Car leasing: a query for the clever people residing in my computer :)

[fairweathercyclist]

Posting for traffic. I need to replace a 12 year old car and the car I am looking at would be around £13K depending on model and level of newness (ie new new or maybe a few months old).

I was talking to someone yesterday who would like me to lease it instead. When I worked out the numbers it would cost around £9000 for 4 years' use. Whereas if I paid £4000 more, it's mine until eg it's 12 years old and I don't have to worry about mileage or the odd scratch here and there.

Anyway my question is - how does leasing stack up financially and why do so many people do it? I think this came up before a few months ago but I can't find the thread now. I am keen to understand the benefits.

Any form of car finance is more expensive than paying cash
(My original note)

Not true. I was going to pay cash from savings for a Citigo, but they
were doing 0% finance (no movement on the price either way) which as well as 0% finance, this also gave free servicing and breakdown cover, which was not available when paying cash.

There would also have been the lost interest on the capital (or interest charged if I had borrowed from the bank). It's probably because it's all financed by VAG finance, which due to their enormity, probably have access to finance at similar levels to banks or small countries. Also, it is in their interests to have more of their cars on the road.

Re this.

Yes - with new cars, the dealer markup gives them lots of ways to offer you "deals" and inducements, so paying cash isn't necessarily the right deal. For used cars, there are hardly ever good finance deals - hence having your own cash is a better deal.

Businesses are different - a lot of it becomes a financial evaluation - that's why businesses factor their debts - they would rather have (or HAVE to have) the cash now rather than later.

A lot of people don't have cash, so the car purchase becomes a matter of weekly payments - "If I can get you this for £60 a week, how does that sound".

Anyone who paid cash in 2016 for a Merc SLC250CDI would have forked out around £43K. If they sold now they'd be very lucky to get £20K. So that's a £23K it's cost them. Plus loss of income on the £43K savings. In 2016, you could have leased that car for £200/month, on a 35+3 deal. That's £7600!!

Can some of the "leasing is a rip off" or "paying cash is always cheaper" brigade please do the maths on this particular car.

Mercedes thought the world was ready for a 2 seater convertible diesel. They were wrong. No one bought it. So they offloaded them in bulk to lease companies for a huge discount, and lease companies were able to offer it cheap (because no one wanted it unless it was cheap).

In 2016, you could have leased that car for £200/month, on a 35+3 deal. That's £7600!!

that's impressive - but the dealers haven't lost, I assume, so Mercedes must have sold them to the dealers for a fraction of the 43K. Opportunities like that must be quite rare, I would have thought. This also assumes that the people who bought them wouldn't have bought a full price Merc, had there been no cheap deals available.

£200 a month hardly covers the finance charge on a 43K asset.

Leasing can be a cheaper way to get the car you want, if you change every few years. Even more so if you aren't stuck on a specific model - the deals vary hugely.

Have a look at www.leasing.com it's a comparison site for all the main leasing companies. They also have an index figure for each deal which indicates how cheap the payments are compared to the cost of buying the same car instead.

As an example of deals on there, you can get a fancy Volvo S90 for £3000 per year, for 4 years, when it would cost £37,000 to buy.

Or a quite good model of Vauxhall Astra for a little more than £2,000 per year for 2 or 4 years.

GTH1234, please tell me which bank offers loans at lower than 0%. You've stated categorically that a bank loan is cheaper than dealer finance. My dealership offers 0% on most new cars.

Either provide evidence of where I can get a loan at cheaper than 0% or admit you've either lied or haven't a clue.

A loan at less than 0% would be fabulous. I’d love to be paid to borrow money.

You cant negotiate a better discount if your paying cash

Err, yes you really can. I've done it several times. Just because you don't do it at your garage doesn't mean others don't too. At my last new car purchase, I haggled a 25% discount on list price, plus a few freebie extras (safety pack, proper spare tyre, tow bar, full fuel tank) and got a really good PX deal on my old car (given £7k and garage sold it for £7.5k!). And the new car came from the factory rather than being sat in the dealers' compound costing them money.

That was cheaper than they could have done using their finance company based on total payments over the term. They were very happy to take immediate payment rather than wait a few days for the finance company money to come through.

Getting new cars every few years is really bad for the environment.
You need to drive a car for at least 200,000 miles before the carbon produced by running it outweighs that used by manufacturing it. And that's for an old diesel.

The pressure to replace old cars with new efficient ones is purely advertising to support the car industry and has nothing to do with the environment.

I would get an older car and aim to keep it as long as possible. Even spending a few hundred on repairs every other year works out much cheaper than leasing

It doesn’t.

In 2016, you could have leased that car for £200/month, on a 35+3 deal. That's £7600!!

Have I understood right that that's £7600 in total to drive the car for 36 months? £211 a month on average?

I find that hard to believe, but taking it at face value, that's a lot less than what I could have leased my medium-spec Golf for, so I'd venture to suggest it's not the sort of bargain one can routinely get by leasing.

Do you get a maximum mileage use?

‘If it appreciates, buy it. If it depreciates, lease it’.

A brand new lease car won’t cost you tax, mot or repair bills. Your fuel usage can sometimes be halved if not more.

4 years is a long lease - 2 years are standard.

I’m all for a lease now

You can set your own maximum mileage @Skyejuly. Always over estimate, the trade in when you return it’s better.

@PettyContractor you've just got to search long and hard for the best deals.

3 years ago we got a 3+23 month deal on a Passat Alltrack with leather, fancy gears, etc for £119.99 per month, plus £180 admin fee.

So £3,300 for 2 years. And the car was over £30,000 to buy.

Talk me into a car lease bargain deal then.

My son is after a new car. Anything sporty-ish, would suit him.
Have you a decent example?

^ Size doesn't really matter. He's single.

leasing.com/independent-brokers/jet-vehicle-finance/vauxhall/astra/363359580/

That might be quite sporty?

£4,350 for 2 years.

That lease deal is only 5000 miles a year, which will be far too low for many people so will lead to excess charges that will make it not quite as cheap as it first appears. Obviously need to do your own research.

@BarbaraofSeville you can change it to more mileage for not much more money if you look at the details.

The excess mileage charges are often lower than increasing the contract miles anyway.

Getting new cars every few years is really bad for the environment.

And quite good for enhanced safety features. My kids also drive the household cars so we want the cars to have the latest safety features. Selfish, yes, and I’ll admit it but that’s our priority.

We buy an old car for about 2-3k. And keep it for 4 or 5 years. Occasionally needs work at MOT time but often under £100.

Cant see hoe leasing is cheaper if you're actually happy with older cars! Ie if you're purely looking for whats cheapest.

The "leasing is chepaer" seems to only work if you would normally buy new cars and replace every few years?

Thank you for all the comments. Someone else had pointed me towards Carwow, thank you for the suggestion and I'll consider further.

We buy an old car for about 2-3k. And keep it for 4 or 5 years. Occasionally needs work at MOT time but often under £100

But you're also banking on nothing expensive like a clutch or gearbox going in that time. If you needed something like that doing shortly after you've spent your £2-3k, that money is effectively gone, or significantly diminished and you're faced with the choice of scrapping the car and starting again, or spending a lot on what could turn out to be a money pit.

Plus there's the inconvenience factor. If you travel around a lot, you just know that if something major is going to suddenly go, it'll happen just as you're setting off for an important meeting at the other side of the country, or driving to the airport or any other important, time critical event.

It's rare to run an old car for 4-5 years and them needing little or no work on them. Even tyres is an expense that you're likely to have with a new car as you'll probably get 2-3 years use out of them.

So that's why people often spend extra on a newer car. It's nothing to do with status, they're just wanting to reduce the risk of something going wrong at an inconvenient time.

If tax and insurance wasn't so costly, I'd seriously consider running two bangers in tandem, or perhaps 3 between DP and I, so we always had a spare working car, should one of the main cars go bang at an inconvenient moment. But obviously not everyone has sufficient off road parking space like we do.

Am following this thread with interest, we need to sort out our ageing car which seems to be showing signs of not lasting much longer!