Lease cars....

[Stressballs]

Lots of people I know seem to drive around in high end cars which are disproportionate to their earnings and every few years they seem to be upgrading to an even bigger/better car. DP and I are car hunting at the moment and I mentioned to DP that I had always been rather intrigued as to how other people earning far less than us managed to afford these executive cars (when we are driving around in a modest little hatchback!) and DP was saying that barely anyone actually buys cars anywmore and they all lease them instead. Not sure where I’ve been but I had no idea!

Is it really that common now?! I’m struggling to see what the financial benefit is as surely since you never own the car it’s an endless cycle of monthly fees to be left with nothing at the end and having to do it all over again. Or perhaps it’s just for the staus of having a showy car. Am I missing something?!

It’s nust part of the personal debt culture in my opinion. I work in a very derived area, and lots of people have PCP deals that take up a large amount of their income. They may get the benefit of a nice shiny car and no insurance or repairs to worry about, but it just depleted their potential wealth. The 300-400 pounds a month they spend could be a mortgage!
If you got to the debt forums on MSE or here, these deals come up again and again as unaffordable debts. It’s like saving up to buy a sofa outright, or getting one on finance - people who struggle with delayed gratification will get one on finance when it works out worse for them.

I always find it ridiculous when people show off expensive cars that they don’t own. But like renting a mulberry handbag - hardly a sign of great success is it?!

How does house prices rising make renting cheaper than buying?

I'm not sure I said that?

The difference is that the end product is worth MORE not LESS.

Surely that's not a difficult concept?

Firesuit & gekiort - guys, chill out, I think you're on the same side

Agree with Firesuit re depreciation. That argument only works if you're comparing the cost of the lease to the depreciation on a brand new car - but it's not an either/or unless you were considering paying cash for a brand new car, and who's going to do that? Plus, for the vast majority of leases, the cost will be AT LEAST the same as the expected depreciation, because that is how companies make money on leases. People should just admit it's easier to lease (from a cash flow and wanting a new car point of view).

So it's not as simple as saying "a car is a depreciating asset - lease it" because a second hand car has already done most of its depreciating. We've sold our last 2 cars for at least what we paid for them, and expect to do that again with 2 of the 3 we currently own (one's for sale lol). Obviously this is very unusual, and only works if you buy rare cars and don't do high mileage, but just to point out that you can beat the depreciation!

Blair - exactly. Why would you want to pay for the depreciation of a new car?! The depreciation is a reason NOT to buy a new car. Leasing means the car company can offset the cost of depreciation of the new cars they make whilst charging you if they aren’t returned in mint condition, and not having to worry about selling it.

It must be lovely to have a brand new car ( never had one, always bought second hand) but don’t fool yourself into thinking it is a financially wise decision. It’s just a way of people who can’t afford to buy a new car upfront getting their hands on one. Leasing companies aren’t being nice buy offering these deals, it’s in their interest!

It will be a sign soon, Brand new car - no money

I think the difference with houses is that in the majority of cases, over a long term. rent vs buying do two very different things:
-rent is an expense only, you don't get anything at the end of it
-buying (mortgage or outright) is buying an asset, and that asset is gaining value. So even if it costs you more per month in the short term - which can happen especially for FTB with high LTV - the money is not all just spent as you have an asset

Cars don't gain any value, they just sink. If you are going to keep it for a long time (my MIL is like this) then the total cost averaged over the lifetime can be very low for buying. If you change regularly, for whatever reason, then the average cost per month for buying will be much higher, and often because of this a lease works out cheaper.

In a lot of cases it seems to be that the two extremes are the most sensible; buy a second hand car outright and run it in to the ground, or lease/pcp. The middle grounds rarely seem to work out; buying brand new is often more expensive, financing second hand is often more expensive due to higher APRs then maintenance costs on top...

The difference is that the end product is worth MORE not LESS.

OK, let's row back for a moment. What I was trying to say (and possibly made a poor comparison) is that where you have two scenarios where people get the same thing, and the underlying costs in once scenario are less than the other, then the scenario with the extra cost can't be cheaper.

Let's keep this simple and keep it to cars. Are you claiming that there is anything about PCP that causes it to be cheaper than owning?

If not, what is it that you think we are in disagreement about?

OK, let's row back for a moment. What I was trying to say (and possibly made a poor comparison) is that where you have two scenarios where people get the same thing, and the underlying costs in once scenario are less than the other, then the scenario with the extra cost can't be cheaper.

Yes, and I was looking longer term. Where the end value was included in the costing, because it's very relevant.

Let's keep this simple and keep it to cars. Are you claiming that there is anything about PCP that causes it to be cheaper than owning?

Absolutely nothing.

If not, what is it that you think we are in disagreement about?

Not disagreeing as such, just pointing out the importance of the end value.

I have a PCP car. It's a fiesta, so not flash, and pay £122 a month. My insurance is £230 a year. I live quite rurally so need a reliable car - both my last 2 cars, which were second hand, needed repairs. Gear box type expenses! I was going to pay it off at the end of the term, but am now having another baby, so will trade in for the next size up.
Leasing works for some, isn't suitable for others, but is just one way to have a reliable car. Yes, there are always going to be people who use it to get high end expensive cars, but everyone I know who leases it is for reliability and lower costs. I've definitely paid out less in the 2.5 years I've had this one than in the previous few years with second hand ones.

People keep saying that lease cars are more reliable, my last Ford Fiesta which I had from when it was a year old to 8 years old was very reliable, I expect my now 2 year old Fiesta to be reliable. Just because I paid upfront does not make it unreliable..

It really just depends on your personal needs. I get a car allowance from my employer and the rules for getting this say that the car has to be less than 5 years old and be able to convey clients around (so not a 2 seater or a smart car basically).

I spend that money on a personal contract hire (not a PCP as I don't have any way to buy the car at the end of the term). This is cheaper for me buying a nearly new second hand car. I am the sort of person who changes their car every 3 years anyway so I always have a car payment.

I dislike the idea of having to deal with private car sales and the instability of buying second hand.

Instead I have a Volvo XC60 for £211 per month for 36 months on a 3+35 contract. I got it cheap because the model was having a face lift and Volvo wanted rid of the old shape models.

The list price of this car is just over £40k with no add ons. Over the course of my contract I will pay £8,018, so 20% of the original value.

if I buy a 3 year old XC60 of the same type it will cost about £17k and I can only keep it max 2 years due to the employer rules. £17000 over 36 months is £472. This is more than double the lease hire.

Even if I can then sell it at 5 years old for £8000 I have spent £9k and needed to find the £17k in the first place. And this doesn't allow for any interest payments on a car loan or the tax and servicing I will have to pay for.

For me it makes sense to lease. For others it won't. In the end it comes down to the sums and personal preference.

Just because I paid upfront does not make it unreliable.

No one is saying, but when you lease you get a brand new car which is under warranty. So is effectively guaranteed to be reliable. That’s not the case if you buy an older car outright, or a new car which is now older.

All the posters that are saying their car is 5/8/12 years old and has never let them down or needed any expensive work, that’s great, but it’s in no way guaranteed. The fact is the older a car is, the more chance it has of needing expensive maintenance / repair work. With a lease car, that’s not going to happen.

No one on here is saying leases are for everyone, but they are the best option for some people.

Placemarking for future reference

I've been leading cars for 12 years now. I do consider it a luxury but one that also comes with benefits. I do it because my financial position is as secure as can be though. I am surprised that people on a lower end income or who plan to have children soon, reduce their hours etc... don't feel anxious to be beholden to such a debt.

Any recommendations for good sites to look at lease deals? I'm interested but I have no idea where to start - prices seem to vary quite wildly and I don't know who's reputable or not.

I did look into PCP as I could have just paid it monthly out of my savings but it was definitely more expensive so I bought a year old car instead, maybe its more worth it if you do a high milage, I only do about 1-2000 miles a year. There must be an optimum milage to make it a better deal.

The list price of this car is just over £40k with no add ons. Over the course of my contract I will pay £8,018, so 20% of the original value.

That is a stupendously good deal. Taking a rough rule of thumb that cars depreciate by 50% over three years, you've effectively had a 40K car for 16K.

I was going to ask what a cash buyer would have paid, but actually I don't see any way they would have been offered as good a deal.

I think one aspect of the car market that could cause PCP to offer better deals than naive economics says is possible, is that manufacturers use PCP to manipulate car prices. In precisely this situation, rather than sell cars for cash at a massive discount, they hide the discount in a lease so as not to undermine the value of their brand, and the cash price they can get for future cars.

This is an example of exceptional circumstances though, I don't think there's any chance of the median PCP deal being this good.

We lease, mostly after a bad run with newer cars. The last straw was a £6k repair to a just out of warranty Jeep Patriot.

We're coming to the end of a 2 year PCH deal on a Renegade (THANK FUCK!) and shopping around now for our next lease, possibly the Hyundai Ioniq Hybrid. DH does a lot of work miles so a guaranteed cost each month is a lot better for us.

We have leased for the last few years. We realised that we keep our cars for 3-4 years. Previously we were buying 3 or 4 year old cars outright, running them for 3-4 years and finding that by that point the repair bills were mounting up. When we then sold the cars at 7-8 years old we were getting peanuts for them.

We like higher end cars and we like SUV’s (so shoot us) and we only buy automatics as we don’t like gears. DH also has a preference for leather interiors although I am less bothered. I pay less than £300 a month for a premium brand SUV. I literally trawled every lease company I could find, followed their prices for a few months and found this deal. Works perfectly for us

TheFifthKey - Select Car Leasing and Nationwide are two I've used.

To get a good deal you need to be happy to take what they have - this week they might be trying to get rid of Astras, next week it might by Jaguars! I got a fab deal this time only because a company car lease company had bought a stock of the cars and then not shifted them before the new model facelift came out and they just wanted rid of them. I had to take what they had - no colour or dealer fit options - and be able to accept it within 4 weeks.

A friend of mine has just got a basic Fiesta for just over £100 per month on a 3+35 contract. She had a 12 year old Clio which she'd had from new but it needed various repairs and the quotes were almost £2k. She didn't have the £10k or so it would take to buy a similar small car so the lease was a good option for her. Again, this was taking what the company had in stock and not being fussy about options and colour.

We've used Nationwide too, and also GatewaytoLease. They both ended up being through the same finance company in the background (ALD automotive) who were fine to deal with.

There's a long running thread over on pistonheads where people pop up lease deals which can be quite useful to help you get a feel for what good deals are around and what "good" actually looks like!

For the Jeep lease we spent a few weeks getting prices online then went to our local Jeep dealer, showed them the figures and asked them what they could do. They matched it.

Things have changed a bit though and our local Hyundai dealer can't come close to online figures for the Ioniq.
We have been told that there are issues in supply because of emissions changes which might mean there are better deals to be had next month so we're holding on for a few weeks.

We have two cars which we own, neither are very new or posh. Neither were new new when we bought them so depreciation has been less than if we'd bought new.

I can't see the advantage of constantly being in debt. And if you lose your job, you lose your car as well. At least the insurance and running costs on our cars are low and we could get rid of one if we needed to.

I also don't see a car as a status symbol as so many people do, it's a means of getting from A to B, much to DS's disappointment, as he would like us to drive something that is cool! Ah well when he's earning enough he can drive a status symbol car.

Oh and repair bills have been very low. The most I've paid out on either car was around £300 and we've had one for 8 years and the other for 3. That does not include routine servicing which is extra.