime. 

As you can imagine I'm very happy with how the deal has turned out.

You will get people on here who wouldn't pay £9k for a car in the first place, who will regard paying £9k to rent somebody else's car as insane.  

Each of us has to do our own sums and make up our mind what works for us.  

Krakkkers

Whats in it for the lease company then?

Nebulous2

Krakkkers said:

Whats in it for the lease company then?

Is it me you are responding to? 

Nothing but a loss in my case.

All deals aren't like that though. For a start they wont pay £32k for a car which retails at £32k. Then they'll generally get much more than £14k back on a £32k car. They work out the lease price by calculating how much the car will depreciate from the price they bought it, add their admin costs, add recovery costs for people who don't pay, financing costs for the capital they have employed and the margin they expect to make. Most they'll win on, some they wont. 

I've had my car less than 2 years, and I don't think you would get an equivalent leaf for less than £350 a month now. As electric cars have developed quickly, and a leaf is old technology, you can also get substantial discounts from a dealer now which means the depreciation should be much less than mine has been. 

WellKnownSid

Krakkkers said:

Whats in it for the lease company then?

The lease company doesn't buy "one car at a time from a dealer".  It buys hundreds or thousands of cars a time - potentially at a 40-50% discount if the manufacturer wants to shift them PDQ.  Obviously less of that today, but it does still happen, plenty of pre-reg cars around even now...

Leasing works out REALLY expensive if you are particularly after a Ford Zapier Twist Plus in peppermint green with sunroof and the candy dispenser option.  Side by side against other financing it can be pricey.

If, however, you're flexible on your next car, there are real bargains out there.  I've had several cars on two year leases costing me a fraction of a typical finance deal.

BUT you need to know your anticipated mileage, expect pricier insurance and return it pretty much as you received it condition-wise.

Oh and never try to return one early... you're pretty much committed to the full term...